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Anytime there's a lot of money sloshing around, it can bring out the worst in people. California's $163 billion public employee retirement nest-egg, CalPERS, is proving to be a feeding trough for opportunists of several different stripes, and in the end, we taxpayers pay for the damage they create.

My ears pricked up on a ski trip about three years ago when the wife of a national real estate investment company casually mentioned how disgusting it was for their company to have to sell projects to CalPERS. There was the expectation that the company jet would be available to ferry a government decision-maker and his or her "significant other" to Las Vegas for an expense-paid weekend. Whether the story is true or not is impossible to verify, but why would anyone make it up?

If, in fact, a former Cal-PERS board member has reportedly been paid $50 million in "finders' fees" by investment companies trying to sell investments to the retirement plan, a free trip to Vegas is just chump change by comparison.

Earlier this year, I read about New York state's indictment, (and now conviction) of a collection of people who were being paid as "finders" by hedge funds like the Carlyle Group to help the latter place investments with that state's pension fund. Carlyle has now paid $22 million as a settlement for its use of "influence peddlers."

Here's why the work of "finders" can be so insidious - and costly to taxpayers.

If investment companies feel that they have to pay influence peddlers, then this cost gets built into the investment they are trying to sell. In theory, if they weren't paying someone to get them in front of CalPERS investment committees, they would be able to offer their services at a cheaper cost. It's that simple.

But then there's more. When investments make it to a selection panel because someone with connections to the existing board members made it happen, a screening process designed to identify the best investments is hopelessly contaminated. If an influence peddler is successful enough to earn what is reputed to be $50 million, some of his clients have made it to the finish line for reasons other than superior performance.

Meanwhile, there are 2,300 employees working for CalPERS. One would think that they could summon up enough brain power to determine what investment managers had generated superior track records without having to resort to the suggestions of outside "finders."

In the end, the higher costs and substandard investment results attributable to a culture that tolerates influence peddlers costs us all a lot of money. When CalPERS falls short of its funding obligation because it isn't earning enough money, we taxpayers have to foot the bill.

County governments, for example, are already being informed that they will have to send more money to Cal-PERS in 2011. The fact that the board is dominated by directors elected by unions, including one member who filed for personal bankruptcy, all suggests enough dysfunction to tempt Michael Moore. Like his film on gun control, a similar focus on CalPERS might wake these people up before they shoot themselves in the foot. The silver bullet in this case would be a successful voter initiative that caps all government retirement pay.

Thank your customer, tell them how valuable they are to you, but don't go overboard. Insincerity is easy to spot.

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