page 18 private equity annual review <strong>2010</strong> s to r i e s o f t h e y e a r j a n | f e b | m a r | a p r | m a y | j u n e | j u ly | a u g | s e p | o c t | n o v | d e c p l a c e m e n t a g e n t s c a n d a l Messing with the middlemen After an investigation into ‘pay-to-play’ activity was undertaken in New York, California’s state attorney general Jerry Brown took action on the West Coast As part of a wide-ranging investigation, California came out hard against placement agent Alfred Villalobos in May, filing a civil fraud suit against him, his company ARVCO Capital and former CalP- ERS chief executive officer Federico Buenrostro. State Attorney General Edmund Brown alleged that Villalobos “attempted to bribe”, the head of CalPERS alternative investment programme, Leon Shahinian, who had been placed on administrative leave. Shahinian no longer works for the pension. Brown: turning the heat up on ARVCO Former New York State Comptroller, Alan Hevesi, who oversaw the state’s massive public pension system, pleaded guilty to accepting nearly $1 million in exchange for approving a $250 million commitment to Markstone Capital Partners, an investment firm based in California. While Villalobos fights in California, placement agents in the US have been faced with a barrage of regulations in “Working as a placement agent for ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the board to authorise investments that generated over $40 million in commission to Villalobos,” Brown said in a statement. Villalobos denied the accusations. He eventually filed for bankruptcy and the case against him is pending in state court. The lawsuit led to CalPERS reviewing its relationship with Apollo Global Management, which used Villalobos to help raise money from the pension, even though CalPERS holds an ownership stake in the Apollo. The California lawsuit came after a vigorous investigation in New York exposed wide-ranging pension “pay-to-play” activities, in which investment firms paid sham finder’s fees in exchange for commitments from the New York State Common Retirement Fund. The New York investigation eventually uncovered connections to New Mexico’s state pension systems, and eventually connections to California firms. the wake of the various scandals. US regulators, both state and federal, latched onto the scandal and proposed various rules they said would prevent similar payto-play activities in the future. The SEC for a brief time considered enacting a nationwide law that would have banned placement agents from interacting with public pensions on behalf of investment firms. That rule never happened, but the SEC did eventually pass a rule forcing all placement agents to register with the SEC. California also considered a rule that would force placement agents wanting to work with pensions in the state to register as lobbyists. The state assembly eventually passed a law that ends payments for successful fundraisings. Placement agents under the law are instead paid flat fees up front, as are lobbyists. Agents also are subject to stricter disclosure requirements. The scandal also prompted US institutions like CalPERS to revise disclosure policies for third-party marketers. ■ Apax debuts in Brazil with $1bn deal Apax joined a host of private equity firms that struck deals as part of a hot M&A surge in the country in <strong>2010</strong> Apax Partners inked its debut Brazil deal, agreeing to acquire a 54 percent stake in Tivit, an integrated IT and BPO services company, for about $1 billion. Apax’s entrance into Brazil came at a time when private equity firms everywhere were looking for ways to get exposure to the country, either through deals, fundraisings or even picking up stakes in native Brazilian firms. The Carlyle Group started the year off with its debut Brazil deal, committing $250 million for a 63.6 percent stake in CVC Brasil Operadore e Agencia de Viagens, an operator of tours and travel services in Brazil and throughout Latin America. DLJ South American Partners, which closed its debut fund in 2008 on $300 million, got in on the act and led an investor group that committed $370 million for a 25 percent stake in Grupo Santillana de Ediciones, which publishes educational text books in Latin America and Spain. First Reserve found an energy-related opportunity in the country, investing $500 million in Barra Energia, an independent exploration and production company. Not to be outdone, The Blackstone Group chose to ramp up its presence in Brazil this year by taking a 40 percent stake in Sao Paulo-based Patria Investments, one of Brazil’s largest asset managers. ■
This announcement appears as a matter of record only. is pleased to announce the closing of Southern Cross Latin America Private Equity Fund IV, L.P. A Value-Oriented Buyout Fund Focused on Operational and Strategic Management $1,681,013,000 Limited Partnership Interests The undersigned acted as financial advisor and placement agent for the limited partnership interests. www.stanwichadvisors.com
Change language