CalPERS Told Obvious Big Lies in Its Response to Our Private Equity Investigation

Since readers have taken interest in the details of our ongoing litigation with the giant California public pension fund, CalPERS, I thought I’d tie off a thread from earlier in the month.

By way of background, last September, we filed a Public Records Act request (California’s version of FOIA) for private equity return data that CalPERS had not previously published. While CalPERS has published quarterly data on a fund-by-fund basis since settling an earlier Public Records Act case in 2002, three researchers at Oxford published a paper in 2013 which discussed specifically and in detail how they were the first to obtain the entire history of CalPERS’ investing in private equity, from its very first participation in the strategy. They stated that they got previously non-public data back to 1990. For more background, see this post.

Note that in California, once an agency has given out a record to one member of the public, it has forever waived the right to claim any exemption from disclosing the records to others. So it seemed that our PRA request should be straightforward. Silly us.

You can find the blow-by-blow of CalPERS’ inconsistent actions and disconnect between its statements (that it was cooperating) and its actions (delivering records that fell well short of what we’d asked for) here and here.

We wrote a post on a remarkable, and not in a good way, press release that CalPERS issued about our suit, in a post titled CalPERS Tries Ineffective Mudslinging in Response to Our Ongoing Private Equity Investigation. The short version is that the press release was extremely inept as well as inaccurate. Generally speaking, a large institution should not deign to notice critics, and when they do, they should above all retain their dignity while trying to tell their version of the situation. But their press release was screechy, defensive, and tried to engage in character assassination.

But we didn’t address the most ham-handed falsehood that CalPERS presented in its press release, since we wanted to see if it might be repeated in some way by opposing counsel in its filings. Since each side has now provided its initial arguments for our hearing on May 2, we though we’d fill you in on a critical tidbit we held back.

The thrust of CalPERS press release was to depict your humble blogger as an opportunistic harpy who was making unreasonable demand while CalPERS was (per CalPERS) cooperating. If so, CalPERS appears to have developed its idea of cooperation from the negotiations to end the war in Vietnam (where among other things, the two sides literally fought over the shape of the table).

In this press release, if you were following this contretemps, CalPERS delivered what it meant to be a showstopper. Our Public Records Act request has started with trying to get the same data that CalPERS had given to the Oxford academics. CalPERS’ initial responses were tantamount to “never heard of them.” They did release a bit of data after our attorney, Timothy Y. Fong, wrote a nastygram, but it was for 2012 and 2013 only, meaning almost entirely outside the time frame of the paper and not containing any of the older, non-public information.

Only after we filed suit did CalPERS rouse itself to call the researchers. The Oxford scholars told CalPERS who had supplied them the information, which had been in the form of a 226 page PDF and e-mailed them the document back to them.

So in its March 28 press release, CalPERS brayed that it was publishing the PDF, which it stated was “an exact copy of the data CalPERS provided to Oxford University academics several years ago” and said it was the also same PDF that it sent us on March 11. It tried to depict us as unreasonably hounding them.

There are a few wee problems with CalPERS characterization. The first is, as the affidavit at the end of this post states, the PDF was not an exact copy of what the Oxford academics received in 2009. Metadata showed it was generated from an Excel 2010 spreadsheet on March 7, 2014 and was modified on March 28, 2014, two weeks after the March 11 date when CalPERS sent us a CD with some documents on it. The PDF they did send me was created on the same day, March 7, but by a different author. It is rather odd that CalPERS would take the time and trouble to create new PDFs when they had the original version in hand (they received it from the researchers on March 6).

But that wasn’t the most glaring issue. The second wee problem was the PDF on their site was 627 pages, not 226, which is far from an “exact copy”. And the third problem was it included data thorough the end of 2011. It’s hard to see how these scholars received 2011 data in 2009 unless CalPERS had access to a time machine.

CalPERS’ screechiness about the PDF is meant to obscure other critical issues. The biggest is that PDF is not a permitted response under the Public Records Act. If the document is a machine-readable document, providing the output in the form of an image (a PDF) isn’t kosher. We asked for data and suggested various output formats and CalPERS has yet to provide us with the germane data in full.

In addition, the Public Records Act is extremely pro-transparency. It embraces the idea that members of the public might need to append their original request. CalPERS, thanks to its refusal, erm, failure to do the obvious and ring up the Oxford scholars, asked us in early February what we wanted. We asked for what we thought the academics got based on their description in their article (it turns out they got less than they implied) as well as bringing the data up to date. CalPERS had accepted our expanded request; they’ve acknowledged that again in their latest filing. So for CalPERS to claim in March that we were being unreasonable in seeking more than an unresponsive document that represented only a portion of the data being sought was more than a tad disingenuous.

But we’ve seen this sort of thing from CalPERS from the outset of our dealings with them, this bizarre pretense that they are cooperating while failing to deliver the goods and then trying to make us out to be the bad guy. All this conduct seems to do is make people wonder what is in this data that they are going to such lengths not to give it to us.

Declaration in Aurora Advisors v CalPERS of Michael Olenick

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  1. vlade

    “make people wonder what is in this data that they are going to such lengths not to give it to us.”

    or, because the data is lost, corrupted etc. so they can’t do it, but admitting it is admitting to breaking a fiducary duty?

  2. diptherio

    Interesting (to me anyway) that the time stamps on all these documents are after business hours. Created at 6:38 pm…modified at 5:51 pm…makes you wonder is someone isn’t coming in after hours to engage in some (inept) CYA…

  3. Jim Haygood

    On the final page, Michael Olenick states that his consulting fee is $2000/hour, when he obviously meant $2000/day.

    Maybe he’ll get lucky!

    1. Yves Smith Post author

      Hah, good catch, but it’s not a “gotcha”.

      He does mean $2000 an hour for court testimony.

      1. His normal rate for expert work is $600 or more an hour. He discounted that to $250 because he likes us.

      2. However, he is now in Florida and will soon be living in France. He wanted a punitive rate for appearing at trial, since he would have lots of travel time for which he could not be paid. Note that under the PRA, the other side is liable for our fees and expenses if legal action was required to compel the production of records. So the $2000/hour is meant to tell the other side that for trial, they’d be much better served deposing him via video link from France than making him fly from France to CA for a lousy few hours of testimony.

    2. craazyman

      If he can charge 2000 per hour he’s already lucky. That’s like one day a week work and you’re good to lay around for 6 days — in France no less. That’s like getting an extra day for free even. That’s a better deal than God, who only had one day to lay around.

      Has this investigation killed anybody yet? If somebody doesn’t have Asperger’s Syndrome, they might be putting their health at risk. Even following the facts is exhausting and if you’re the person at Calpers who gets this assignment, to deal with this internally, from some golf playing Private Equity fee skimming California white wine and cheese eating financial illiterate with a big office and a little mind (sorry if that describes any real person, it’s just a character of fiction i’m making up in my head for narrative impact), then this could be an dangerous assault on tender human sensibilities

      The capacity to enjoy Makking sense of file cabinets full of details is not a trait that most of humanity possesses. Is this why Mr Olenick can make 2000 per hour? If I was up against this kind of assault by detail, I’d start crying. I don’t mean to be a wimp, I’m just being honest. Sometimes things get so complicated they can’t be figured out by an form of structured thinking. They just exist as a phenomenon that physicists call Chaos. And then somebody says “Go take a look at Chaos and tell me what the equation is” But it’s not chaos then, if there’s an equation for it, the humble lab assistant says. I want Chaos and I want the equation, says the Man. That’s when the assistant has a problem and it just creates even more chaos. But don’t call it that!

  4. RUKidding

    Thanks, Yves, and keep the pressure on! I mainly logged in the first time here (some days ago) to be in line to thank you for this law suit. I am a *potential* (who knows what the future will bring??) CalPers retiree (via a local district govt, not as a State employee). I have advised my staff and our Board about your lawsuit, which most find a bit confusing. I have suggested that everyone should do their best effort to have their own “extra” savings just in case…
    Very frustrating. Keep us posted and keep up the good work! Much appreciated from those of us in Cali with all of our contributions to CalPers the opaque.

    1. monday1929

      Please make a screen-shot and distribute it to your co-workers of the following from Calpers “Investments” page: “The Calpers portfolio is diversified into several asset classes, so any weakness in one area is offset by gains in another”. You might want to send a registered letter to Calpers now, stating how “comfortable” this statement makes you. Their statement could be the basis for a class action lawsuit. Any (small) investment firm making this claim would be shut down in an instant by the SEC. Note how well “diversification” worked in 2008. When the System goes, it ALL goes.

    2. Lambert Strether

      RUKidding, please also consider writing Letters to the Editor, and asking your colleagues to do the same; Yves’s posts should provide good material.

      Our elected officials really do pay attention to Letters to the Editor, because, unlike online petitions or comments, they show somebody willing to stand up in their own community and express an opinion, which isn’t always easy.

      In fact, I’d encourage everybody who has a CALpers pension to write a letter to the editor calling for transparency in how CAPpers invests its their money.

  5. Chauncey Gardiner

    Re: “The thrust of CalPERS press release was to depict your humble blogger as an opportunistic harpy who was making unreasonable demand while CalPERS was (per CalPERS) cooperating. If so, CalPERS appears to have developed its idea of cooperation from the negotiations to end the war in Vietnam (where among other things, the two sides literally fought over the shape of the table).”

    Seems to me you’re already in the third phase of Gandhi’s continuum: “First they ignore you, then they ridicule you, then they fight you, and then you win.”

    The behavior leads one to your last paragraph. Wonder what a small group is hiding?

  6. Tom

    We asked for what we thought the academics got based on their description in their article (it turns out they got less than they implied)

    Those pesky academics. NC: This statement makes it sound like you know what they got in the first place, otherwise, how would you know that they got less than they implied? Is this an implication that the academics are just making stuff up?

    1. Yves Smith Post author

      They repeatedly described their data set in the paper and we relied on their language. Third parties who have read their description interpreted it the same way I did. The issue is what they meant by “cash flows,” believe it or not.

    2. monday1929

      Since you can’t make the logical leap: either Calpers lied about sending Yves all that the academics got, or, the academics got less than they implied they got. Getting less than implied is not exactly, or necessarily, “making things up”

      1. Yves Smith Post author

        There is actually a third issue here. You are allowed to add to a PRA (the California version of FOIA) as you get into things. The laws contemplates that that might happen.

        So the drill was:

        1. CalPERS said, “We never heard of these academics, but tell us what you want”

        2. We thought they were dealing in good faith so we told CalPERS what we wanted based on our interpretation of what the academics said they got

        3. When we found out that the academics got less than we thought, CalPERS was stuck having to deliver on what we asked for in 2. And they’ve never denied that in their court filings, but they clearly implied the reverse in that press release (that what the academics got was more than enough, although that was not what they put on their site).

  7. Lambert Strether

    Readers, READ this. If you are an activist, whether you are dealing with landfills, or fracking, or charters, or any state or regulatory agency, Yves’s patient and methodical work is showing how its done. This series of posts is a clinic.

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