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