Parsky, G $

<h1 class="multi-line-title-1">Lawyer Gerald Parsky Gets In on the Action</h1>

</div>

<div id="mod-article-byline" class="mod-latarticlesarticlebyline mod-articlebyline"><span class="pubdate"><a href="http://articles.latimes.com/1987/sep/27">September 27, 1987</a></span><span class="separator">|</span><span>DOUGLAS FRANTZ</span></div>

<li>

<ul>

</li>

<tr>

<tr>

</td>

</td>

<div class="gig-button-text gig-share-button-text">Email</div>

</td>

</td>

</tr>

</tbody></table>

</div>

</td>

<tr>

<tr>

</td>

</td>

<div class="gig-button-text gig-share-button-text">Share</div>

</td>

</td>

</tr>

</tbody></table>

</div>

</td>

</tr>

</tbody></table>

</div>

</td>

</tr>

</tbody></table>

</div>

</li>

</li>

</ul>

</li>

</ul>

</div>

</div>

<p><b>When Gerald L. Parsky was ready to leave the Treasury Department in 1977, </b>his friend and mentor William E. Simon invited him to join in forming an investment firm. Despite Simon's promise that he would make more money than he had ever imagined, Parsky declined.

"If I had gone with Bill, I would always have wondered whether I could do it on my own or whether I'd always be his boy," Parsky recalled in a recent interview.</p>

</div>

<p><b>So Parsky, who in 1974 had become the youngest assistant secretary of the Treasury in modern history at the age of 31, became the first outside lawyer hired as a partner by the Los Angeles law firm of Gibson, Dunn & Crutcher.</b>

He helped build the firm's Washington practice before coming to Los Angeles in 1983 with his wife, Robin, a native of Pasadena and former assistant vice president at Crocker National Bank.

Once here, Parsky continued to set records: At 40, he became the youngest senior partner at the law firm, a tribute in large part to his role in its expansion into a truly national firm. He also built a thriving corporate practice, which included negotiating some major real estate transactions and other investment deals. And that led to some frustration.

"I found many people wanting to retain us, in part because of a counseling role that I might play in assisting a principal or an investor in negotiating his transaction," he said.

So, he asked himself, why not be a principal and reap the benefits of his own expertise?

The opportunity to do that arose in September, 1985, when Simon, who had made a fortune in leveraged buyouts since leaving his post as secretary of the Treasury nearly a decade earlier, telephoned and asked Parsky to join him as an investment partner in a new endeavor.

The rest, as they say, is history.

Over the last two years, the partnership has bought four savings and loan firms, interests in two banks and invested $50 million in real estate projects. Parsky and Simon have also joined with an Australian takeover firm to start a fledgling merchant bank and are eyeing other acquisitions in the financial field.

The number of partners has increased to a core of six, with some deals bringing in others as investors. But Simon and Parsky have remained the two senior investment partners in every deal.

So now, although the 44-year-old Parsky also remains at the law firm and says he is committed to his practice, he is finally a principal.</p>

</div>

<p>

<h2 align="center" style=" text-align: center;"><span style=" font-size: 28.0pt;">UC deal followed big gift to GOP</span></h2>

<p class="MsoNormal"><span style=" font-size: 11.0pt; font-family: Geneva;">- Lance Williams, <b><i>SF EXAMINER</i></b>,<span style=" color: black;"> July 16, 2000 </span></span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">A University of California regent who heads George W. Bush's presidential campaign in the state steered a UC contract to an investment firm after its boss gave $80,000 to a Republican fund, The Examiner has learned.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In an interview, Regent Gerald Parsky, a Los Angeles financier and a fund-raiser and confidant of the Republican candidate, downplayed his role in hiring the firm for the University of California system.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">He said he was unaware of political donations made to Bush and the GOP by executives of the firm.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">But according to UC records and informed sources, in recent months Parsky has pushed a sweeping restructuring of the UC's $59 billion pension fund.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">At a series of university meetings, some held in closed session, Parsky has told the regents they should overhaul UC's investment strategies and has sparked a move to oust the university's veteran treasurer, Patricia Small, according to records and sources.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">To carry out the changes, the records show, Parsky has persuaded UC to give a series of consulting contracts to Wilshire Associates, a prominent Los Angeles investment firm.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The firm's president is Dennis Tito, a longtime Republican donor who recently made headlines by announcing he would pay $20 million for a ride on the Russian Mir space station.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky's efforts culminated May 18, when at a Los Angeles meeting, the regents awarded a $350,000 no-bid contract to Tito's firm to carry out much of the overhaul Parsky had advocated.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In a phone interview Friday, Parsky downplayed his role as an advocate for the Wilshire contract, saying he merely presented the consensus view of a special UC commission. He also denied wanting to oust the university treasurer.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Wilshire's hiring was done according to UC procedures and was done on the merits, he said.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">But federal election records show that on May 11, one week before the UC vote, Tito donated $80,000 to a Republican Party soft money committee that is raising money in support of Bush's election.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">It was the largest political donation Tito had made since 1990, when his donations were first noted in election records.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Denies donation for Parsky</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">California law says appointees to state boards and commissions cannot "accept, solicit or direct" political donations of more than $250 from prospective contractors, except when the contracts are let via competitive bidding.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The 1981 law was written to buttress the integrity of official decision-making, said Robert F. Stern, president of the nonprofit Center for Government Studies in Los Angeles, who helped draft the measure.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">"You don't want people appear</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">ing before public agencies to think that they have to give so that they can get," he said. "It is an appearance question."</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">But Tito said that the donation reflected his personal political views and had nothing to do with the UC contract. In any event, Parsky was not involved, he wrote in an e-mail.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Instead, Tito wrote, he made the donation in response to a solicitation from his friend Bradford Freeman, a Los Angeles investment banker who is Bush's California fund-raising chairman.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">"If Jerry Parsky had asked for a contribution, I would have been unable to do so, as there would have been a real or perceived conflict of interest," Tito wrote. "In fact, I have never had a conversation with Jerry Parsky either about making a political contribution or his position as a regent."</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Cause for concern</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky said he was unaware of the donation, saying, "I have never had any contact with Mr. Tito about making contributions to the Bush campaign." Although he accompanies Bush to fund-raisers in California, he said he could not recall encountering executives from Wilshire.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Critics say the push to oust UC's highly regarded treasurer and alter UC's investment practices was cause for concern.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Small "is an excellent treasurer - her rate of return has been outstanding, higher than almost any other university," said former Regent Glenn Campbell, a scholar at Stanford's Hoover Institution. "It would be very unfortunate for UC if they got rid of her."</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky and Tito are wealthy Southern California financiers with strong ties to the GOP.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky, 56, is a lawyer and former U.S. Treasury official who heads a Los Angeles investment concern that specializes in buyouts of undervalued companies.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The firm was roiled by controversy in 1992, when founding partner William Simon, a former U.S. Treasury secretary, quit in a bitter falling out with Parsky, his former protégé.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">But the firm, renamed Aurora Capital Partners, has since rebounded, and Parsky has emerged as one of California's most active Republican fund-raisers.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Seen as possible cabinet member</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">His friends tout him as a likely U.S. Treasury secretary if Bush becomes president.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Since 1992, Parsky and his firm have contributed more than $500,000 to the GOP, most of it in so-called soft money - donations that are exempt, through a legal loophole, from federal contribution limits. He has raised millions more for the party in California, including $11 million to underwrite the 1996 GOP Convention in San Diego, according to news accounts.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In 1996, Parksy was named a regent by then-Gov. Pete Wilson, to whom Parsky had donated</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">$75,000, state records show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Two years later, Parsky signed on to chair Bush's presidential campaign in California. The Texas governor wanted Parsky to help him "penetrate the state's vast network of campaign donors,'' as the conservative magazine the Weekly Standard wrote. "The California finance director is the highly regarded Brad</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Freeman."</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky disputed that he played a significant fund-raising role, saying his main job was to direct political strategy for Bush in California.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">As California chairman, Parsky has accompanied Bush on a series of fund-raising forays around California. They included a three-day, nine-city swing in the summer of 1999 in which the Texas governor raised $2 million; and another trip in May in which Bush raised an estimated $4 million, much of it in soft money, at events including a $25,000-per-plate dinner at the Rancho Mirage estate of philanthropist Walter Annenberg.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Rocket scientist yearns for space</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Tito, 59, is a former rocket scientist who pioneered the use of computers to create investment strategies, according to people who have worked for him. Today his firm, Wilshire Associates, provides investment advice to pension funds with $7 billion in assets, according to the trade publication Nelson's Guide. CalPERS, the state's public employee pension, last year paid Wilshire $691,000 for consulting.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Tito lives alone in Pacific Palisades in a $20 million, 30,000-square-foot hilltop estate called the "Wag the Dog" house because part of the 1998 political satire was filmed there.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Last month, he said he would pay $20 million to spend a week orbiting the Earth on the Russian Mir space station, which has been bought by a Dutch firm. "My commitment is to fulfill all my dreams that are healthy and legitimate," he told the New York Times.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In the early 1990s, Tito became a donor and fund-raiser for Gov. Wilson and for Los Angeles Mayor Richard Riordan, according to former Wilshire executives. Riordan named him chairman of the Los Angeles Department of Water and Power, where he clashed with unions over a plan to tap pension funds to close a city budget deficit.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In July, 1999, when Bush made the California fund-raising swing, Tito and other Wilshire executives combined to donate $10,000, according to federal records. In May of this year, when Bush was in California to raise soft money, Tito donated $80,000, the records show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Stephen Nesbitt, the Wilshire executive in charge of the UC project, said the $10,000 donation was for a table the firm had bought at a Los Angeles fund-raiser for Bush. Neither donation was related to the UC project, Nesbitt said.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Pension fund's performance</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">After he became a regent, Parsky was named to head a powerful</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">UC committee that oversees UC's $59 billion pension fund.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">UC's pension fund has long been managed by Treasurer Patricia Small, a highly regarded career employee who serves on the board of the Association for Investment Management and Research, an international organization for investment professionals.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In a 1999 report, the treasurer's office said the fund had been a big winner for the university, outperforming comparable funds and achieving an annual return of 16 percent over the past 20 years.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Because it generates a surplus, UC employees haven't had to contribute to their pensions for a decade, according to the report.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Nevertheless, according to documents and interviews, Parsky began urging the regents to scrutinize the treasurer's investment strategies and her job performance.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The regents set up a special commission to oversee the treasurer's office. Parksy was named chairman, and two other regents, Howard Leach, a San Francisco financier, and Judith Hopkinson, a former home loan executive from Orange County, also were appointed.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Wilshire gets contract</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">UC general counsel James Holst said the commission was exempt from state open meetings laws, and it held a series of closed sessions. At one such meeting in 1999, the commission hired Wilshire Associates to a $97,000 consulting contract, records show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">In response to other regents' queries, Parsky said Wilshire had won the contract competitively.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Then, in July 1999, a few weeks after Tito and nine other Wilshire executives and their wives combined to donate $10,000 to Bush's campaign, the regents authorized hiring consultants to analyze the portfolio's mix of investments.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The commission Parsky chaired gave the $250,000 contract to Wilshire Associates without seeking competitive bids, according to UC records.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">When queried by other regents, Parsky said no other bids had been solicited because the new contract for Wilshire was seen as an extension of the first, meeting minutes show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Treasurer Small's concerns</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">By early this year, according to documents and sources, both Parsky and Wilshire's consultants were contending UC's fund should be overhauled because its mix of investments was too risky. Parsky also asked the regents to hold closed meetings that involved discussions of Small's job performance, sources said.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Small declined to be interviewed for this story. But according to documents she has written, Small was concerned by what she considered Parsky and Wilshire's unfounded critique of the pension fund's performance.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Small became alarmed as Parsky and Wilshire pushed for what</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">she saw as abrupt and major changes in the fund's successful asset mix and its performance benchmarks, she wrote.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">She feared the changes might lower UC's investment returns by millions, the documents said, and she thought it was imprudent of UC to order a sudden, major overhaul of its portfolio based on the say-so of a single consultant.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">She was also troubled by the powerful regent's urgency - "the adversarial, rush to judgment atmosphere that has been created by Regent Parsky," as she wrote at one point - because she believed important investment decisions should be made with care.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">The $350,000 contract</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Nevertheless, in March the regents adopted Wilshire's recommendations - changing the pension fund's mix, hiring money managers to run about 30 percent of the portfolio, and bringing aboard a general consultant, at a fee of up to $400,000 per year, to put the new strategies into effect.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Then, at a regents' meeting on May 18, one week after Tito had made his $80,000 donation to the GOP soft money committee, Parsky recommended that UC give Wilshire Associates yet another no-bid contract. This one, for $350,000, was to pay Wilshire to carry out the overhaul of the pension fund it had recommended.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Parsky had faced few queries on prior contracts for Wilshire, but this time two regents were opposed, meeting minutes show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Both Lt. Gov. Cruz Bustamante, a regent ex-officio, and Regent Ward Connerly, a Sacramento businessman, urged that the contract be put out for bid.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">But Parsky contended it was important for UC to have Wilshire involved in putting its advice into effect. Once the investment mix was overhauled, UC would put the pension consulting contract out to bid. The other regents agreed, andthe contract was awarded to Wilshire, the minutes show.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">More recently, according to informed sources, the regents have approached Small and attempted to persuade her to retire from the university.</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Regent Hopkinson, who joined Parsky in a conference-call interview with The Examiner, said Parsky had been "very deliberative and encouraged and obtained significant input" from other regents before bringing in the consulting firm and restructuring the fund. <</span></p>

<p>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">Article URL:</span>

<span style=" font-size: 11.0pt; font-family: Arial; color: black;">http://sfgate.com/cgi-bin/article.cgi?file=/examiner/archive/2000/07/16/NEWS9974.dtl</span>

<p>

 </p>

<p>FORMER Treasury Secretary William Simon and Los Angeles lawyer Gerald Parsky were close friends as well as highly successful business partners. Just last September Simon spent ten days at Parsky's 23-acre California estate. Formed in 1986, their WSGP group, which took its name from its two lead partners, had attracted investors ranging from Saudi royalty to European billionaires and had invested in such things as banks, real estate and manufacturing companies.

Yet ten days after leaving Parsky's home, Simon sent out a one-sentence fax to Parsky and other partners, saying he was withdrawing as a partner from WSGP. The abrupt resignation came just as WSGP was about to close a $300 million fund. When WSGP officials first saw the fax, they thought that it was a joke. It wasn't. By the end of the day the $300 million fund had collapsed.

Three more Simon allies with investments in WSGP deals--including Preston Martin, former Federal Reserve Board vice chairman--also left the partnership. And …</p>

</div>