Reuters Reports that CalPERS “Lawyered Up” in Response to Our Public Records Suit

Reuters is keeping tabs on some of the developments in our ongoing dispute with the nation’s largest public pension fund, CalPERS.

By way of background, we have asked CalPERS to give us data about their private equity fund performance that they provided to two scholars at Oxford University. Their article stated repeatedly that substantial portions of their data has never been made public. Under California law, once a public record has been given to a member of the public, the agency can not refuse other requests for the same records.

Even though CalPERS keeps claiming in its dealings with my attorney that it is cooperating with us, its actions scream otherwise. CalPERS has repeatedly bait and switched us, the latest instance being sending us records that fell well short of what they had supplied to the Oxford researchers.

The latest move is to send the matter over to outside counsel two weeks ago, with the net result that everything has come to a screeching halt. People who have contacts within CalPERS tell us that the party line is that the law firm, Steptoe & Johnson, is trying to work something out with us. Let us just say that that is inconsistent with the conduct of the Steptoe partner towards my attorney.

So on the one hand, it’s gratifying to see the the Reuters private equity publication peHUB say that this fight looks ridiculous (and remember, it’s CalPERS that is fighting by virtue of refusing to comply with a simple Public Records Act request):

The California Public Employees’ Retirement System has lawyered up as it continues to face withering criticism from a financial blog that says the system is stonewalling its public records request. The system has brought in Steptoe & Johnson — the firm that ran CalPERS’ internal investigation into pay-to-play activities a few years ago — to help deal with a data request from blog Naked Capitalism in a situation that has escalated to almost absurd levels.

CalPERS is not talking, preferring to leave it to the lawyers to handle the situation.

While this is the right overview, there are a few places in which the author, Chris Witowsky, appears to have fallen for CalPERS’ spin. For instance:

The problem is the performance data was not released in an official way, and therefore, there’s no record for the system’s public records people to trace. Apparently this information was released informally by somebody within the system.

This implies that the only way a records release could be permitted was through a Public Records Act process. Our understanding is that the party who released the records was senior enough to have the authority to do so (and this separately makes sense; if it was someone who did not have the authority to do so, CalPERS could use that as a basis for not cooperating. The fact that they are feigning cooperation means they know they are stuck). So the CalPERS “informal” claim is a dodge that allows them to play dumb and pretend that an inadequate investigation was all they were required to perform.

Moreover, even if they really do lack an internal paper/electronic trail (which is not impossible, given that CalPERS in 2010 implemented a very aggressive policy of disposing of all but the most critical e-mails after 60 days), they by their own admission have been in contact with the Oxford academics. As we’ve discussed long-form, you can see simply by reading their paper carefully the sort of records they got (as in the paper describes the time frame and the more comprehensive set of records from which the scholars extracted the private equity investments). The academics have also told me, and clearly have also told CalPERS the time frame (1990 to the end of 2008). CalPERS could clearly could make more specific inquires if they really are having trouble sorting out what records are relevant and which ones aren’t. I assume the big reason for the lack of inquisitiveness is that in discovery, if they had gotten the particulars from the Oxford writers, we could show CalPERS was deliberately stiffing us. This way, they can feign ignorance and incompetence.

This part is also a misreading:

The performance information was apparently the same information you can find on the CalPERS website, except that it went much further back in time.

We’ve repeatedly stated that the researchers got more data fields from 1990 to the end of 2008 than CalPERS now releases to the public (CalPERS started publishing valuation information about all of its PE fund investments on a quarterly basis at the end of 2002). But to have a consistent data set through first quarter 2012, the researchers had to integrate that data with the public data from 2009 to the end of the first quarter 2012. That meant they could not make use of the more specific non-public data items, namely, the actual cash flows (as in the dates and amounts of contributions to and distributions from each fund). Witowsky may not regard this as sexy, but aside from making more precise return calculations, there are other important potential uses of this information. And despite its lack of cooperation, CalPERS has apparently conceded this point by sending us cash flow information for 2012 and 2013.

So this perverse battle continues, wasting the funds of California retirees. And CalPERS is making it clear that the promises it made during its pay to play scandal about more transparency and greater responsiveness to Public Records Act requests were just a Big Lie. But just like Los Angeles public pension fund LACERA, CalPERS seems to see indulging the PE industry’s mania for secrecy as more important than meeting its obligations under the law and doing what is in the best interest of its beneficiaries.

Print Friendly, PDF & Email


  1. Jim Haygood

    From the abstract of the Jenkinson et al paper:

    ‘Fund valuations … tend to be smoothed (relative to movements in public markets). We find a significant jump in valuations in the fourth-quarter, when funds are normally audited.’

    Valuation smoothing is the inevitable result of the conflict of interest that occurs when a GP can set its own valuations.

    Risk-adjusted return is measured by the Sharpe ratio, with return in the numerator and volatility (risk) in the denominator. Slash volatility with judicious smoothing, and your PE fund can trounce the Sharpe ratio of the S&P 500 with the same or an even lower return.

    Cool! If we could set our own IQ scores, we’d all be geniuses.

  2. Peter

    I’m on your side in this struggle; though as a CalPERS beneficiary, I’m afraid of what all that data may reveal. Maybe we can’t depend on that 8% return anymore.

    1. steelhead23

      You never could depend on that 8% return on investment – and by trying to meet such expectations, it is more than likely that CalPers lost money. With the 10 year Treasury bouncing around 3%, the only way to get 8% is to gamble.

      1. psychohistorian

        This what happens when you replace insurance actuaries with politicians bought by people with Gawd of Mammon intent.

  3. susan the other

    If PE has colluded with the management of calPERS, how many other state pension funds have been involved with PE? This probably isn’t just a California mistake. Illinois? The city of Detroit? How many of the bankrupt pensions across the country can be shown to have played fast and loose with their funds? Wasn’t the SEC was quick to overlook the misbehavior of PE when it was revealed that they essentially broker deals without a brokers license? So in addition to all of the bribery, they’ve probably all been skimming with abandon and no authority has ever stopped them. Tip of the iceberg.

    1. Jackrabbit

      April 2013: Educating Gina Raimondo, Rhode Island’s Wall Street-Friendly State Treasurer

      In recent years the U.S. Department of Labor, the Securities and Exchange Commission, and the General Accountability Office have each publicly acknowledged that conflicts of interest related to firms that provide investment services to pensions are widespread, and that these conflicts have resulted in reduced returns and higher fees for retirement investors.
      . . .
      Indeed, a 2007 study by the GAO revealed that one form of industry abuse alone affecting pensions with over $4.5 trillion in assets – pension consultant conflicts of interest – can undermine a pension plan’s investment performance by 1.3% annually. Many other breaches of duty, such as those related to securities trading, money managers, and custodians (which the GAO did not examine), I have found to also be harmful to pensions.

      October 2013: Report rips Raimondo performance

      Rhode Island’s much-vaunted pension reform law amounts to a “Wall Street wealth transfer scheme” that General Treasurer Gina Raimondo knowingly participated in, according to the author of a report commissioned by the state’s largest public employee union and written by an acknowledged foe of hedge funds who has feuded with Raimondo for much of this year.
      . . .
      The 104-page report, titled “Rhode Island Public Pension Reform: Wall Street’s License to Steal,” attacks the treasurer professionally and personally, lambasting her for alleged conflicts of interest and refusing to disclose information about the pension fund’s investments and who benefits financially from them. It was issued Thursday at the headquarters of Council 94 AFSCME. The full report can be downloaded at

      February 2014: Raimondo far outpaces gubernatorial rivals in donations from financial sector

  4. washunate

    Reuters keeping tabs on this may be the most interesting development. Media silence has been one of the core components of keeping the mismanagement at public institutions out of sight over the past couple decades.

    I love how the ‘withering criticism’ comes from ‘a financial blog’ first before stating which financial blog. But hey, NC is still in paragraph 1, so that’s pretty good.

    1. psychohistorian

      It sounds like Reuters is playing propaganda outlet for the Calpers and their attorneys as part of some scheme, yet to be clear. I suspect the issues to be sused out of the Calpers/PE incestuousness relationship are endemic to all pension funds to some degree or another. Penn State pension irregularities were reported in comments previously and Rhode Island is reported above.

      It looks like their will be an effort to expand the To Big To Prosecute (TBTP) circle of organizations to include pension funds…..I suspect private ones are suspect as well.

      Rule of Law, what a seemingly quaint concept for the FIRE sector in these times; I wonder why the hypocrisy?

      I hope you get somewhere with this Yves but I am not optimistic of the outcome given continued exposure of the depth and breath of the corrupt stench pervading our “advanced” society.

      1. MaroonBulldog

        I think Reuters’s interests are aligned with Naked Capitalism’s interests in this particular case. This is why I think so:

        Reuters recently brought a CPRA lawsuit that to compel the Regents of the University of California to obtain and disclose particular information concerning private equity investments the Regents made in Kleiner Perkins funds and a Sequoia fund. Reuters won in the Superior Court, but the Regents appealed and the Court of Appeal reversed the decision.

        For those who may be interested in the details, the official citation is: Regents v. Superior Court, 222 Cal.App.4th 383 (1st Dist., 2014). The Regents never had the information in its possession; the Court of Appeal held (1) the requested information was not a public record because it was never prepared, owned, used, or retained by the Regents, and (2) the Regents could not be ordered to go and get it from Kleiner Perkins or Sequoia. The case gives a good discussion of the history of the CPRA statutory rules regarding disclosure of PE and hedge fund investment information held by California public agencies.

        1. Yves Smith Post author

          Reuters has been very helpful to us. I think the reporter might have felt the need to bend over backwards to be/look fair to CalPERS in his second piece. I was reluctant to chide him but thought it was important to clarify the story.

  5. Peter Pan

    CalPERS have “lawyered up” because they know they’re in trouble.

    Can’t wait for the malarkey to hit the wind machine.

  6. Hugh

    Have to wonder what kind of festering shitpile CalPERS is going to such lengths to hide.

  7. Frances

    Prediction: They are going to offer you a substantial settlement to go away or to accept incomplete data, prettied up with language that claims to meet the criteria of your CPRA (it won’t be accurate).
    “They” doesn’t mean CalPERS per se, but the PE firm(s) they’ve no doubt been dealing with since 1990. Data from the early years (1990 etc.) detailing these deals is threatening to certain big players that you’ve previously mentioned on NC. You can be assured that the data was sent to the researchers without the knowledge of CalPERS board members.
    I hope that you persevere and are successful. I’m not worried about the former, but the latter is in question.

    1. Yves Smith Post author

      No, they are going to go to court. They hope either to beat me or have the judge order them to hand over the data. Either is a win for them. If they give me the data because the judge made them, they can tell the PE firms they were forced to.

      1. psychohistorian

        So is this how new age reporting is accomplished, by lawsuits?

        Are you going to crowdsource the cost for this kind of reporting, Yves? Can this be a viable business model?

        I am not being critical of your efforts, Yves, but of the insanity of our situation as a “people” wanting to challenge systemic fraud and corruption. Can we crowdsource a new government, judiciary, etc.?

  8. craazyman

    There’s a reasonable chance the outside counsel is Nathan Thurm, who’s had involvement in the past defending private equity scamsters.

    In fact, believe it or not, 60 Minutes did a story on one company Thurm an had involvement with. If this is the kind of thing in CALPERS portfolio it’s no wonder they’re lawyering up. Thurm appears at about the 3 minute point and also later on, but the rest of the piece lays out the broad background and the nature of the scam.;_ylc=X1MDMjE0MjQ3ODk0OARfcgMyBGZyA3VoM19teV93ZWJfZ3Nfc3JwaHR0cARuX2dwcwM0BG9yaWdpbgNteS55YWhvby5jb20EcXVlcnkDbmF0aGFuIHRodXJtIHNubCB5b3V0dWJlBHNhbwMx?p=nathan+thurm+snl+youtube&type=2button&fr=uh3_my_web_gs_srphttp

    1. craazyman

      This is horrible. The link doesn’t work exactly right. it’s the bottom right video of the 6 shown. You can see Mike Wallace (may he rest in peace but it was a while back) Counselor Fong will have his hands full but he can prevail.

  9. just me

    Has Reuters filed its own public records request?

    Have California newspapers filed public records requests?

    I was reading Errol Morris’s four-part series on Donald Rumsfeld/Unknown Known in NYT, and part 1 describes the “known/unknowns” press conference and the reporters trying to pin Rumsfeld down to facts, that day in February 2002 about what the evidence for WMD in Iraq truly was. A fruitless dance that Rumsfeld enjoyed leading. Cheshire grin. Morris now interviews reporters who were there that day. One describes their job, “We’re there as reporters, trying to assemble a public record.”

    Is Yves the only one trying here? If she’s susceptible to settling, getting paid off, or just endless delays, there will be no public record. Looking for that headline: NO PUBLIC RECORD. Job done.

    Apologizing if I’ve misunderstood.

    1. psychohistorian

      This is a replay of the movie Chinatown. Yves will produce one or more “smoking guns” and some “one” like Reuters will pipe up and say to Yves, “But Yves, its Chinatown” and the world will keep spinning.

      I keep trying to get more jaded but think I have reached my limit. Any suggestions?…..grin

    2. MaroonBulldog

      I don’t know if Reuters filed a public information request in this case, but Reuters has a history of obtaining private equity investment information from public agencies and publishing it. In my 12:03 AM reply to Psychohistorian, above, I cited a recent case in which Reuters did not prevail. A little more background information might help NC readers understand what has been going on here.

      About ten years ago, Reuters sued the Regents of the University of California for disclosure of certain information regarding investments if Kleiner Perkins funds and Sequoia funds. Reuters won, the Regents turned the information over, Sequoia stopped letting the Regents invest in new Sequioa funds, and Kleiner Perkins and Sequoia stopped giving the the Regents some of the information. The Regents went to the Legislature and got the CPRA amended to change the rules about what private equity and hedge fund information was subject to disclosure and what was not.

      A year or two ago, Reuters sued the Regents to get current information of the same type that had been turned over 10 years ago–including information that Kleiner Perkins and Sequoia had stopped giving to the Regents. Reuters argued a theory of that the Regents had “constructive possession” of the information they were no longer getting. The Superior Court accepted the argument and ordered the Regents to go and try to get the information from Kleiner Perkins and Sequoia. The Court of Appeal reversed; it held that the information in question was not public information under current law, regardless of the consideration that it might have been subject to public disclosure under the law that existed 10 years ago, at the time of Reuters’earlier lawsuit.

      1. psychohistorian

        Thank you for the education about Reuters quest for “public truth”. That said, I don’t believe that Reuters’ has clean hands in relation to the 0.001% and elevendimensional geo-political agendas or is being manipulated by non-obvious forces. When all Reuters reporters and management do their reporting and management like Yves and Lambert at NC, I may start to give them the benefit of the doubt again.

        I believe that just like the recent technocrats collusion about IT hiring practices shows that rules of business procedure have been operating off the event horizon of global “rule of law” for quite some time, wink, wink, nod, nod. History is written by the “winners”. Our president has can continue to tell me that what those Wall Streeters are doing is “legal” but it sure stinks from this pond scums’ point of view. This pond scum suggests that we end the Gawd of Mammon “Glass Bead Game” and neuter inheritance so there is no longer the ability to buy and run the worlds’ governments by “making” or accumulating/inheriting wealth. Turn off the spigot to the Gawd of Mammon game and all the incentives around interaction with each other change, for the better, IMO.

Comments are closed.