CALPERS lawyer delivers report on Board bribery and corruption

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A lawyer hired to investigate bribes and kickbacks at one of the nation’s largest pension funds, the California Public Employees’ Retirement System, said on Monday its former board member Alfred Villalobos, corrupted top officials there and likely cost the fund tens of millions of dollars in extra investment fees.

Independent attorney Philip Khinda reported that Villalobos, a so-called “placement agent,” corrupted five senior CALPERS officials including former CEO Fred Buenrostro, former board members Charles Valdes, Kurato Shimada and Robert Carlson, and former investment officer Leon Shahinian.

Both Villalobos and Buenrostro have been sued by the state’s attorney general and federal prosecutors are conducting their own investigation.

Authorities claim that a handful of investment firms paid Villalobos and his cronies over $50 million in secret fees to help make introductions and convince CALPERS executives to do business with them. Buenrostro attempted to shield Villalobos from legal liability by signing papers saying that CALPERS was aware of the fees that Villalobos was collecting.

In his 56-page report, Khinda said that Villalobos created a perception that investment firms needed to pay for connections to secure business for their firms.  The firms likely inflated their fees they charged CALPERS in order to offset the secret fees paid to Villalobos.

Since the scandal was discovered, Khinda has renegotiated deals with the investment firms that were clients of Villalobos and obtained over $300 million in fee discounts.

In a matter unrelated to the investment firms, Khinda’s report provides details about a $4 million consulting paid to Villalobos by Medco Health Solutions, a New Jersey company that handles the CALPERS employees’ drug benefit plan.

In 2005, when the drug administration contract came up for bidding, a copy of an internal CALPERS report was leaked to Medco that showed that the company was the leading contender for the contract. The contract was worth $8 million annually.

After Medco was awarded the contract, the company began paying Villalobos an additional $20,000 per month in consulting fees until 2009, when the scandal was first reported.

CALPERS has since enacted new rules and reform procedures including a prohibition on the payment of “placement” fees by investment firms.

The Sacramento Bee

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New York state lawmakers indicted on bribery and money laundering charges

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N.Y. State Sen. Carl Kruger and Assemblyman William Boyland surrendered to authorities on Thursday, after being charged for allegedly selling their influence to hospitals, real estate developers and lobbyists.

N.Y. Sen. Carl Kruger allegedly took over $1 million to grant political favors.

Prosecutors said that Kruger, a longtime Brooklyn Democrat, received over $1 million in bribes since 2006. Much of his illegal activities were connected to prominent Albany lobbyist Richard Lipsky, with whom he shared fees, and then took “the very official acts in favor of which Lipsky had been paid to lobby.”

In one instance, Kruger helped steer $500,000 in taxpayer monies to one of Lipsky’s clients.

The court documents claim that Kruger regularly worked with Lipsky to ensure that his clients received favorable treatment on issues that required government approval. Kruger sought to conceal the bribes and kickbacks, passing them through a bogus company called Adex Management, and then further through a shell company, Olympian Strategic Development.

Olympian was controlled by Dr. Michael Turano, the son of Kruger’s close friend Dorothy Turano, a local community board director.


Boyland, a four-term Democrat, was hired as a “no-show employee” at Brookdale Hospital, which at the time, was seeking approval in Albany for its expansion plans. Boyland picked up $177,000 under the sham arrangement.

Besides the lawmakers, several others were indicted in illegal schemes. David P. Rosen, of Medisys Health Systems, who gave Boyland the “no-show” job; hospital executives Robert Aquino and Solomon Kalish; real estate developer Aaron Malinsky and Dr. Turano.

The 53-page complaint detailed the FBI’s investigation which included bugs on Kruger and Lipsky’s phones, recording months of conversations and regular surveillance.

The men were charged on various counts of bribery, mail and wire fraud, and money laundering.

Preet Bharara, of the U.S. Attorney’s office in Manhattan said “Once again I am here to report, sadly, that the crisis of corruption continues in Albany.  Every single time we arrest a state senator or assemblyman it should be a jarring wakeup call,” he added. “Instead, it seems like no matter how many times the alarm goes off Albany just hits the snooze button.”

Information from The New York Times

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Former Mich. State Rep. Mary Waters backtracks on corruption guilty plea

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After pleading guilty last year in a corruption case involving her then-boyfriend, convicted Detroit political consultant Sam Riddle, former politician state Rep. Mary Waters has changed her mind and wants the plea reversed.

Waters, 55, pleaded guilty for her role in a bribery case in which Riddle allegedly took $45,000 in cash, and a $5,500 Breitling watch, for his help in getting an approval from the city of Southfield, Michigan, for the relocation of a jewelry store and pawnshop. As part of the arrangement, Waters received a $6,000 Rolex watch.

A Southfield city councilman, William Lattimore, was paid a $12,500 bribe by the couple to push the approval through Southfield city council.

Waters and Riddle were indicted in July 2009 by a grand jury investigating widespread corruption in Kwame Kilpatrick’s city hall administration.

Riddle pleaded guilty to charges of bribery and extortion, and is serving a 37-month sentence in federal prison.

As part of a plea deal, Waters claimed the Rolex was a gift from Riddle, and plead guilty to a misdemeanor charge of filing a false tax return. She was sentenced to one year’s probation.

Waters filed a brief on Friday claiming her Constitutional rights were violated, and wants the plea arrangement overturned.

In the court papers, Waters court-appointed lawyer, Melvin Houston, said that her Six Amendment rights to effective legal representation were violated, that U.S. District Judge Marianne O. Battani failed to establish a factual basis for her guilty plea and it was unfair to make her guilty plea part of an overall plea deal involving Riddle.

The legal brief asks that the conviction be set aside, and for a new plea and sentencing hearing.

Information from: The Detroit News

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Florida politician arrested on corruption charges for aiding developer

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The former vice mayor of Fort Lauderdale, Cindi Hutchinson, 53, was arrested on Friday and charged with corruption in trading political favors for over $14,000 of gifts from a real estate developer seeking zoning changes.

Broward County prosecutors charged Hutchinson with three counts of unlawful compensation, four counts of official misconduct, and one count each of grand theft, petty theft, conspiracy to commit unlawful compensation, and perjury.

The charges center on Hutchinson’s involvement in the rezoning of land owned by controversial developer Glenn Wright, in 2003 and 2004. At the time, Wright was seeking a zoning change on land that would enable him to build large luxury-style homes in an area that was near much smaller homes.

While Hutchinson was serving on the city commission that was responsible for granting the approvals, prosecutors say that Wright’s business partner, Steve Goldstrom, ordered subcontractors to make improvements at the Edgewood home shared by Hutchinson and her mother.

Goldstrom, 54, a former manager of exotic car business, The Toy Store, was also arrested on Friday and charged with one count of perjury.

Authorities say that subcontractors installed a new toilet, a surround sound system, special pool lighting, fencing, pavers and performed air conditioning repair work.  The improvements were done after Hutchinson voted to grant Wright the zoning changes on his La Preserve and Georgian Oaks developments.

Prosecutors said that when investigators asked about the work done at her home, she lied about it and denied knowing any of Wright’s business associates.

Bruce Udolf, Hutchinson’s lawyer, said she will fight the charges. “Any work that was done was a personal favor between friends and there was absolutely no quid pro quo. Any favors that were done for her by her friends were not given in exchange for an official act.”

Hutchinson, a registered Democrat, was on the city commission for nine years until she termed out in March 2009. While on the commission, critics said that she used her elected position to solicit monies for charity from people that had business with the city. Because of her actions, the city passed a law in 2007 prohibiting elected officials from the practice.

more at The Miami Herald

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Mass. Attorney General to up focus on public corruption

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Massachusetts Attorney General Martha Coakley announced Wednesday she is creating a task force to focus on public corruption that has permeated the state’s political establishment.

Coakley says she intends to focus more on corruption in government by reorganizing her department.

The Democrat told the Greater Boston Chamber of Commerce she will split an existing fraud and corruption unit in her office and refocus its workers. One new unit will focus on financial crimes, the other on public corruption.

The focus comes after the bribery convictions of former state Sen. Dianne Wilkerson and former Boston City Councilor Chuck Turner. Turner was sentenced Tuesday to three years in prison after U.S. District Court Judge Douglas Woodlock blasted what he termed the former councilor’s “ludicrously perjurious testimony” at trial.

Coakley told the business leaders attending the Chamber breakfast: “If we cannot ensure the integrity of our markets and of our government, then most of our efforts to rebuild our economy, at this stage, are undermined.”

Besides Wilkerson and Turner, former House Speaker Salvatore DiMasi is also facing federal corruption charges, following criminal prosecutions against his two predecessors.

And Coakley herself is investigating allegations of fraudulent hiring practices within the state Probation Department, the Middlesex sheriff’s office and with Massachusetts Lottery advertising during last fall’s gubernatorial campaign by independent candidate Timothy Cahill.

Coakley has been accused of ignoring many corruption cases, especially involving her fellow Democrats who compose most of the state government, but she has said that in many cases, the federal government has better law enforcement tools to prosecute the crimes.

She also highlighted for her Chamber audience the more than 40 public corruption cases brought by her office – against members of both parties – and her focus on falsified training by EMTs seeking extra pay; false workers compensation and unemployment claims; and her successful recovery of more than $250 million during the past four years through Medicaid fraud prosecutions.

Coakley said both of the new units will be staffed with prosecutors trained in public corruption techniques, as well as the white-collar crime that will be targeted by the financial crimes unit.

The attorney general encouraged business leaders to cooperate with her efforts by turning in employees suspected of embezzlement, hacking and theft of company secrets.

“Sometimes it makes sense for you, in your businesses, to send a line to your employees, to send the message, that we do not take this lightly, we are not just going to write it off after we fire you – and, by the way, send you out in the world so you can go do it someplace else at another business,” she said.

Coakley kicked off her speech with a reference to the high-profile U.S. Senate race she lost a year ago to Republican Scott Brown. Noting she had been re-elected in November and sworn in last week, Coakley quipped that “twice now in the past year, the voters have said they want me to stay as attorney general.”

She also provoked murmurs as she repeatedly highlighted the good-citizenship theme highlighted in regular Citizens Bank television ads – as she stood in front of a Bank of America banner in recognition of its sponsorship of the breakfast.

Source: The Associated Press

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Boston politician Chuck Turner sentenced to 3 years behind bars for bribery

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Former Boston Councilor Chuck Turner, who was convicted in October for taking a $1,000 bribe from an undercover FBI agent in 2008, was sentenced today to three years in prison by U.S. District Judge Douglas P. Woodlock.

Turner, 70, could have received a sentence for as much as 35 years, although his defense team asked for no-prison sentence, pointing to his more than 40 years of community service.

Boston Councilor Chuck Turner was sentenced today to 3 years in prison for taking a $1,000 bribe to help secure a liquor license. (photo The Boston Herald)

Turner was caught in an FBI sting, during which he was recorded on video taking a $1,000 bribe from businessman-turned-FBI informant Ronald Wilburn. During his trial, Turner said he didn’t remember if he looked at the cash changing hands and referred to it as a “preacher’s handshake.”

Around the same time, another prominent African American politician was also taken down by Wilburn and the FBI. Former State Senator Diane Wilkerson took $23,500 in bribes for agreeing to help Wilburn obtain a liquor license for a nightclub he was purportedly planning, and for her influence on a property development deal.

Wilkerson pleaded guilty to eight counts of attempted extortion and was sentenced two weeks ago to 3 ½ years in prison.

The Harvard-educated Turner began his career in politics as a community activist in Boston’s South End, fighting for better housing conditions for poor residents. He was first elected to the Boston City Council in 1999 running on the Green-Rainbow ticket, and representing District 7.

Even though he was under indictment for bribery when he ran for re-election in 2009, his popularity with voters helped him easily retain his seat.

After a jury convicted him of bribery, the city council voted him out of his seat earlier this month, but Turner refused to go quietly. Turner filed a civil lawsuit against the city claiming it had no authority to remove him from office.

U.S. Attorney Carmen M. Ortiz said of the sentencing, “Mr. Turner was sentenced to prison today because of the choices he made and the actions he took during the course of this case. It is the obligation of every elected official to be ethical and honest, and in this case, Mr. Turner was neither. Public corruption is more than a violation of the law, it erodes the public’s trust in the very system that was designed to protect us.”

In addition to the prison sentence, the Judge Woodlock ordered Turner to return the $1,000 bribe monies.

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City official arrested for taking bribes from developer

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The community development director in East St. Louis has been indicted on charges that he took bribes from a local real estate developer, in connection with a low-income affordable housing project known as Bowman Estates.

Arthur M. Johnson, 61, was arrested on Monday and charged with three criminal counts of accepting bribes using his position as the city’s community development director, in which he oversaw housing and other real estate operations in the community. He was also charged on two counts of aiding and abetting two of the developer’s criminal offenses.

Charged with nine counts of wire fraud was real estate developer Harold N. Rosen, 79, owner of Kully Construction, the firm that developed and was to build the project.

The indictments centered on the $5.6 million development, consisting of 56 apartment units in 14 four-family flats. Court documents claims that one of Johnson’s relatives prepared the business plan for the proposed development, and Johnson was paid by Rosen to secretly rewrite it so that it would be acceptable to the city council.

Rosen applied for $1.9 million in public financing from the city, having submitted bogus financial statements, loan documents and tax returns. When applying for the public funds, Rosen claimed to be a wealthy developer who would obtain $3.6 million in private financing for the project, as a condition of starting the project.

After the project was approved by the city in 2008, Rosen submitted bogus invoices for reimbursement of expenses that had not been incurred, and actually received more than $60,000 of payments.

Prosecutors in the U.S. Attorney’s office said that Johnson allegedly approved a phony $40,000 reimbursement request from the company, even though he knew it to be fraudulent. That reimbursement, and others, were flagged and blocked by the East St. Louis Financial Advisory Authority, a state agency that monitors city spending.

The agency said that discrepancies on paperwork led to their concern that Rosen might be defrauding the city. Conflicting information on six different letters of credit provided by Rosen, including home addresses that were purportedly of financial institutions, caused officials to alert federal investigators.

Authorities said that Rosen promised Johnson a job with his company after he retired from the city, in order to get his cooperation in the scam. Rosen also paid cash bribes to Johnson, according to the indictment.

The indictment also said that once the project moved forward, Rosen intended to purchase cheap pre-fab housing modules from an outfit in Indiana, thus depriving local residents from job opportunities for on-site construction.

“It was a development we were greatly looking forward to that was going to complement what already is a blossoming Emerson Park neighborhood,” said East St. Louis Mayor Alvin Parks. He added that another developer has been engaged on the project, and that the city still intends to see it built, although perhaps in a slightly different form.

Johnson had been working at the city since 2005, but “he will not be employed much longer,” according to Parks.

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