Kentucky Retirement Systems Lawsuit Targets New York Fixer Regina Calcaterra for Alleged Bid Fixing

What passes for the elite in this country is normally immune from prosecution or even career harm if they follow their monetary interests: curry favor with the right people, never cross anyone important unless the potential payoff is worth it. Morals be damned.

We may have the gratifying spectacle of someone who openly, as in too openly, followed that creed having a day of reckoning. Regina Calcaterra, partner in the law firm Calcaterra Pollack and a notorious New York State fixer is charged with bid rigging. The New York Times published an investigative series about the Moreland Commission, an anti-corruption probe. Calcaterra was its executive director. The commission was disbanded early. The Times reported that Calcaterra harassed investigators, interfered repeatedly in the report drafting process, improperly blocked subpoenas and communicated with Governor Cuomo, with the aim of squashing any findings that might embarrass Cuomo. The New York Board of Elections sued Calcaterra several times for violating campaign finance laws. She was barred from running for office for lying about her residency. To the extent she knows anything about public pension funds, she learned it from her one-time boss, state controller Alan Hevesi, who went to prison in a pay-to-play scandal (note Calcaterra worked for him his earlier role as New York City controller; in that capacity Hevesi was also responsible for the pension investments).

As you can see below, the tenacious legal team that originally represented the so-called Mayberry eight in Mayberry v. KKR has Calcaterra and an alleged co-conspirator at Kentucky Retirements Systems, its now general counsel Vicky Hale, in its cross-hairs for alleged violations of Kentucky procurement statutes, breach of trust and fiduciary duty, and conspiracy claims. A new group of so-called Tier 3 (defined contribution) plaintiffs are seeking to sue the KKR, Blackstone et al for selling overpriced, misrepresented customized hedge funds that underperformed stocks and even cash. The suit against Calcaterra, members of her firm, and Kentucky Retirement Systems’ Hale is a side but nevertheless revealing action.

The filing below perfects allegations previously made against Calcaterra and her apparent partners in misconduct. The first time the Tier 3 attorneys, led by Michelle Lerach, covered much of the same ground in an early 2021 filing and asked for the so-called Calcaterra Report to be released. Judge Philip Shepherd reacted harshly, as if the point of the filing was primarily to dirty up Calcaterra. He also discounted the New York Times investigation, saying more or less than anyone who has held an important job has been on the receiving end of bad stories.

But as we noted at the time of the earlier filing:

By contrast, just about everything about this new “investigation” stinks. Recall that on July 20, the Kentucky Attorney General filed his unexpected intervention. On July 29, the plaintiffs’ attorneys filed a motion asking permission to file a Second Amended Complaint on behalf of a rejiggered “Mayberry 8,” this time including three Tier 3 beneficiaries in place of three of the original beneficiaries.

On August 24, the Commonwealth of Kentucky solicited bids on a contract to ascertain “if there are any improper or illegal activities on the part of the parties involved,” meaning KRS and the Kentucky Public Pensions Authority, with a due date of September 14. Such a tight time frame that included the Labor Day weekend smacks of an intention to discourage submissions. We saw the same behavior when CalPERS was trying to hand its private equity investment program over to BlackRock, well, except that CalPERS provided for a four-week bid period, as opposed to three for the KRS.

How could a bona fide investigation question if there were any improper/illegal behavior when an independent litigation committee, much closer to the date of the alleged frauds, had concluded there was enough to take the virtually unprecedented step of endorsing litigation? One has to wonder it the plan was to have the report minimize misconduct so as to pave the way for a lowball settlement.

Since then, the Calcaterra Report and related documents have been made public, ironically via a public records filing that wound up before Judge Stephens. Stephens found that there was pretty much no reason not to make the report public. It was expensive and paid for by taxpayers. Kentucky Retirement Systems had said repeatedly in his court that it would be made public. From his in-camera review, it was a stretch to deem a very few sections as offering legal advice; a mere compilation of information is not subject to attorney-client privilege. And importantly, to the extent there was any privileged information, Kentucky Retirement Systems waived that by handing the document to the state Attorney General without obtaining any protections.

The Kentucky Courier Journal has a good write up. Important sections:

Following the recent release of the Kentucky public pension system’s $1.2 million investigative report on alleged illegal actions involving its hedge fund investments, a new lawsuit claims there was an illegal bid-rigging conspiracy behind the hiring of the firm contracted to do the report….

The 88-page complaint filed by California-based attorney Michelle Ciccarelli Lerach alleges not only that the law firm conspired with pension employees to violate the Kentucky Model Procurement Code and illegally secure the investigative contract, but also that the report itself served as a “whitewash” and “cover up” of wrongdoing by the pension authority’s leadership.

The lawsuit seeks to hold the Calcaterra Pollack firm and its partners liable for damages, the voiding of the firm’s contract with the pension authority and the return of the $1.2 million it was paid. It also seeks a judicial order for the firing of the authority’s executive director, David Eager, and its general counsel, Victoria Hale….

Lerach’s complaint cited Shepherd’s order questioning the bidding process, which notes Calcaterra Pollack first submitted a proposal to investigate the allegations more than two months before the KPPA put out the initial request for proposals in 2020.

Shepherd wrote that Calcaterra Pollack’s second bid-winning proposal was substantially identical to its first one, adding that this and the report’s final content raised questions about whether its purpose and intent was to “fully expose all the relevant facts (and to determine if the KPPA and its employees made mistakes)” or to “cover up or minimize those mistakes in an effort to convince the (attorney general) to not pursue claims that could prove embarrassing to the current or former management of KPPA.”

The new complaint picks up from there, alleging Regina Calcaterra had long been friends with Hale, KPPA’s general counsel…

It also alleges Hale was promoted to general counsel by Eager for pushing through the firm to win the contract, which produced what Lerach called “a corrupt multi-million dollar investigation and report” that served as a “cover up.”

Calcaterra spoke to the Courier Journal and dismissed the filing as desperate. Michelle Lerach is a very savvy and tough-minded attorney. I am very much looking forward to her squaring off against Calcaterra.

000 (2022-09-14) Conformed Complaint (Calcaterra Pollack)Rev2
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  1. Paul Art

    The moral of the story for me is, ban all hedge funds, take retirement security completely out of the private sector. Capital needs to be firmly shackled with bit and bridle, whip and fetters.

  2. greensachs

    Wait! How can such a thing be?
    Each Evening News narrative tells me no one is beyond the laws accountability.
    I’d post further but I’m due at a plea bargain hearing.

  3. David in Santa Cruz

    For the few, the law protects but does not bind; for the many, the law binds but does not protect.

    Our self-selected elites call their corruption “democracy” because it entitles these few gatekeepers to collect rents from the many while distributing a few kick-backs so the politicals will look the other way — because money is speech. Like Don Fanucci in The Godfather Part II, they ask for “…just enough to wet my beak.”

  4. flora

    Thanks for this post.
    By contrast, just about everything about this new “investigation” stinks.

    At some point a stink becomes too overwhelming to ignore even for pols and judges who earlier found ways to not notice the odor. It’s good that there is still a point where things can’t be ignored without losing all credibility. The re-election ads write themselves. Popcorn time? / ;)

    Thanks for NC’s continued reporting on PE and pensions.

  5. Tom Stone

    Suits like this can really open things up in discovery, and if the attorney for the plaintiffs is good and the defendant is arrogant enough, cross examination can be wonderfully clarifying.

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