Post-Employment Restrictions
AB 873 (Furutani)
Amended April 14, 2011
SUMMARY
This measure will:
1. For CalPERS and CalSTRS board
members, executives, senior investment
officers, general counsels, and senior
managers in the health benefits and
investment divisions: extend the current two-
year ban on lobbying a former state employer
to four years. Additionally, this provision
would shift into the Political Reform Act and
violations would be subject to Fair Political
Practices Commission enforcement.
2. Prohibit designated CalPERS
and CalSTRS board members and senior staff
from assisting a new employer on any
contracts with CalPERS or CalSTRS if they had
substantial contract dealings (valued above
$10 million) with their new employer in the
two years prior to their separation. This
prohibition would last for two years.
3. For ten years after their
separation, prohibit designated CalPERS and
CalSTRS board members and staff from
accepting compensation as a placement
agent for providing services in connection
with CalPERS or CalSTRS.
CURRENT LAW
Prohibits CalPERS and CalSTRS board members,
senior executives and investment officers, and
general counsels from accepting compensation
and lobbying CalPERS or CalSTRS for the purpose
of influencing administrative or legislative action.
Prohibits discussions on employment with a
prospective employer for whom those discussions
could lead to a material financial benefit.
Requires placement agents who wish to do
business with CalPERS or CalSTRS to register as
lobbyists and be subject to all related reporting
and compliance requirements under the Political
Reform Act.
Federal law generally prohibits employees from
accepting employment with an entity with whom
they’ve had substantial contract dealings (valued
above $10 million) in the one year following their
separation.
BACKGROUND
In early 2009 a public pension fund scandal
involving the trade of campaign contributions for
pension fund investments broke in New York
State. The individuals at the center of that
scandal were investment middlemen, called
placement agents, and some of those involved
were linked to placement agent firms in
California.
In the months that followed the scandal rippled
westward, catching former California Public
Employees’ Retirement System (CalPERS) board
members and a chief executive who had received
tens of millions of dollars for arranging
investment deals that, in some cases, lost the
state hundreds of millions of dollars.
In 2010 CalPERS commissioned a study by the
respected Washington DC law firm Steptoe and
Johnson to review CalPERS’ investment decision
making and identify ethical vulnerabilities. The
initial findings of that report, which included a
recommendation to further limit the “revolving
door” of employment between pension fund
investment work and private firms seeking those
investments, was released in November 2010.
This measure is modeled on current federal post-
employment restrictions and would not prevent
separating employees from working for any
employer with whom CalPERS or CalSTRS does
business, as long as their duties did not involve
performing, implementing, or executing a
contract with CalPERS or CalSTRS.
JUSTIFICATION
This proposal addresses a key ethical challenge
associated with former state pension fund board
members and staff tied to the placement agent
scandal. By enacting stronger revolving door and
lobbying restrictions CalPERS and CalSTRS
investments will be better insulated from undue
influence, restoring the systems’ performance
and credibility in the public eye, while reducing
the likelihood that investment decisions would be
influenced by job offers and former employees’
“insider” knowledge.

FOR MORE INFORMATION

Dave O’Toole
Policy Director
State Controller’s Office
dotoole@sco.ca.gov
(916) 445-2636