CalPERS is so desperate to stymie transparency that it has effectively declared war on its new board member Margaret Brown.
As we will see more clearly when the board video is published (I have a rough transcript), Brown called a point of order at the top of the Investment Committee meeting. The transcript shows the Brown’s microphone being cut:
Board Member Margaret Brown: I have a — thank you. .
Investment Committee Chairman Henry Jones: Is your mic on? Push it back. Okay.
Brown: Thank you.
Jones: Ms. Brown?
Brown: I need to know whether I might be subject to arrest for trespassing for being here today. I was informed by the board president on Friday she claimed to have the authority to lock me out, the Board chambers on certain days.
Jones: Ms. Brown? Ms. Taylor?
Board Member Theresa Taylor: Great. Thank you. This is not on the agenda, so this is not appropriate time for this to be discussed right now.
Jones: Okay. I think that is the rule, so it’s not appropriate to discuss it at this time, so we need to move on.
Taylor: Turn it off.
Jones: Okay. Now back to the agenda.
This is pure banana republic stuff.
A point of order is always in order under Roberts Rules of Order, the procedures the board has adopted for conducting its meetings. But instead of allowing Brown to complete what she intended to say, Theresa Taylor interjected with a point of order, which does not supersede Brown’s point of order.
But this is merely the most visible sign of a series of heavy-handed moves the Board and staff have engaged in to stymie not just reasonable steps, but ones required for Brown to perform her duties as a board member.
What Brown wanted to discuss, as you can see from the copy of the letter she was prevented from presenting to the board that we have embedded at the end of this post, is yet more evidence of abuse of authority, in this case meted out by Board President Priya Mathur. Mathur made charges and issued a punishment against Brown that wildly exceed Mathur’s authority, that of illegally locking Brown out of her offices and other part of CalPERS premises. 1
Moreover, the underlying charges were trumped up, based on a deliberate misreading of the law. And Brown was never given an opportunity to rebut the charges or challenge the process.
But even worse is what triggered this abuse of authority. At the end of the letter, Brown explains how she has been repeatedly thwarted in her efforts to read transcripts of past board closed sessions. When she was finally allowed to do so, she was shown only a small portion of what she had asked to see, and the material included blacked out portions of pages.
CalPERS has revealed itself to be worse than a kangaroo court. A kangaroo court is at least a court, after all, and at least makes a show of having some sort of process. And this “make it up as you go” style is now being led by Priya Mathur, who has been subject to far more serious sanctions than any board member in recent years, including repeated ethics violations that led to fines by independent authorities. From a 2014 Sacramento Bee article:
The country’s richest public pension fund has stripped one of its 13 members of her posts on its board of administration after she repeatedly violated California’s political ethics laws.
Rob Feckner, board president of the California Public Employees’ Retirement System, announced at a Wednesday meeting that colleague Priya Mathur no longer serves as his vice president. Mathur also lost her chairmanship of the CalPERS Pension and Health Benefit Committee and vice chairmanships of two other committees….
On Thursday the five FPPC members, without debate, voted unanimously to fine Mathur $4,000 for failing to file timely campaign finance reports for 2012 and 2013. Mathur has agreed to not contest the enforcement action.
FPPC enforcement staff in August originally proposed levying a $1,000 fine against her. The commission rejected the settlement, saying Mathur should get a higher fine because of previous violations of the state’s Political Reform Act in 2002, 2007 and 2008…
In all, Mathur, recently reelected to a fourth term, four-year term on the CalPERS board, has paid or agreed to pay a total of $17,000 in penalties for late filing of legally required campaign finance reports and personal statements of economic interest.
The fact that CalPERS staff and board will not allow a new board member to see the history of its recent board meeting is so alarming that the Legislature needs to launch an immediate investigation and subpoena the records. The refusal to allow Brown access strongly suggests that the misconduct and corruption at CalPERS is even more pervasive than they had imagined. As governance expert and former co-head of McKinsey’s organization practice, Doug Smith, said:
Absent action by the legislature or the Governor and/or the courts, private equity’s capture of CalPERS is now complete.
Priya Mathur’s unilateral lock out of fellow Board Member Margeret Brown and the governance travesty of Henry Jones acting like a tinpot tyrant and cutting off Brown”s comes straight from the playbook of a badly run privately held corporation. That is consistent with CalPERS being a wholly owned subsidiary of private equity. Let me repeat that. CalPERS under Priya Mathur is owned by BlackRock and various other PE firms. California retirees — whether teachers or cops or judges or others — do NOT have any beneficial interests whatsoever. Instead, shareholder value fundamentalism prevails. And, the only legitimate interest to be served are those of the private equity barons who now own CalPERS lock, stock and barrel.
At any institution, and particularly a fiduciary entrusted with billions of dollars of beneficiary funds, a board member should have access to any document generated by the organization on demand.
CalPERS has instead repeatedly thwarted Brown in her efforts to read the transcripts of the closed sessions of CalPERS board meetings for the last year, starting with the Investment Committee. Frankly, this is something every board member should be doing as a matter of course. Board members aren’t psychic, nor should they be expected to be. It should be obvious that for a board member to make informed decisions, they need to know the history of discussions on many topics that occurred prior to them joining the board. The most important and sensitive matters are relegated to closed session, making it particularly important for a newbie board member to learn enough about the history to participate effectively.
It should send alarms that CalPERS has used repeated excuses to deny Brown access to basic history she needs to do her job, and then given her only a handful of pages, and even more stunning, with redactions! Note that all that CalPERS staff has been willing to allow Brown to see is snippets of the discussion, a small fraction of the record for the last year. Why isn’t she being allowed to see the full history of all discussions? Why are they being cherry picked and sanitized?
It’s not hard to conclude that the staff knows that any independent reading of the full record will show many questionable decisions and actions, in particular, regarding their risky, unprecedented, intermediary-enriching scheme to outsource private equity. As we’ve discussed, from early on it looks designed to hand the business to BlackRock. If that’s the case, it is a flagrant violation of fiduciary duty, due among other things to have a bona fide competitive bidding process (even assuming the underlying idea were sound; we’ve discussed long form as to why it isn’t).
And if this picture could not possible be worse, Brown was made to read a paper copy on a time of a CalPERS’ staffer’s choosing, in the staffer’s office with the staffer present. The message is crystal clear: the staff thinks it and not the board is in charge. Any governance expert would when that behavior is not stopped, it lays the groundwork for abuse and misconduct.
Needless to say, we’ve seen this playbook before. CalPERS attempted a bogus sanction process for former board member JJ Jelincic, whose real offense was asking basic questions about private equity that had the unfortunate effect of exposing staff ignorance and outright lies. There was never any public airing of the charges, which you would have expected if there was a there there. 2 The threat to remove Jelincic from the board resulting in Jelincic being made to take a course he would have taken anyhow, and some “counseling”. Anyone from Corporate America will recognize that as a face-saving gesture.
However, as we have said, CalPERS’ approach is to give board members the mushroom treatment. New board members are kept in the dark as long as possible, with the apparent aim of making sure they are well indoctrinated before they feel they know enough to participate. Since the board defers slavishly to staff, anyone who dares to ask basic questions is demonized as disruptive or even more perversely, as “embarrassing the system” as if the image of CalPERS as an organization is more important than serving the interests of beneficiaries and California taxpayers.
I urge readers to send this post to California residents. Please e-mail or call your state Assemblyman and Senator and tell them that CalPERS has repeatedly thwarted even basic efforts of board members to do their job of protecting California taxpayers. You can find your Senate and Assembly representatives here.
A captured board means CalPERS, with an over $300 billion kitty, is free to do as it pleases. That is a prescription for more bad performance and scandals. The Legislature needs to intervene because if it doesn’t, things are guaranteed to get worse, and on the current trajectory, quickly.
1 Priya Mathur’s e-mail to Brown referred to Board “chambers”. The official map of CalPERS premises shows only an “auditorium” and a “galleria”.
2 When board member Bill Slaton made heated but vague and completely unsupported charges against Jelincic, several board members said that even though Slaton claimed that Jelinic had violated closed session, it still ought to be possible to hold a public hearing. And the idea that you couldn’t was ludicrous. If Jelincic really had exposed confidential material, it was therefore already public and no further damage would be done by discussing it. But Board President Bob Feckner quickly reneged on his commitment to have an open process.pm lockout 31918 sig black out
Anyone know what Brown’s legal options are? Can she sue Jones, Mathur, or the board itself for violating the rules or bylaws?
As usual, I sent a message to Gov Brown’s Office regarding these posts, considering the fact that this will definitely affect all CA Taxpayers eventually, and as usual I check the “Request a Reply” box and I’m sure, based on past comments with that box checked, I will hear not one peep.
Holy crap, this is insane. Time must be running out for them to be this transparently stupid and obtuse. When it starts getting into the minutes, the end has to be near. Keep on them!
Thought Yves might like this one, if she hasn’t seen it already.
“CalPERS retirees are suddenly worried about their pensions. What happened?”
Every contact with public employees in California, cops, firemen, building departments, public works, librarians, health, wherever you meet them face to face, talk the them on the phone, or even ask questions online, should refer them to this article and others like it at Naked Capitalism.
Start a conversation like this:
“Have you heard the latest about what’s about to happen to your pension?”
This will get their attention!
At that point you can hand them a written URL for this or other articles. Public employees have Facebook pages and they do talk to each other. It’s your civic duty to be a shit disturber.
Thank you! And other readers, take note!
Dan Walters had an editorial in yesterday’s SacBee about the ever-rising cost of CalPers pensions sending cities into bankruptcy. Dan’s usual slant is to blame all of the “high cost” pensions that safety employees get.
Well that may be a piece of the puzzle, but to my knowledge (limited at best), I don’t believe I’ve seen Dan discuss how poorly CalPers is run, plus what a load of CROOKS they are there.
This is getting beyond ridiculous when a lawfully elected Board member cannot ask questions or obtain basic information.
As usual, I’ll send off some emails, fwiw – but usually I hear a big fat ZIP and nothing changes.
Thanks for the continuing coverage of the travesty know as the CROOKS at CalPers.
Count me as a current CalPers contributor and a hopeful to be an annuitant some day (if any money is left).
This is typically where the buzz goes out about how greedy granny has “ripped off” her grandkids by expecting a big fat pension that “ruins” it for the next generations. But you never hear about the CROOKS at CalPers and their shady dealings. KickBacks R Us at CalPers (at least, that’s my theory). JMHO, of course and speaking only for myself.
I see this catastrophe as a three-legged stool: defined benefits plans, the California Rule, and CalPERS incompetence and corruption.
CalPERS’ portfolio shows a volatility that should be much lower with an asset mix of 60% stocks/40% bonds. That they actively-manage the securities in the account AT ALL is irresponsible. My passively-managed Vanguard account has a rate of return several points higher than what is reported by CalPERS with much less volatility and I’m 90% into stocks. Passively-managed index funds have been shown to outperform actively-managed funds by at least 2% which is huge. I think the only reason the CalPERS fund grows at all is that they’ve duped the cities into paying more into it every year. It’s like if I put 18% of my income into my 401(k) instead of 15% – of course it will grow simply because I’m saving more.
I think Yves’ post above goes further to show that the CalPERS board is hiding quite a bit. Perhaps cities are behind on their catch-up payments and they’ve had to revise-down their projections.
Defined contribution plans passively-managed by Vanguard or one of the other low-cost index fund providers would bring much more honesty to the state retirement system. Everybody gets what they put in and it is much harder to steal because everyone has their own account indexed to broad market indices which are clear as crystal.
By now, it’s pretty obvious that there’s some heavy-duty corruption going on at CalPERS, which is motivating all this coverup maneuvering.
If you’re a beneficiary, I suggest you call the California law enforcement agency and ask them to check the other CALPERS officials’ bank accounts for peculation. Don’t know the correct agency in Cali – here I’d start with the Attorney Generals’ office.
This is probably something you need to be a California resident to do effectively. There has to be a reason for all the gyrations.
yes, it seems like a criminal enterprise
My guess would be that CalPers gave a big wad of money to the PE enthusiasts who subsequently lost it betting on unicorns at the horsetrack. Now that the blow and the hookers are gone, panic is setting in as they try to cover up the fact that Calpers has lost most or maybe all of its funds in the effort to score big.
Probably the next “surprise” will be that Calpers will report that they’ve been hacked and some deviant has wiped out all financial records. Whocoulddanode ?
In an interesting (to me) aside, the children of several prominent Dems (Kerry, Biden, Clinton(Chelsea’s husband), and now Obama himself) are managing or want to manage PE funds.
This sort of criminal behaviour is only possible if such an organization has a lot of political cover. Has anybody ever gone into the question of how much money is given to Democrats by CalPers every year? California is a Democrat bastion after all. Then again, for that to happen, you would have to audit the books which I suspect would be difficult.
What may not be difficult in the long run is to get Californians to unite as this is their retirement pensions on the line after all. Someone should tell them that if CalPers is not reformed, then they will be eating dog food in their old age as CalPers would have blown their money. I am willing to bet that that would get people’s attention there. Sometimes you have to fight dirty tricks with dirty tricks.
Attorney General Becerra and Governor Brown will be ALL OVER THIS, as soon as they have some time free.
Governor Brown needs another $20-$30 Billion for the first leg of the High speed train to nowhere and attorney General Becerra is concentrating all his efforts on Impeaching Trump.
There’s only so much time in the day and sometimes tough choices have to be made.
People have asked why I did not run for re-election. Today’s Investment Committee (3/19/18) is an example of the incompetence, ignorance and disrespect I was no longer willing to put up with..
A Point of Order, is an allegation that the rules are being violated. It is ALWAYS in order even if a motion is on the floor, other than to adjourn, recess or Point of Privilege and even is another speaker has been recognized and is speaking. The whole purpose of a Point of Order is to bring the body into compliance with the rules.
Margaret Brown (recently elected) raised a Point of Order. Even before she was able to state her Point of Order she was interrupted by Theresa Taylor (up for election this year, hint, hint) with another Point of Order. Ms. Taylor (an SEIU Local 1000 Vice President) objected that Ms. Brown’s Point of Order was out of order because it was not on the agenda. [I will ignore that Ms. Taylor’s Point of Order was also not on the agenda.]
Henry Jones (up for election next year) a 10 year Board member and long serving Chair of the Investment Committee upheld Ms. Taylor’s objection and at the direction of Ms. Taylor cut off Margaret Brown’s microphone. Mr. Jones should know better. If he doesn’t Matt “Roy Cohn” Jacobs the CalPERS General Council should have stepped in. It is noted that not a single Board member objected to the violation of the rules or the absurd and irresponsible decision of the chair
I know that the Board can be very dysfunctional but even I cannot imagine any way to agendize that a rule will be violated. Unless the rule violation was scheduled at least 10 days in advance it can not be put on the agenda. If the violation is scheduled 10 days in advance someone needs to step in.There is a reason a Point of Order is a very high priority motion.
In yet another irony Margaret Brown had asked to a copy of Robert’s Rules of Order. I think is shows good responsibility to try to be informed of the rules. She was told by Karen Perkins, Principal Advisor to the Board President, that Ms. Brown did not need a copy because Matt “Roy Cohn” Jacobs acted as the Board’s parliamentarian and made sure the rules were complied with. I guess there is no reason for the Board to know the rules of order if the parliamentarian doesn’t,
The whole farce reminds of this passage by David Friedman about the Chinese legal system
Nah, Catch 22 sums it better. M&M Enterprises indeed, with Catch 22 is bylaws.
“What’s good for Milo Minderbinder, is good for the country.” M&M Enterprises, indeed.
an aside: for those who haven’t read “Catch 22”, look up the Wikipedia entry for “Milo Minderbinder”. These references will become clear.
Thank you for your service. As an honest man with one life to live, you know when it’s time to cut bait and move on with your life. As a third-generation Californian and private-sector taxpayer, I am becoming aware that men like you and women like Margaret Brown are outnumbered roughly 10:1 in our state institutions.
I think I will be cutting bait myself.
When is the “Jolly Roger” going to be run up the flagpole outside CALPERS’ office?
I heard of something like this at a small nonprofit, where an outsider got elected to the board and the rest of the board wouldn’t let him see the org’s financials. It was very obvious from the relevant state statutes (not California) that he was entitled to see them, so he sued and the court ordered the board to give him the records. If California has something similar, it’s a slam dunk.
If CalPERS’s management and its lead board members have done nothing wrong, they should stop acting as if they were guilty. Instead, they are doubling down. CalPERS’s carpet must look like a mogul run, what with the mounds and mounds of dirt swept under it. When will the governor and legislature act to protect billions of state assets and the millions of lives dependent on them?
Cutting off a person’s microphone seems to be a standard ploy in the book of dirt tricks. I’ve heard that when the Syrian Ambassador to the United Nation stands up to defend his country and make a speech, that his microphone suddenly develops all sorts of mysterious problems. And this is at the United Nations General Assembly!
Bring something to the meeting that looks like a briefcase but is actually a small PA system with batteries and a speaker inside. Set it casually down on the table while giving your talk. When they cut off your microphone, calmly pull your own wireless mic out of your pocket, flip on your briefcase PA, and keep talking as if nothing had happened.
CalPERS is corrupt, plain and simple. The corruption is rampant through this fund and will continue to be until the public takes a stand. The board members are in it for themselves. What was it two years ago Ms. Mathur was in trouble herself due to misuse of funds. All I can say is I’m fully disgusted and the members need to be as well.