The U.S. Department of Justice is investigating whether illegal payments were made to employees at California public pension fund giant CalPERS and others to influence where they invested money. This is part of several nationwide probes into many public pension funds.

But as CalPERS is the biggest fund, they will get the most media focus. As is their wont when questioned about how they lost money on investments and now with a corruption investigation, CaLPERS says the amount of money involved, while in the millions, is just a tiny part of their totals assets of $200 billion. While that may be true, it is beside the point and seems deliberately evasive.

If CalPERS loses $1 billion on an investment, as they did in 2008 with Landsource, the public has a right to know and CalPERS should be held accountable. When a federal agency is investigating pay-to-play corruption, saying the amounts involved are just trifles is irrelevant and seemingly unconcerned with the matters at hand.

The investigations are focusing on placement agents. They are the go-betweens, hired by money managers to get public pensions to invest with them. While this can certainly be legitimate, with placement agents being contract sales reps "cutting a cut" of the business they bring in, the possibilities for corruption are obvious.

The State of New York under Attorney General Cuomo launched an aggressive investigation last year into corruption in their state pension fund. Six have pled guilty so far, including the Chief Investment Officer for the fund who now says it was a "culture of corruption". Another one of them, L.A. financier Elliot Broidy, could get four years in prison and forfeit $18 million in assets and has ties to CalPERS. The SEC has demanded that Broidy turn over any contracts his firm had with Alfred Villabos and Fred Buenrostro. Villabos is a former CalPERS board member who has received over $60 million for CalPERS deals. Buenrostro is a former CalPERS CEO who went to work for Villabos after leaving CalPERS.

Another placement firm who has done business with CalPERS, Wetherly Capital Group, has returned $1 million to the New York pension fund as a result of the investigation.

CalPERS has hired a D.C. law firm to investigate placement agents, an incongruous move at best. Law firms don't have the power to investigate like law enforcement does. This seems more like a damage control move using politically connected Washington lawyers adept at public relations and calming troubled waters. They do support legislation to ban commission payments to placement agents and would require them to register as lobbyists. This could be an important first step (although I suspect financial types have probably already figured out ways to route around the no commission rule).

However, the best way to stop this kind of corruption is to strongly enforce laws already on the books. In addition, investigators should not settle, as too often happens, for payments of fines in return for no criminal prosecutions. Because, what's the deterrent then?

In addition to the real possibility of prison, forfeiture of assets should be widely used. Every penny of ill-gotten gains is taken from them. And it doesn't matter where they hide the money. The US government can reach through any agreement or irrevocable trust and into any bank account in the US as well as apply pressure on foreign banks. Then, they should be banned from future work in the financial industry.

Such corruption is damaging to the pensioners the pension funds are supposed to have uppermost in the minds. "Investments" greased by bribe money are probably not worth making. If they were, then an honest fund would already be making them. Plus, any bribes paid will simply be added into the costs of running the investment and passed on to the pension fund, thus indirectly lessening their return.

Most importantly, these are pension funds. People's retirement security depends upon them being well-managed and honest. We should demand the strongest possible oversight over them with the inevitability of prison and forfeiture of assets for those engaged in corruption.