For last few years, we have been laboring earnestly to get CalPERS to travel on a straight and narrow path, with occasional success despite their dogged resistance. We hope you recognize how important these efforts have been for CalPERS beneficiaries, California taxpayers, public pension fund governance generally, and in helping in a small way curb bad conduct in private equity. So we hope you’ll enable us to apply even more pressure by visiting the Tip Jar and helping fund our work.
For instance, we exposed the fact that they had no idea what they were paying in private equity carry fees and worse falsely claimed they could not get the information. In less than six weeks, they did a volte face and were scrambling to collect the information. When they published the results, it was hailed as a landmark.
Similarly, CalPERS attempted to give private equity a free pass on risk via a stealth plan to subjecting it only to an “absolute return” return requirement. Not only is that bogus methodologically, it also would have been a complete departure from their framework for measuring risk and return and set a dangerous precedent that would have served as a powerful justification for other public pension funds to emulate them and thus put even more money into private equity. We sounded an alarm in a Bloomberg op ed. Even more important, Eileen Appelbaum and Rosemary Batt, scholars who are recognized private equity experts, heard our alert and quickly wrote an op-ed for the Sacramento Bee criticizing the plan. CalPERS’ staff retreated from their scheme the very next day.
In addition, last year, we warned about how disturbing it was for CalPERS to have appointed a scandal-ridden attorney, Robert Klausner, in the critically important role of fiduciary counsel. In addition of being involved of decades of questionable pay-to-play practices, Klausner was also known for telling public pension funds whatever they wanted to hear, regularly with not just strained justifications, but readings that other attorneys deemed to be flagrant distortions. Klausner resigned from the CalPERS account on terms we are told were not entirely voluntary less than a year after we started scrutinizing his activities at CalPERS.
Yet CalPERS continues to resist our efforts to keep them out of trouble. At our last visit to a board meeting, the chairman of the investment committee cut us off even though CalPERS has not passed a regulation as required under the Bagley-Keene Open Meetings Act, to limit the time of public comments.
Former CalPERS board member Michael Flaherman, now a visiting scholar at UC Berkeley, felt compelled to chide the board:
Michael Flaherman, Visiting Scholar, UC Berkeley: I was really disappointed by what happened with Miss Webber. You know, Mr. Jacobs is an effective advocate. He was a litigator for many years. No matter how illegal or even outrageous the behavior of his client, he’s going to get up and say, make an argument for why it was legal. And it’s pretty transparent when he says, oh, it was legal, but don’t worry we’re bringing back a regulation.
And it was disappointing to me as a beneficiary and as a former member of the Board to see it as well, because what was the point of cutting off this woman? I suspect I think that many of you don’t know actually that Susan Webber is actually one of the most important financial commentators in the United States. I don’t think I’ve ever talked to a financial journalist at any great length without them actually bringing up the fact that they read her avidly. In other words, she is the sort of central clearinghouse on a number of issues, private equity being the one that has the most nexus to this organization, and opinion maker.
Similarly, all of the…many of the members of the staffs of the congressional committees that are responsible for finance read her avidly. She is read avidly at the Securities and Exchange Commission among the staff.
It was a mistake to cut her off. As far as I could tell actually, she was actually kind of praising you, which I don’t think I’ve ever heard her do, and, you know, and I also want to be clear. I’m not a shill for her. I’ve actually had very heated disagreements with her at times actually, and some of which actually related to some of her criticism of this organization.
But I was the one, as you may know, who brought up the fact that there are no regulations permitting time limits on public comments. And it’s been disappointing to me that nothing has happened with it until today, where it got called publicly, and in a way that was embarrassing.
And, you know, and there is, there’s an age old legal doctrine I think that you all need to reflect on, which is, you know, which is, I took Latin for many years, so I’ll say it in Latin, right, tacetus consensat importat, which means silence implies consent. If you sit here and an action is taken and you say nothing, then the world is left to believe that each of you supports that action. And that’s very disappointing. Thank you.
CalPERS’ general counsel, Matt Jabobs (the “Jacobs” Flaherman mentioned) made flagrant misrepresentations to the board on this very topicat the last board meeting, so we need to keep the heat on. Back our initiatives to hold public officials accountable. Donate now to Naked Capitalism. If you can’t afford much, give what you can. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn’t just giving, it’s a statement that you are want a different debate, a different society, and a different culture.