Bloomberg.com yesterday ran a column about one of the most interesting little lawsuits the city of San Diego is involved in right now.
The implications of this case are huge.
The deal is simple: Callan Associates Inc. was one of the investment advisors to the city pension system. But Callan allegedly earned money not only from its contracts with trusts like the city’s, but also from managers of investment firms.
In other words, the city is claiming in court documents that Callan may have recommended investments to the city not because of their overall merit but because the managers of these investments were either clients of Callan or potential clients.
Callan has asked the judge to dismiss the case and there’s a hearing Oct. 6.
Columnist John Wasik from Bloomberg said “something sure stunk” with Callan’s deals with San Diego.
Pension whistleblower Diann Shipione has been saying that for years.
While the suit doesn’t provide a total tally of how much money managers paid the firm while the consultant was working with the San Diego fund, “Callan’s referrals to the San Diego fund of large-cap growth managers consisted entirely of candidates who had purchased services from Callan,” the city attorney’s suit claims.
If City Attorney Mike Aguirre and the city’s hired counsel, Bryan Vess, are successful on this claim, it would have repercussions for a great many of Callan’s other clients, who may not have fared as well as San Diego did on its investments.