California Fund Management Firm Sues CalPERS In Contract Dispute
On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Contract Disputes on Wednesday, April 17, 2013.
Making sure that every citizen has equal opportunities is an essential value in American society. This includes making sure that minority communities have the same opportunities as anybody else. California Public Employees Retirement System (CalPERS), the nation's largest pension plan, hired Centinela Capital Partners to manage the pension fund and find the next crop of private equity managers with special focus on minority-owned firms. With such a noble beginning, it may be surprising that the relationship between CalPERS and Centinela has resulted in a legal contract dispute.
The conflict began when a scandal broke out in 2010 known as 'The Placement Agent Scandal.' The scandal involved former CalPERS executives and board members as well as CalPERS associates. The state of California sued two of the executives as a result. However, CalPERS somehow suspected one of Centinela's founding partners to also be involved in the scandal, despite two investigations by CalPERS consultants which apparently showed that this was not the case.
Despite this finding by the two investigations, CalPERS told the other two founding partners of Centinela that it would not do business with Centinela unless it severed ties with the suspected third founding partner of the minority-owned firm. Centinela eventually did as CalPERS asked and, in return, CalPERS promised to invest $100 million into the firm. However, after the fund management firm severed ties with its third founding partner, CalPERS allegedly reneged on its promise.
This caused Centinela to file a lawsuit for breach of contract as well as racial discrimination against CalPERS. Now, the contract dispute will have to be settled in the court of law in front of a judge. Both sides will be required to present their legal arguments. The California court will then decide the case based upon the evidence presented to support the legal claims by both the plaintiff and the defendant.
Source: Los Angeles Wave, "Minority-owned fund management firm takes on Goliath CalPERS in lawsuit," Betty Pleasant, April 4, 2013