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.