The recent report on CalPERS was scathing in its detailing of alleged corruption, kickbacks and bribes at the highest level. Former CalPERS CEO Fred Buenrostro and board member Alfred Villalobos have already been sued by California, and the attorney in charge of the report says he expects that criminal indictments will follow saying, "It's time for law enforcement to do what it sees fit to do."

Calpensions says the report, as laudatory as it is, leaves unanswered questions. Among them, was Buenrostro made CEO of CalPERS "with the understanding that he would be an inside man for Villalobos, or was he recruited later?" This is made all the more appalling by CalPERS being the biggest public pension fund in the country. After all, it manages money for retirements. Such money should be conservatively invested with clear and enforceable oversight. Yet, quite the opposite happened. 

While CalPERS has instituted some piecemeal reform, much more is needed. Dan Primack at Fortune says high level investment managers are leaving public pension funds because they find the new rules confining. Um, does that mean that private funds have no such rules? If so, that needs to change too. He proposes four reforms that would certainly help clean up the mess as well as stop the brain drain.

1. Stop fretting about the middlemen.  Instead, all prospective investments made by the fund should be detailed and documented extensively. He sees the problem as primarily within the fund, with the placement agents being peripheral. But placement agents need strict oversight too, or else the bribes and kickbacks will just happen again in some new way.  

2. Fix compensation.  Bonuses should be tied to multi-year performance, not just the previous year, and on a sliding scale so that those with the fund for several years make more. Those in their first few years should make no bonuses.

3. Commonsense travel and gift rules. It seems outrageous that such rules were not already in effect and being enforced. 

4. Let your people leave. They can work for firms that had business with the fund so long as they were not responsible for that business.

Pension Pulse adds to this saying:

1.  If the fund loses 10% in a year, there are no bonuses period, even if an individual manager beat his benchmark

2.  Points accumulated on business trips cannot be used on personal trips

3.  Employees who leave cannot work for any firm they had business dealing with for a minimum five years

4.  The crucial thing is to enforce any existing rules, especially since many funds simply ignore them.  They sadly lament that getting kickbacks sent to your private overseas bank account is far too easy to do and happens far too often in the pension industry.  

There should also be periodic audits by outside firms paid by the state, not the fund, with the power to request any document and conduct any interview. These pension funds are the retirement security of millions, not a piggy bank to be looted by a few at the top.