At CalPERS’ latest Investment Committee meeting, the committee chairman, Henry Jones, cut our public comment off illegally, over the objection of board member JJ Jelincic. This action took place despite the fact that the California agency has been put on notice repeatedly that it has not taken the steps under the Bagley-Keene Open Meeting Act to allow it to restrict the time of public remarks. In addition, a three-minute limit is substantively questionable. The matters before CalPERS are complex and the arbitrary three-minute limit that CalPERS currently imposes is often insufficient to present information to the board in adequate depth. CalPERS’ move is even more surprising given the chairman occasionally allows speakers more than the three minutes for comments limit and we were in the midst of offering helpful advice.
To compound the damage, CalPERS’ general counsel Matt Jacobs tried depicting CalPERS’ illegal conduct as permissible, despite the fact that the state’s Office of Administrative Law depicts imposing a regulation without having gone through the necessary administrative procedures (which included having a public hearing) as an “underground regulation”. From the Office of Administrative Law’s website: “State agencies are prohibited from enforcing underground regulations.” On top of that, Jacobs lied by saying that CalPERS already planned to address it at the next board meeting. The draft agenda for the September board meeting, released the next day, showed no such item.
This contretemps matters for two reasons. First, CalPERS is abusing its authority even when the stakes are low. This refusal to comply with clear statutory requirements proves critics right when they say that officials cannot be trusted to exercise power and bolsters their case for reducing the role of government. Second, it raised serious doubts about Matt Jacobs’ judgment. The role of a general counsel, above all, is to keep his organization out of trouble and minimize the damage when it finds itself in hot water. Yet Jacobs was ultimately responsible for the disastrous recommendation of the tainted attorney Robert Klausner as fiduciary counsel and withheld information about his unsavory track record from the board when it was making its choice. As we wrote earlier this week, Klausner is being replaced, and given that the CalPERS relationship was a plus for him from a marketing standpoint, one can safely assume that his departure was not voluntary.
We now have Jacobs having refused to address a violation that was called to his attention last November….and for what reason? Because CalPERS sees itself as above the law? Because Jacobs deemed it to be too much bother? Because he mistakenly thought the issue would go away? None of these lines of reasoning show an appreciation of CalPERS’ visibility and the downside risk of well-deserved bad press versus the small investment of effort it would take to bring CalPERS into compliance.
And although Jacobs is acting as the front man for this ongoing abuse, as former CalPERS Investment Committee chairman Mike Flaherman told board members, their silence makes them complicit in the eyes of the law.
Let’s turn to the relevant sections of the board meeting and the evidence. We’ll cover:
How we tried to offer helpful advice to CalPERS but were cut off illegally
How general counsel Matt Jacobs misled the board and the public
How the board is complicit in this misconduct
How We Tried to Offer Helpful Advice to CalPERS But Were Cut Off Illegally
Here are our remarks from the board meeting. They are as not as accessible to people who did not participate in the full meeting as I would like, since I was building on the discussion that had taken place earlier in the morning. With the benefit of hindsight, trying to do that wound up focusing too much on secondary issues and losing the main message. I could have acknowledged the preceding discussion in a much more cursory manner and spoken to the audience in the room and later viewers online more effectively.
The context: Chief Investment Officer Ted Eliopoulos started off the meeting with a long but still cautious and coded discussion of the difficulties CalPERS was facing in meeting its 7.5% return target. Readers may recall that CalPERS has come under criticism for opposing the proposal of state governor Jerry Brown to lower the return target to 6.5% over four years. CalPERS instead opted for a Rube-Goldbergish plan that has them lower the return level in good years, and then only gradually, allowing the pension fund to take up to 20 years to make the 1% cut.
You can find Eliopoulos’ remarks and the comments and questions of board members here, from 3:45 to 36:45*. Some board members suggested that CalPERS ask its Federal lobbyist to call for more infrastructure spending as a way to boost economic growth. We spoke right after the agenda item, “Asset Allocation, Performance and Risk” which gave more detail on this topic.
Our message to CalPERS, which we did not get to deliver in full, was that we were offering them some friendly advice about their communication strategy. Like the unions, they are making the mistake of reacting tactically and defensively to critics, which lets them frame the message. They instead need to use every opportunity they can to sell a positive message about pension funds and CalPERS in particular: that pension funds are clearly a better alternative for workers than individual investing, since retail investors, by virtue of paying much higher fees, will find it almost impossible to achieve the same results unless they are extremely lucky. And that’s before you add in that many retail investors further reduce their returns by overtrading or dabbling unsuccessfully in high risk strategies like futures trading (where 70% of retail investors lose money).
Our second major point was that CalPERS, in line with some of the ideas that board members had discussed, should make use of its bully pulpit and become a forceful advocate of better growth policies. Ultimately, the cost of supporting retirees is a function of the growth of the real economy. The US has pursued much less sound policies, starting from the 1970s. CalPERS should call for higher levels of Federal spending, particularly for R&D and infrastructure, and more redistribution, since high levels of inequality are also linked to lower growth. I had also planned to discuss how the Fed and other central banks are making matters worse, particularly for long-term investors, and that CalPERS should also call out how over-reliance on monetary policy had become counter-productive.
You can watch the clip below or view it here, starting at 1:13:50:
Susan Webber, Aurora Advisors/Naked Capitalism: Thanks so much. Strange as it may seem, I’m here to offer some helpful advice. Many of you know me through my website where I’ve been a critic of you folks in private equity. But since you may not know the rest of the things that I write, I’m actually a big supporter of government-provided pensions. And I’m a very big critic of the efforts to privatize them.
And therefore, when I look at your efforts to communicate with critics, I see that you are falling into some of the patterns that the unions exhibited in terms of operating generally tactically and being defensive. And that winds up accepting, often times accepting, the framing of your critics, which isn’t to your advantage.
What was encouraging about the discussion this morning around the chart that Mr. Eliopoulos presented is, is the candor about acknowledging the overall strategic issues. And I’d encourage you to be more strategic in your discussions with the public. And, in fact, some of the things, and I think you’ve got much better messages that you can convey, despite the difficulty of this overall situation, and, you know, even despite the fact that I sort of disagree with you tactically on your not lowering the 7.5% investment
The way the conversations have gone around that sort of illustrate the general pattern that you’ve got better messages, there’s an opportunity to shift the conversation to other topics. And, in fact, some of it came up in the Board meeting today, that the fact there’s a difficult return environment, you know, is something that people, that parties other than CalPERS face, you know, articulating that this isn’t just a CalPERS problem, that it’s a problem for all long-term investors, that it’s a problem for savers. And using that as an opportunity to reiterate the fact that if it’s hard for CalPERS, it would be even harder for private individuals, you know, to make the bigger strategic point that CalPERS is still better positioned to do this than other parties.
Similarly, the sort of discussion you had, you know, with Ms. Mathur and Mr. Jelincic mentioning the fact that we need better growth policies. I would go much further than just talking to your lobbyists about this. There is sort of belatedly an emerging consensus among economists that we’ve had a very long term set of bad economic policies for growth. That what looked like was working for 30 years is now looking like it, that it wasn’t such a good policy mix, that we need much more emphasis on wage growth. We need much more spending on R&D, that there’s an emerging consensus that running deficits on an ongoing basis is actually, is actually productive, and, of course, the point about infrastructure spending.
And not just talking to your lobbyist, but actually being a much more forceful external advocate for better growth policies. You know, similarly, the other thing, and I wish I’d heard it more discussed this morning
was the role of the Fed in this. That the difficult environment is driven to a very large degree by not just, not just the Fed, but the central banks around the world. [Mike cuts off].
Investment Committee Chairman Henry Jones: Ms. Webb, your time is up.
Board Member JJ Jelincic: Henry.
Webber [speaking without a mike]: With all due respect, you have not obtained the permission, Mr. Chairman, under Bagley-Keene to limit the time of speakers. There are certain steps you have to take to do that and those have not been taken.
Jones: Our…this is our policy to…
Webber: There’s certain steps under the law you need to take to limit the time. You have not done that under Bagley-Keene.
Jones: Our policy to apprise the speakers that they have three minutes. And when that time expires, then the mike is cut off.
Jelincic: Henry, I would like to ask that she be allowed to continue. We spent this morning talking about Bagley-Keene. We have been put on notice that the statute requires adoption of regulations if you’re going to limit speakers. We have chosen not to adopt those regulations. I would..
Jones: Yeah, well, I think that the issues related to Bagley-Keene we will address with our legal counsel.
Jones: Our general counsel.
Jelincic: The state
Jones: This is not the place to debate the Bagley-Keene with the..
Jelincic: Henry, the board has been put on notice that this was an issue.
Jones: And I said that the general — our General Counsel will be the person address that issue.
Jelincic: But he hasn’t since May. He hasn’t since the last…and the statute is really clear.
Jones: Okay. Then I’m going to move on, because I said that that’s our policy, and we will address the Bagley-Keene issues with our general counsel.
Webber: Mr. Jelincic, can you raise a point of order?
Jones: So I’m going to move on.
Jelincic: I’m not sure it’s a violation of our rules, so I’m not sure a point of order is appropriate. However, I will point out that your behavior is illegal.
Jones: Well, that’s a different question. Anyway…
Jelincic: Well, actually..
Jones: I’m moving forward.
Jelincic: It’s not..
Jones: As I said, this agenda item.
Jelincic: It’s not just a question if you actually look at the statute.
Jones: I’m going to ask that the Wilshire Group come forward to start your presentation on this issue.
Jelincic: So much being a public agency.
As you will see at the end of this post**, former CalPERS Investment Committee Chairman Mike Flaherman put the entire board on notice in May as JJ Jelincic indicated, but Jones and Jacobs knew of this issue as of at least last November. Several parties, including Flaherman, raised them as a result of misconduct in CalPERS’ private equity workshop last November.
The two bones of contention were the imposition of the three-minute limit as well as the agency refusing to allow members of the public to speak after each item on its legal notice of its meeting, which was the version published on its website. As we wrote last December:
Bear in mind that Bagley-Keene Act does allow state bodies to impose reasonable limits on remarks by members of the public. From Section 11125.7:
(b) The state body may adopt reasonable regulations to ensure that the intent of subdivision (a) is carried out, including, but not limited to, regulations limiting the total amount of time allocated for public comment on particular issues and for each individual speaker.
However, the statement that a state body “may adopt reasonable regulations” limiting speaker time is clearly a reference to the regulation adoption process stipulated in the California Administrative Procedures Act. This law is very specific about what it takes to “adopt a regulation.” It does not allow for a state agency to make things up as they go along and declare, “This is our rule and everyone has to abide by it.” Instead, an agency has to comply with a formal proposed rule notice process and hold a public hearing on it. Only then can it adopt it, at which point the regulation is published in the Code of California Regulations (CCR).
Here is the section of the CCR that deals with CalPERS. There appears to be no regulation on public comments at board meetings:
It thus looks like CalPERS never went through the process that would allow it to restrict the length of public comments. Instead, it appears to have imposed limits and assumed no one would ever challenge them.
Even worse, it appears that Jones knowingly violated the law last November and (as we will see) Jacobs has decided he will cover for him rather clear up the underlying issue. From the same post:
A member of the audience who had sat right behind Jones, spoke to me after the board meeting. He’d heard the discussion with Jones over the public comment time limits.
That audience member saw the general counsel, Jacobs, hand a piece of yellow paper to Jones after the lunch break. He could read nearly all of it. It clearly said “not authorized” regarding the time limits. The audience member is 99% certain from what they saw that Jacobs informed Jones that he could not impose time limits on public comments. That would seem logical given CalPERS’ evident failure to go through the steps required for them to do that. Nevertheless, Jones proceeded with his illegal remedy of a five minute limit instead [his finesse in that meeting for also having denied members the opportunity to comment after items on the internet version of the agenda].
This evidence should be deeply disturbing to every California taxpayer. If CalPERS is willing to break rules so casually to avoid tame challenges to its thinking, and one that any public institution should accept as part of its role, what is it capable of doing to cover up real dirt?
How General Counsel Matt Jacobs Misled the Board and the Public
Despite this history, CalPERS’ general counsel saw fit to double down after the lunch break. You can watch the clip below or view it here, starting at 0:30:
General Counsel Matthew Jacobs: Mr. Chair, there’s been some discussion and some confusion, I think, about what Bagley-Keene actually requires with respect to time limits on public comment. What it actually requires is that the public have an opportunity to comment. So here’s what the most important line says, this is section 11125.7(a) of the Government Code. “Except as otherwise provided in this section, the State body shall provide an opportunity for members of the public to directly address the state body on each agenda item before or during the state body’s discussion or consideration of the item”. Then there’s some other sentences, but that’s the core of it. It also says in the next subsection that, “The agency may,” and it uses the– that word, that is the permissive “may” as opposed to “shall” or “must,”, “· .. adopt regulations to effectuate the intent of subdivision (a), which is the one that I just read. So the basic idea is the intent of subdivision (a) is to ensure that the public has an opportunity, a chance, to be heard.
So that section I just referenced 11125.7(b), the exact language is, “The state body may adopt reasonable regulations to ensure that the intent of subdivision (a) is carried out, including, but not limited to, regulations limiting the total amount of time allocated for public comment on particular issues and for each individual speaker.”
The absence of a regulation that, an agency regulation under this cannot mean that there are no limits on public comment. The agency can utilize reasonable limits on public comment in the absence of a regulation, and certainly three minutes is reasonable. So, Mr. Jones, I think you’re safe. I don’t think that you committed any crimes. That said, we are bringing a draft regulation on public comment to the board next month. That is already in the works, it’s already drafted, and it will be before you next month, and it will address this and some other items.
The only reason Jacobs may have been able to persuade himself that his ruse worked was that he did it verbally. If you read the text of the relevant section of the California Government Code, Section 11125.7, it parses that the government body….”may adopt regulation….to implement”. In other words, if they want to “may…implement” more specific provisions via regulation. Due to the length of this post, we will not go through the information about the requirements of the Administrative Procedures Act and the relevant case law, but you can find information from the Office of Administrative Law about unenforceable “underground regulations” and more detail on when regulations are required.
Moreover, Jacobs is being disingenuous when he tries to pass off “Surely the statute cannot mean that in the absence of regulation there are no time limits on comments.” As Flaherman pointed out in his e-mail to the board, which Jacobs presumably read, CalPERS historically did not impose any time limits on public comments, and many other California agencies still take that posture.
Karl Olson, a top California attorney who has sued CalPERS twice, successfully, disagreed firmly with Jacobs’ interpretation:
It’s difficult to read the California open meeting law and come to the conclusion that the CalPERS general counsel presents to his board and the public, particularly given the very strong language in the statute that government bodies serve the public and not vice versa. If CalPERS wants to set time limits on public comments, the law is clear: it may do so via regulation, which is a formal process. Assertions about “policy” don’t satisfy this requirement.
And if Jacobs were so confident that CalPERS’ legal position is sound, why were he and Jones so eager to address the matter, and why is Jacobs bothering to bring a draft regulation to the board in September? His actions speak far louder than his words.
But what is most disturbing is that Jacobs decided to tell a flagrantly obvious lie to the board and the public, namely, that a “draft regulation” was “already in the works” to be brought before the board next month.
If this measure was set to be part of the September board meeting, it would have been included in the board agenda, which was released the following day. As you can see here, there is no such item.
I cannot stress firmly enough how destructive it is to an organization to have an employee, and worse, the head of a critical control function, lie casually and flagrantly to his bosses and not be called out or otherwise sanctioned for it.
As a consultant for over two decades to top executives of major financial firms, including ones who were larger and far more active in the financial markets than CalPERS, a obvious lie is the most dangerous and destructive sort of insubordination. It says loudly and clearly that the officer in question not only has no respect for the truth, but far worse, no respect for his superiors. And to make an ugly picture even worse, not only is Jacobs showing open disrespect to the to the highest level of authority at CalPERS, but he is doing this fully aware of the fact that both her and they are held to the standard of fiduciary duty, the highest standard of care.
It is bad enough to see this sort of thing come from any executive, but to see if from the general counsel is very troubling. I would tell any client that this level of lack of respect for both accuracy and for the proper chain of command represented an unacceptable business risk. The only place I’ve seen anything approaching this type of behavior first-hand was at Bankers Trust. That movie ended with Bankers Trust found first subject to private litigation for racketeering, and it later pled guilty to fraud for escheating customer funds, forcing its sale to Deutsche Bank. The fact that Jacobs so casually lied to deal with an embarrassing exchange at a board meeting is a strong indicator that outgoing CEO Anne Stausboll approved of, even encouraged, this type of ends-justify-the-means approach, and that it is therefore endemic in the CalPERS culture.
How the Board is Complicit in This Misconduct
Do not forget that the board is ultimately responsible for actions of CalPERS’ staff, as former CalPERS board member Michael Flaherman points out. You can watch the clip below or view it here, starting at 9:33:
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.
Flaherman is correct to stress that the board is culpable for its failure to rein in staff and question fellow board members. When Flahermnan made his statement, he did not know that Jacobs had made an even more serious misrepresentation in telling the board that he had already planned to have a draft regulation as part of the September board meeting. The documents posted the next day caught Jacobs out.
The former co-head of McKinsey’s organization practice, Doug Smith, who is a top change management expert, was deeply disturbed by how Jacobs handled the board:
Lying to the board – telling unadorned and stark lies as in this case – is not just sleazy. As a former attorney and current board member, it’s unimaginable to me that Matt Jacobs was not fired – or put on “leave” – immediately. A board cannot do its job – cannot govern – in the absence of accurate and truthful information, including information about what the law demands and requires a board to know and do. Who in their right mind can possibly disagree with this? Well, as we see in this case, the only ones who might disagree – who might say, “Hey, flat out lying is fine with us,” are folks who have lost all common sense and, frankly, are one step away from being fire-able themselves. Appalling.
One can only hope that incoming CEO Marcie Frost has the street smarts to recognize the signs of a diseased culture at CalPERS and take corrective action. Unfortunately, with a clueless and complicit board, the odds favor staff falsely persuading her that its behavior is normal for CalPERS, when it’s the result of decay over a long period, reinforced by a CEO who saw fit to aggrandize her own power and a board all too willing to go along. The result is an organization with $300 billion in assets that is effectively accountable to no one, which is a prescription for disaster. The staff’s cavalier attitude towards honesty and accountability confirms that CalPERS is priming itself for bad outcomes.
* If you watch this segment, it’s disconcerting to see several CalPERS board members openly treat Eliopoulos’ soft-pedaled depiction of the tough investment CalPERS faces as depressing and seem at a loss as to how to deal with the information.
** Text of e-mail:
on behalf of Michael Flaherman
Sent: Tuesday, May 17, 2016 4:16 PM
To: Bilbrey, Michael; John Chiang; Grant Boyken; email@example.com; Frank Moore; Betty Yee; Karen Greene Ross; Alan LoFaso; Lynne Paquin; firstname.lastname@example.org; email@example.com; firstname.lastname@example.org; Mathur, Priya; Bill Slaton; Ron Lind; Costigan, Richard; Henry Jones; Taylor, Theresa; Hollinger, Dana; Jelincic, JJ; Feckner, Rob
Subject: CalPERS Ongoing Bagley-Keene Open Meeting Act Violations
Members of the Board of Administration:
Yesterday, I addressed the CalPERS Investment Committee twice. On both occasions, I was informed by the chair that I would have only three minutes to speak, and from prior experience, I expected that my microphone would be disconnected precisely upon three minutes elapsing.
The Bagley-Keene Open Meeting Act (“the Act”) states very clearly that state bodies bound by the Act may not enforce time limits on public comment absent the adoption of regulations specifying such limits, and it appears, based on my review of the California Code of Regulations, that CalPERS has adopted no such regulations. The relevant provision of the Act states:
11125.7(b) The state body may adopt reasonable regulations to ensure that the intent of subdivision (a) is carried out, including, but not limited to, regulations limiting the total amount of time allocated for public comment on particular issues and for each individual speaker.
Notably, the Act does not specify that a state body may implement time limits on public comment via the adoption of a policy. Rather, the Act specifies that time limits on public comment may only be implemented via regulation, which in the context of California law clearly refers to the process for adopting regulations via the Administrative Procedures Act (APA). Among the steps necessary to adopt regulations in compliance with the APA is the holding of a public hearing on the proposed regulations.
As a substantive matter, I oppose the adoption of a regulation limiting time for public comment. The CalPERS board performed its business for decades without such a limit, and many state bodies continue to operate without one. Such a limit also seems in tension with the board’s unique duties of care and diligence, where allotting only three minutes to expert members of the public could serve to deprive the board of crucial information that is helpful or even necessary in the execution of its fiduciary duty. I would therefore voice opposition to a time limit regulation if CalPERS followed the procedural requirement of holding a hearing to consider the issue, which is exactly why the procedural requirement for a hearing exists.
Despite my opposition on the merits, I absolutely concede the board’s legal right under the Act to adopt time limits on public comment. Nevertheless, important procedural steps need to be observed before adopting such limits, and it appears that they have not been.
I first informed Matt Jacobs, your general counsel, of this defect in your procedures in mid-November of 2015. Since then, I have inspected your board agendas every month expecting to see a hearing notice on a proposed regulation setting limits on public comment. If you want to ratify the status quo, which, again I do not support, the solution is very simple. Propose regulations pursuant to the requirements of the APA. It troubles me that this has not occurred, and I hope that each of you recognize a duty to discover why it hasn’t.
I trust that until properly issued regulations take effect, there will be no further efforts to enforce time limits on public comment.
– Jelincic: So much being a public agency.
So it’s not who is on the Board that counts, it’s who controls the agenda. Kinda like, it’s who counts the votes that counts.
republicans – the party of the 1%
democrats – the party of the 0.01%
I haven’t seen anything like this since I saw an old newsreel of a Russian communist party congress under Stalin.
Is the CalPERS Board channelling its inner Queen of Hearts:
I should, right now, try out this novel approach to the law by walking down to the grocery store, taking something from the shelves and leaving the store without paying for it. If challenged about my unlawful conduct I should, like the CalPERS Board, simply retort (I’d have a really hard job capturing the requisite haughty and unassailable tone) “It’s my policy, if there’s an issue with it, which I don’t think there is, I’ll have my counsel look into the matter” and then proceed to alight carrying my unpaid-for tea and packet of biscuits.
Hey, don’t laugh, if it’s good enough for the CalPERS Board…
Stalin and the Queen of Hearts are good comparisons. Another is the first Mayor Daley of Chicago:
not to mention the recent nevada state convention (the one where no chairs were actually thrown).
but that was OK because the nevada democratic party is a private organization. /s
thank you yves, for, among many other very important acts, modeling for the less experienced how to conduct oneself in a government/public meeting. right down to the local level–as the same principles, rules, types of laws, and officials’ tricks to seize brute power by calling in their official attorneys, ignoring rules of order, operating in secret, and evading accountability are common at all levels of government.
your emphasis on the meaning of a public official’s lie is worth noting by any citizens and shareholders interested in holding public officials and private boards to account.
While it’s nice to see this getting some publicity I doubt things will change much in Sacto or at CalPers.
The casual disdain you were treated with is reflective of the fact that California ceased to have a representative form of Government decades ago due to voter disenfranchisement ( The 1994 crime bill comes to mind) and gerrymandering.
Thank you, Susan Webber, for your efforts: not to “speak truth to power,” that lame bit of prose, but to keep the lights on in the kitchen so the roaches and rats have to at least consider whether they can make yet another run at the cheese…
Corruption is a positive-feedback loop, with rewards for everyone who matters, treats (or beat-downs) for complaining victims, and a big FU for the rest of us.
the lights must be turned off after 3 minutes, to protect the rights of the roaches and rats.
It is an outrage
“This contretemps matters for two reasons. First, CalPERS is abusing its authority even when the stakes to it are low. This refusal to comply with clear statutory requirements proves critics right when they say that officials cannot be trusted to exercise power and bolsters their case for reducing the role of government.”
Even though I am a retired Federal employee, I think but for the grace of God goes my retirement account…
There is no better justification for supporting NC than the fact that it takes extreme vigilance to monitor the working of all these boards and agencies. Ironically, the modern bureaucratic state has perfected the technique of “hiding in plain sight.”
I look at the dealings of the board and get a sense of a Hillary sensibility and deja vu all over again – a lack of good faith and tendentious arguments put forward designed to gum up the works until someone dies or so much time has passed and the record is so muddled and gargantuan that the legal system is incapable of any relevant determination, and therefore becomes a “political” problem.
And finally, do CA public meeting take written comments? It would seem to stifle public comment only to have participation by people who are physically present. I know with federal regulations for advisory committees, substantive public comments must be responded to, which at least helps to pin down the agency and not give cover to an agency by pretending the issue never came up.
It comes as no surprise that the CalPERS Board is run like the Mafia, and that their thug general counsel fabricates “interpretations” of statutes in his “legal opinion” that bear no resemblance to the literal words (dismissed as “there’s some other sentences”). Their now-imprisoned former CEO led them into major investments in casinos (Caesar’s World, for example via PE) and horse racing tracks (Hollywood Park, through a lobbyist who even had legislation passed to facilitate a card room there as well) — enterprises that were traditional mob investments.
California has been crooked for decades, at least since the outrageous “privatization” of PG&E (now a felon — not the executives who paid themselves bonuses out of safety budgets, but the corporation…), SoCal Ed, and SDGE. Don Corleone knew that you can’t run a crooked enterprise without a bent lawyer to drop horse’s heads in people’s beds…
Calpers has been corrupt for decades. Back in the late 80s, I was a real estate executive for a large firm in LA that often offered commercial real estate projects to CalPERS for their investment consideration, for which we acted as a Broker. We consummated just one transaction with them. Prior to the final approval of our deal, a Board Member called me and asked me to contribute $100k (5% of the commission we would receive) to the campaign of a politician whose name you would all recognize. We complied, but we were not thrilled to have the legal liability that was inferred from this bribe. Needless to say, we did not present any other deals to CalPERS, and we felt justified when the Keating Five corruption scandal made headlines.
You’re offering friendly, sound advice. They cut you off, saying “they have decided.”
Their lead council Jacobs declares their actions compliant with statute:
‘ “Except as otherwise provided in this section, the State body shall provide an opportunity for members of the public to directly address the state body on each agenda item before or during the state body’s discussion or consideration of the item”. Then there’s some other sentences, but that’s the core of it. ‘
“Then there’s some other sentences,…”
“some *other* sentences” ???
CalPERS legal needs a good housecleaning.
Thanks so much for your continued reporting on CalPERS, Pensions, and PE.
It is sound. It’s exactly what they should be doing, and Calpers has the clout to do it, too.
This is incredible. It’s also very common across California state bodies. I’ve had my comments cut off in the legislature in Sacramento (when discussing an underground regulation in the former Department of Financial Institutions), and the California Judicial Council Technology Committee has re-arranged its agenda on at least one occasion to avoid discussing or revealing the existence of substantive comments I have submitted. It’s incredibly frustrating. I’m glad to see the issue come to light in such an extremely embarrassing way for CalPERS.
Bear in mind that an agency can limit the time for commenting IF it has made a regulation to that effect. There’s a process for doing that, including having a public hearing. CalPERS has never done that even though they were alerted last November, and possibly previously by others.
That was, in a word, badass.
Matt Jacobs on the CalPERS website
Matt Jacobs on the Martindale-Hubbell website
Both show DLA Piper firm reference. Maybe he changed his middle initial to throw the hounds off the scent?
I’ll write more letters/e-mails to our illustrious California legislators and public servants about the matter, and encourage citizens, beneficiaries and others to write, too.
In the famous words of young boys everywhere who’ve just done something dumb I’d say to the Calpers chair “uh oh now you’ve done it”. Over the years of reading NC and seeing yves’ interactions w refractory commenters I long ago concluded that not pissing her off was the smart policy. this Calpers clown has made it personal and my bet is hell will soon rain down from the direction of a certain Susan Webber. Have fun yves and make the bastard rue the day he was a rude prick!
In the link about “underground regulation” it states:
If you believe a state agency has issued an alleged underground regulation, you can challenge the alleged underground regulation by filing a petition with the Office of Administrative Law (OAL).
The 3 minute “policy” seems to be a clear example of an underground regulation. Will you or Mr. Flaherman be filing a petition with the OAL?
If you think this is a problem, my question is “What are YOU doing about it?”
It should not be up to Mr. Flaherman or Ms Smith to fix the problem. The complaint process is clearly explained at http://www.oal.ca.gov under the underground regulation tab. Even the needed form is there, Although you do not need to use their form if you provide the needed information. Again clearly explained.
I remember something about evil succeeding when good people do nothing.
So what are YOU doing?
This is me standing up and cheering you on Yves! Keep on keeping on and keep lighting fires under these scurrilous bastards.
They keep running away from legitimate questions and comments. WHY? What are they AFRAID of? What is it that they don’t want CA citizens to see???
You were correct in approach; correct in your interpretation of the law. Matt Jacobs was dead wrong, and the Board is tainted by what Jacobs did. The Board *should* sit up and take notice and demand better practices from Jacobs going forward.
Speaking as a CalPers contributer, who is paying attention. CA citizens deserve better financial management of OUR money. NOTE to CalPers Board: it’s not YOUR money. It is the money of all CA Citizens. What you do and how you handle OUR money has an impact on every CA citizen. We demand bettter financial management. NO to PE investing.
Let Susan Webber have her say. She is protecting all CA citizens and doing you, CalPers Board, a big favor. Stop the obstruction now.
Good stuff, Yves. I don’t know that power necessarily corrupts, but the arrogance of power certainly makes for stupidity. I hope this is a “have you no sense of decency” moment.
“This isn’t America. This is L.A.” (apropos of “Mulholldand Falls”)
As someone stuck with PERS, is there anything I can do as a stakeholder to promote change?
“and certainly three minutes is reasonable.”
That seems like a bit of a blanket statement for all of public commentary.
Great work on covering this.
“Jelincic: I’m not sure it’s a violation of our rules, so I’m not sure a point of order is appropriate. However, I will point out that your behavior is illegal.”
That’s just awesome.
Thank you for being there and doing this, Yves!
It is the Attorneys willingness to say illegal activity is legal that allows the wrong doing across the board in our society.
It is some of the government attorney willingness to do this also that takes our right of redress away from us in City and County Council Meetings.
This also goes on at the State and Federal hearings and the elected officials say the attorney says this is legal when it is not.
Naked Capitalism should report the attorney to the State Bar and see if the whole profession should be disbanded.
Thanks for the suggestion, but state bar associations almost never sanction attorneys unless they engage in gross abuses, like making personal use of escrow funds. And even when they are engaged in flagrant misconduct, as we saw with the foreclosure mills in Florida, the firm partners were never sanctioned despite national media reports of systematic abuses, which I have no doubt were used to support in-state complaints by homeowners. The exception was Daniel Stern, who was disbarred, after his firm failed, and even then, it appears to be that part of his crime was not passing on the matters he had in progress in a required orderly manner.
I hope you’ll visit again on future CalPERS posts. We regularly suggest ways readers can help. On the state and local level, actions like letters to legislators and state officials (particularly if you cc your local news outlets, such as your local paper and TV station) is very effective. State officials get much less correspondence from constituents than ones at the national level, and well-argued messages stand out.
Jacobs is not a “government lawyer” but rather comes from California’s “Deep State” of corrupt fixers. Most of his career has been at large private-sector law firms; his last job was a DLA Piper. He is also an insider with outgoing U.S. Senator who shares the Keating Five senator’s legacy mentioned in andy b‘s comment above.
Ironically, the person likely to inherit that U.S. Senate seat is the same person who abandoned her duty to enforce California’s Open Meetings law a few years ago, to the frustration of career state government employees who are concerned for the integrity of their pension savings. A “government lawyer” generally wouldn’t openly advise client on how to break the law.
However, I agree with Yves that the California State Bar is captive of this “Deep State” — I have seen it in (in)-action. People don’t rock the boat around here. The State Bar is more likely to go after the whistle-blower.
It is past time to respond but maybe in the future there could be some explanations of the importance of who is the client for a government attorney and why their instructions by their client should be made, for a city or county, in a public forum by the client for all to know.
There are elected officials such as Superintendents of Elections, School Boards and other’s in elected office or working in government whose attorney is assigned to their office by another politician. The individual who assigns them is their client and the attorney is obligated to act in their behalf regardless of the desires of the peoples’ elected official. There are more implications to this.
Please think about and describe crimes against the processes prescribed by Law, Statutes, Ordinances and Charter as acts against our form of Democracy.
“We regularly suggest ways readers can help…..”, please link to or ask experts to help the readers understand and stop crimes against the processes of Democracy.