Flashback to September 2011: we reported that the Kentucky Retirement Systems investment committee voted 4-to-1 to invest more than $450 million in a Blackstone fund. Blackstone had been in a huge mess and KRS made the move to do business with the joint again. At the time there was one vote of dissent on the committee. They wanted to wait until Blackstone was cleared in the Securities and Exchange Commission placement agent investigation before dropping half a billion bucks.
Fast forward to now: Looks like the largest hedge fund scandal since Bernie Madoff’s fun is upon us. This one involves SAC Capitol:
One of hedge fund billionaire Steven A. Cohen’s largest outside investors, private equity firm Blackstone Group LP, appears inclined to keep its money with his SAC Capital Advisors, even as the U.S. government scrutinizes the fund in its ongoing insider trading probe.
Of course, KRS is a major investor in that fund.
You shouldn’t be surprised to see that article. And shouldn’t be surprised that it has been grossly ignored in Kentucky.
Probably also shouldn’t be surprised to see Robert Klausner pop up in the piece defending Blackstone’s use of sleazy hedge funds.
“I am unaware of any representation by Blackstone that they are pulling out,” said Robert Klausner, a Florida attorney who represents a pension fund from Louisiana that is an investor in a Blackstone fund with money at SAC Capital.
Klausner said an investment adviser hired by the Louisiana pension fund he represents said it is comfortable with Blackstone’s decision to stay with SAC Capital after doing its own research into the matter. Klausner said the decision by SAC Capital to pick up the tab for any legal costs and fines that might be levied by authorities against the hedge fund, gave his pension client comfort.
“The indemnification was a huge deal and the fact that the principals of SAC own 55 percent of the firm,” he said.
He’s an all-time favorite attorney with folks at KRS. He acts as a placement agent of sorts, selling access to public trustees to hedge fund managers like Blackstone at his annual conference. For the last eight years, the major form of trustee education for board members of the KRS? Klausner’s conference.
Pension consultants aren’t the only ones holding conferences where money managers can hobnob with pension officials. Robert D. Klausner, a lawyer at Klausner & Kaufman in Plantation, Fla., whose firm provides legal counsel to many pension funds in Florida and elsewhere in the south, runs similar meetings.
Klausner & Kaufman’s sixth annual client conference was in March at the Hyatt Regency in Fort Lauderdale, Fla. Among the eight companies that paid to sponsor the 2003 conference were Merrill Lynch and Davis Hamilton Jackson & Associates, a money manager based in Houston that Merrill often recommends to its pension clients.
There’s this from Forbes:
The outside counsel to the Jacksonville Police & Fire Fund, Robert Klausner of Plantation, Fla., receives a varying cut of lawyer fees for work on cases he refers to class action firms, on top of a retainer for routine work. Fund trustees seem largely unaware of Klausner’s arrangement. “There are a lot of suits we’re probably involved in because our attorney [Klausner] is involved in a lot of things,” says Barbara Jaffe, a Jacksonville fund trustee and an adviser with Wachovia Securities. Trustee Bobby L. Deal, a lieutenant with the Jacksonville police, says of Klausner: “He’s on retainer. If there’s any other compensation, I’m not aware of it.” Klausner says his pay is adequately disclosed and that it’s the job of the fund’s administrators to keep the trustees well informed.
Bernstein Litowitz also pays Klausner a sum he won’t disclose (and which Berger puts at up to $30,000) to be the only class action lawyers with access to Klausner’s annual powwows of pension officials. The firm will spend a similar sum hosting a cocktail party for fund officials at a Council of Institutional Investors get-together in September. It also cosponsors Guns & Hoses, an annual police and firemen’s fund conference slated for San Diego in October.
To make things even more fun, two Blackstone folks recently registered (Warning: External PDF Link) as lobbyists with the Blackstone Hedge Fund of Funds (BAMM), which owns the SAC fund under SEC investigation:
- Sobczak, Iliana 2764 Blackstone Alternative Asset Management L.P. 7/23/12
- Schwartz, Brian 2763 Blackstone Alternative Asset Management L.P. 7/23/12
And the Blackstone-owned placement Agent, Park Hill, had two folks register as lobbyists:
- Baquiran, Lestrino P. 2762 Park Hill Group 7/1/12
- Roberts, II Thomas Hugh 2761 Park Hill Group 7/1/12
Looks like there’s a lot of fun coming down the pike in Frankfort this legislative session.