Correcting the Record on Another Misleading CalPERS Press Release

An alert reader sent me a link to a CalPERS press release, dated March 14, before the one we rebutted in the post CalPERS Tries Ineffective Mudslinging in Response to Our Ongoing Private Equity Investigation This earlier press release was not as consequential, so we decided to wait till the weekend to address it.

This press release, Naked Capitalism Gets it Wrong and Should Choose Words Wisely, is in response to our post, Has CalPERS’ General Counsel Lied to Its Board About Our Suit? This is the critical section of that post:

As readers may recall, we filed suit against CalPERS on February 27, 2014 to obtain access to private equity fund data that CalPERS previously gave to two academics at Oxford University. We have proof of service as of March 4, 2014 (please find both filings embedded later in this post). At around that time, CalPERS moved the matter over internally from being handled by its Office of Stakeholder Relations, which includes Public Records Act specialists, to a litigator.

You’d think that’s pretty conclusive evidence that CalPERS knows we’ve sued them.

CalPERS’ Interim General Counsel, Gina Ratto, is telling CalPERS board members the exact opposite, that there was no new litigation filed in the past month. That statement is made at the location in the agenda materials where the CalPERS General Counsel reports to the board on new lawsuits to which CalPERS is a party (you can also view this document on the CalPERS website).

It’s worth noting that the intended audience for this press release was likely to be CalPERS board, and not the general public. We had sent letters to board members on February 28 outlining multiple procedural irregularities in the handling of our Public Records Act request (California’s version of FOIA) that should concern them. But it was presumably also intended for me, since the headline’s “Should Chose Its Words Wisely” is a not-too-thinly veiled threat of litigation.

The press release claims that they received service on my suit too late to have included it in the mailing to the board for its meeting March 19. CalPERS was served on March 4. A CalPERS employee has told us that it is likely that they did not mail the materials to the board until March 7, so our belief that CalPERS could have informed its board in writing but chose not to is thus credible.

Perhaps more important, publishing the litigation, although formally a mechanism for informing the board, is also a way to inform the public. As we have previously reported, CalPERS also failed to include the underlying PRA request in its monthly updates to the board until they had deemed it to be closed, at the end of January, again neglecting to observe the procedures set in place to keep the board and the public informed.

In addition, even if CalPERS was somehow unable to organize including information about our pending lawsuit in its mailing to the board and corresponding internet materials, why did the interim general counsel Gina Ratto not orally update the board at the meeting on March 19, since they knew about our suit by then? After all, the press release is dated March 14. If you look at the video of the open board session, you will see Ms. Ratto does not update the board, as would be expected.

The press release states that the board had been informed about the litigation. Since the board did not meet between the time we served them and the date of the press release, they must have sent the board a memo about your lawsuit. That would seem to suggest that CalPERS staff was concerned about our action. Yet the CalPERS beneficiaries was not informed via the usual channels for transmitting this information, the general counsel’s monthly update and the open board meeting. The press release, while mentioning our lawsuit, fails to mention the content of our action and hence is not useful for parties that are not already up to speed on the dispute.

Finally, readers will should take a look at the last two paragraphs. The press release goes to some length to present me as a fringe party and unbalanced (“obsessed” and “self important,” among other derogations). Apparently, CalPERS staff is keen to discourage members of its board from looking into my side of the story.

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  1. allcoppedout

    The video of the board meeting could almost be a student role play exercise. I could only bear it for the first half-hour. I saw nothing I’d recognise as real business discussed, a lot of mention of administrative management (training and development) issues and a rubber-stamping procedure by the board members. Not only were there a lot of presumably highly paid people present doing nothing, there seemed to be a lot of discussion on other meetings in which people would gather to do nothing elsewhere. A very brief statement of rates of return was made that I didn’t regard as financial information at all. For all I know the claimed rates could be the product of investment subject to collapse, and none of it was related to returns matching (or otherwise) the payout demands of the fund.

    There was almost a hint in the use of Ms Smith/aka/Webber of ‘one of those dreadful agentic wimmin’ and the personality write-off terms Yves points out seem clear in the CalPERs document. It is inexcusable to be using language like this before the board addresses the concerns Yves wants to raise. In fact, this tactic is similar to that used to smear genuine complainants against police and other governmental agencies to reject the complaint before investigation.

    I was left wondering how much money this organisation is wasting and whether anyone on the board could have a grasp of the real financial condition of the show. What do they get paid? I could turn up and second, nod, aye, clap and pocket the cheque.

    1. Nathanael

      CalPERS staff is defrauding the CalPERS board and doesn’t want the board to notice. Pretty obvious.

      If the board members are worth their salt, they’ll start sacking people in the CalPERS staff pronto.

  2. Ben Johannson

    Interesting that someone at CalPERS thought it would be a good tactic to attack Yves’ mental health. Someone is seriously overreacting, which means they’re insecure, which means they know there’s something to worry about.

    1. Oregoncharles

      The implication of the whole exchange is that they’re hiding something – something big enough to worry about.
      What do you think it is, Yves? There has to be a reason you went on this quest.

  3. scraping_by

    It’s one thing to hire lawyers, it’s another thing to listen to them. I doubt any competent litigator would allow such unsupported personal invective in any public utterance. It’s too close to creating more causes of action.

    If nothing else, arrogance doesn’t go down well outside the Ivy League. I think you’re dealing with pikers here.

  4. TheCatSaid

    That press release from CalPERS was a shocking misrepresentation of the state of affairs.

    It was also insulting to Yves.

    CalPERS should produce the documents that it is legally obliged to provide. It should stop its foot-dragging and excuses. It should stop making inaccurate and insulting public comments about Yves and NC.

    I hope CalPERS fund investors start looking closely at the actions of its Board and CalPERS staff to find out why they are behaving in this way. Is it incompetence on their part? Using attack as their best defence? Petty maliciousness? Attempts to cover up something seriously wrong in CalPERS data?

    From what’s been said about the other researchers’ work based on CalPERS data, it doesn’t seem likely that CalPERS fund results will look better after they are subjected to even closer scrutiny. At least, their resistance to provide the requested data gives this impression.

  5. MaroonBulldog

    Curiouser and curiouser …..

    My California tax dollars at work. And April 15 is just around the corner.

    1. JohnC

      Except for those not there?

      Vacant, Governor Appointee, Insurance Industry Representative

  6. MaroonBulldog

    No sane person would accept the liability that goes with being a CalPERS board member unless that person were covered by liability insurance The CalPERS board members may purchase such liability insurance … from CalPERS. Get a load of this:
    So, if and when the CalPERS board members are held accountable, it looks like CalPERS may be on the hook for the tab.

    1. TheCatSaid

      That link relating to the insurance doesn’t work.

      Wouldn’t there be conditions in which the insurance on a Board member’s liability would be void? E.g., if Board members had been alerted to a problem but didn’t look into it? Or if a Board member’s action or non-action contributed to a fraud or other crime?

      1. MaroonBulldog

        You can find the document doing a browser search for California Attorney General Opinion No. 02-1101. It was issued on June 5, 2003 when Bill Lockyer was the attorney general. Bill Lockyer is now a member of the PERS board.

        From the description on page 2, this insurance would not cover liability for “intentional acts” but it would cover liability for “omissions”. Being “alerted to a problem” and not looking into it probably would be considered an “omission” by most courts in California, so board members would probably believe themselves well-covered here.

        1. Nathanael

          Here’s the thing though. If the board was “in on the scam”, the staff would have reported the lawsuit to the board as part of the regular meeting.

          The staff is lying to the board.

  7. allcoppedout

    Well spotted Bulldog, Sadly can’t get to your link. I suspect in archives beyond our eyes they have probably established directors’ insurance for ‘Yves Smith on your case’. The old notion of groupthink (somewhat refined since the 60s) rears its head. I couldn’t stomach all the videos of ‘CalPERS in Action’, but I wondered after even a few minutes why I couldn’t spot anything I recognise as business going on. It all felt like Al Capone saying there was ‘nothing to see here’, except our lovely diversity policies (black guy wheeled in off the street to read a few lines from a bit of paper). It’s pretty scary CalPERs offers this for public consumption. I know it’s so well shrouded in boredom they can rely on no one watching. The cunning of it all is secrecy in public. The attack on Ms Smith/Webber is thinly veiled, but the attack on public scrutiny, amounting to ‘give them any old shit, they won’t notice’ leads me to wonder how long it will be before they point the cameras at drying paint.

  8. Kevin Smith

    The description of Yves in the CALPERS press release bears no resemblance to the Yves of my acquaintance. Maybe someone from CALPERS ought to sit down and discuss this with Yves, the sooner the better.

    1. scraping_by

      Remember our esteemed hostess has a lawyer. CalPERS has lawyers. Lawyers in, civility out.

      And that’s assuming the lady has the patience to sit through what would be a long, dark fog of management speak. Meh.

      Just make it a question of how long until they do what they’re supposed to.

  9. craazyman

    i’m getting a horrible feeling this could start World War III.

    what if their PE valuations are consultant-hyped financial fantasies that need 15% or 20% haircuts just to look presentable. If that’s Calpers, what about everywhere else? Holy Actuarial Apocalypse! Where’s the stock market after that cat flies of the bag? Recession here we come. Oil prices collapse, Russia freaks out and sends troops to Ukraine. China goes with gold against the dollar and sides with Russia against U.S. Europe and Japan. North Korea lobs a missile at South Korea thinking this is the time to let it RIP. Shooting starts everywhere.

    The famous litigator, Attorney Nathan Thurm, may have nothing to do with this, but Calpers tactics seem like those Thurm used in the 60 minutes interview easily found on the internet. Thurm’s an expert at deflection and turning questions around, especially when he accuses Mike Wallace of being defensive (Just like “self important” in this case) and when he says his company makes semiconductors not cheap imitation Chinese finger prisons and fake doggie doodie — which of course is exactly what they make, as the video shows.

    Minkman Industries is the world we’ve left behind — with the plaid sportcoat and boat oar tie — but the world we’re in with its private equity sharpies, actuarial exaggerations and mark-to-model mayhem could use a little old fashioned integrity.

    Everybody should calm down and work this out amicably or the mushroom cloud on the horizon may not be a funny coincidence of wind and atmospheric pressure.

    1. MaroonBulldog

      Work this out amicably? Even if it requires some civil servants to do some actual work?
      If CalPERS staff wanted to do that, they would have, by now.
      The private equity exemption statute works like this. Subsection (a) says that certain documents and records pertaining to private equity investments are exempt from disclosure “unless” the agency has previously disclosed those documents or records in public. Subsection (b) says that certain financial information and performance data are public information and must be disclosed, even if that financial information and performance data were communicated in documents and records that are exempt under (a).

      1. MaroonBulldog

        Further to my last, above. I was trying to lay the foundation for a conclusion that everything Yves has aksed for in her pleadings appears to be: (1) subject to required disclosure under subsection (b) because that requires disclosure of all the types financial information and data she asked for, and (2) not exempt under (a) because it was disclosed to the Oxford researchers, even if CalPers then disclosed unredacted information that went beyod the scope of what is required under subsection (b). There is really appears to be no excuse for CalPERS failure to perform here. I don’t see what outside counsel can do to defend the case, except maybe trying to raise dilatory procedural objections and confusing the issue.

  10. Tom Stone

    Has anyone else noticed that the laws apply to little people, not the elite? And Cal-Pers board members are among the elite. Having a grubby female blogger call them out for their supposed transgressions is insulting and intolerable.

  11. savedbyirony

    Just like with the SOE firm Yoast, what do these people not understand about the term “fearless” when they take you on? If there is better financial/economic muckracking journalism going on somewhere in the public domain, someone please tell me of it. One can’t say it enough, but thanks for all your hard and generous work.

  12. susan the other

    The best resolution to this totally offensive malfeasance by calPERS and many other municipal and corporate pension funds, and which would also be a good investment for any free-floating retirement savings, would the the 80-20 solution. Most retirement funding should be established by the local government, and secured like social security as part of the expense to citizens of everyday living which includes planning for retirement, along with all the other needs, provided by the government. If citizens choose to freely invest part of their 20% discretionary income into city municipal bonds that would be a good idea if it were not another pension fund scam. It would be a flip of a switch. However, reversing this deposit would not be a simple flip of a switch because that might open the doors to all sorts of electronic theft.

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