Add one more to the CalPERS “Oops” list. After the pension fund yesterday released the names of eight private equity firms which did not comply with its request for placement agent information, we learned that four of the firms claimed they were placed on the list in error. Today, we can add one more to that list, and it’s possibly the most important one of all.
A representative from Markstone Capital emailed me to say the firm did comply with CalPERS’ request for placement agent information. The firm’s statement:
The February 17th report that Markstone did not respond to Calpers request for information about placement agents is erroneous. Markstone has responded to Calpers and provided the requested information. We have been fully cooperating with all regulatory agencies.
The Markstone files will be of particular interest, since the firm’s founder, Elliot Broidy, in December pled guilty to providing $1 million worth of bribes to officials at the New York State Common Retirement Fund in exchange for commitments to Markstone Capital. The SEC is currently investigating Broidy and Markstone’s connections to former CalPERS CEO Fred Buenrostro and former board member Alfred Villalobos.
Will these forms, which indicate all fees paid to placement agents, reveal anything scandalous? Not necessarily, since it appears Markstone did not paid any placement agents in connection with the New York scandal. But with CalPERS, it’s possible that, if Villalobos is involved, Broidy went through Villalobos’ intermediary firm. The fees paid there would be included on the CalPERS document. Markstone declined to provide the firm’s information request form.
Update: A few more unfortunate notes about Markstone.
Number one: The firm is facing battling its former law firm in a fee dispute. According to New York Law Journal, Gibson Dunn & Crutcher, which represented Markstone while it was under investigation by Attorney General Andrew Cuomo, said Markstone owes the firm at least $1.3 million.
Number two: An Israeli news organization is reporting that Markstone’s investors are not confident in the fund valuations provided by the firm. Investment firm Meitav has marked down its investment in the fund by 30%. Beyond that, the firm (according to this report) is trying to do a deal, despite LPs’ requests that it not deploy any capital during ongoing investigations:
Markstone has reportedly been trying of late to acquire a stake in the Yes satellite television company from Shaul Elovitch for about NIS 600 million, which was a surprise, because several Israeli institutional investors had asked that Markstone refrain from new investments following revelations of bribes given by Markstone’s Elliott Broidy to senior New York State pension fund officials.
From a legal standpoint, Israeli investors have no grounds to ask Markstone to stop making new investments, but it is thought investors made it clear to the fund that no new deals should be in the offing and that Markstone had said in the past that no new investments would be made until the end of the Broidy affair.