CIM Group Inc., which is interested in acquiring Delek Real Estate Ltd. (TASE: DLKR) from Yitzhak Tshuva, was the subject of a December 2009 investigation piece by the "Los Angeles Times" about its involvement in a corruption scandal surrounding form Los Angeles Deputy Mayor Alfred Villalobos. CIM has never been accused of wrongdoing.
The "Los Angeles Times" reports that documents show that CIM paid Villalobos nearly $16 million in fees for securing investments from the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System. CalPERS officials said they were unaware of the amounts CIM and others had paid to Villalobos and other so-called placement agents, who lobby pension funds on behalf of big money managers. CalPERS officials have also hired an outside law firm to determine whether the fees and investments were proper.
Based in Los Angeles, CIM Group was founded in 2004 by Israeli expatriates Avi Shemesh and Shaul Kuba together with Richard Ressler, whom the "Los Angeles Times" described as "an investment banker who once worked with junk-bond king Michael Milken". The company secured billions of dollars in pension fund investments and tens of millions of dollars in public subsidies, chiefly by locating many of its projects in struggling neighborhoods where grants, loans and other forms of taxpayer help were readily available.
CIM's flagship project was an urban renewal project on rundown Hollywood Boulevard, which turned the area into a thriving tourist hub.
According to the "Los Angeles Times", CalPERS had a $466-million balance (in 2009) in a CIM fund initially pitched by Villalobos, and invested nearly $1.9 billion with the company. The paper also reported that the US Securities and Exchange Commission (SEC) demanded that Eloit Broidy, the former chairman of Markstone Capital Partners Group LLC, disclose his communications with CIM. At the time, Broidy was a board member Fire and Police Pensions, which invested $30 million in CIM. For its part, CIM invested $500,000 in Markstone.
In December, Broidy pleaded guilty to a felony corruption charge in New York, admitting that he paid $1 million in gifts to public pension officials there to win $250 million in investment capital for Markstone.
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2011
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