If you were harboring any doubts as to how deeply corrupt CalPERS is, the latest incidents offer yet more compelling evidence. CalPERS’ board president Priya Mathur has directed the employees of the CalPERS Board Services unit, an administrative team, to open and read the mail addressed to board member Margaret Brown. Mathur reserves the right not to send the correspondence to Brown and to answer on her behalf.
Even worse, when Brown e-mailed CalPERS CEO Marcie Frost to tell her this practice had to stop immediately, Frost acted as if she lacked the power to intervene. This is nonsense. All of the members of the Board Services team are CalPERS employees, meaning Frost is their boss. The fact that Frost is unwilling to stop a clearly illegal procedure says she is not fit to be CEO.
On top of that, as we’ll discuss later in this post, Mathur, via the same Board Services group, has also been denying Brown access to transcripts of past board meetings. This is another flagrant abuse. As law professor and white collar criminologist Bill Black stated, a board member is entitled to see any document of the organization they oversee.
Brown’s attorney James Moody sent a sternly-worded letter to Mathur telling her that these practices and other forms of interference with Brown performing her duties of office must stop. We’ve embedded Moody’s missive at the end of this post.
This is banana republic behavior. And there is no mistaking that this is standard procedure, as least as far as Brown is concerned, which raises the question of whether she is being singled our or whether all board members, who are officials of the State of California, are having Mathur meddle in the performance of their duties. It is also clear that CEO Frost is actively supporting Mathur’s campaign against Brown even though it is against the law and a violation of fiduciary duty.
Let us also not forget that Mathur has been repeatedly censured for not showing up to board meetings and fined for failures to file required disclosure forms on time.
CalPERS’ Mail Heist
Brown found out about the interception, reading, and even diversion of her mail and e-mail by accident. A constituent complained about Brown’s failure to respond to a letter he had sent in March, which Brown had not received. After Brown asked why she hadn’t gotten her mail, here was the response from a member of the Board Services unit (note that Karen Perkins is the head of that group):
From: “Ortega, Christina” <Christina.Ortega@calpers.ca.gov>
Date: April 11, 2018 at 9:57:12 AM PDT
To: “Brown, Margaret” <Margaret.Brown@calpers.ca.gov>
Cc: “Perkins, Karen” <Karen.Perkins@calpers.ca.gov>
Subject: RE: Member Correspondence – XXXX
To answer your questions, we received two copies of this letter on March 22nd: one was addressed to Priya and one was addressed to you.
Following is our procedure for handling member correspondence:
* Priya reviews all correspondence addressed to board members and directs how to proceed.
* Depending on the matter at hand or the specific circumstances, emails are either routed to the appropriate program area (via the Executive) to handle directly with the member and/or a response is developed for the Board President’s review, approval, and signature.
* In either case, when the letter is forwarded to the program area/Executive, we also send it to the board members included on the letter (after redacting personal information).
* When the program area develops a response for the Board President’s signature, we send a copy of the signed response to all board members included on the letter.
It should be obvious what an outrage this is.
Brown is an elected official. It would be completely unacceptable for, say, the chairman of a Congressional committee to intercept, read, and answer mail sent to members of his committee. It is even worse in the case of CalPERS because board members like Brown are jointly and severally liable for the performance of their fiduciary duties. Mathur is thus actively undermining the independence and thus performance of board members.
Moreover, CalPERS institutionally is aware of and supporting this conduct. The Board Services members are all CalPERS employees. Their pay levels are set by CalPERS, not the board. The board has delegated its authority for CalPERS personnel matters to the CEO. Marcie Frost could change the staffing of the Board Services group any time she wanted to.
Yet astonishingly, Frost is taking the cowardly path of trying to pretend she has no authority. Brown e-mailed Frost demanding that she stop the interception of Brown’s mail:
From: “Brown, Margaret” <Margaret.Brown@calpers.ca.gov>
Date: April 12, 2018 at 2:22:46 AM PDT
To: “Frost, Marcie” <Marcie.Frost@calpers.ca.gov>
Subject: Fwd: Member Correspondence – XXXX
I have given no one permission to open, divert, and/or read my mail or other documents addressed to me whether delivered by the the post office, or any another method including hand delivery or email.
The Board Governance documents do not grant this permission to the Board president or to staff.
As a constitutionally elected officer of the CalPERS Board, privacy in my correspondence is necessary, especially in my watchdog role.
Please immediately confirm that diversion of mail/documents addressed to me individually or as a member of the Board has been halted.
CalPERS Board of Administration
Brown e-mailed Frost again the evening of the 13th asking why she had not gotten a response. That finally elicited a reply:
From: “Frost, Marcie” <Marcie.Frost@calpers.ca.gov>
Date: April 14, 2018 at 7:04:07 AM PDT
To: “Brown, Margaret” <Margaret.Brown@calpers.ca.gov>
Subject: Re: Member Correspondence
The board services unit doesn’t report to me – they report through the board president. I’ll send this to Priya for a response.
Frost’s claim is a baldfaced lie and she has to know that. Frost and not the board controls the pay and the staffing of the Board Services unit. Frost could replace the individuals any time she wanted to.
The Chief Executive Officer delegation clearly states that Frost is responsible for managing all functions at CalPERS. There is no exception for the Board Services Unit. Likewise, the Board President delegation doesn’t come close to delegating any management authority over any staff to Mathur. 1
Here are some reasons why this “procedure” is appalling:
Undermines Brown’s performance of her duties of office. Brown is a California elected official. Brown is also a fiduciary. Mathur has no legal basis for usurping her authority.
Perpetuates corruption. Less than a decade ago, CaLPERS’ CEO Fred Buenrostro and former board member Al Villalobos were indicted for bribery and other charges. Buenrostro had, among other things, taken $200,000 in cash in paper bags. Villalobos committed suicide. Buenrostro is serving a four and a half year sentence in a Federal prison. One current board member resigned and two who were close to Villalobos did not run for reelection.
So given this record of criminal conduct, it isn’t a stretch to think a whistleblower might try to send Brown, the only reformer on the board, hard copy evidence about misdeeds. Given what we’ve documented about CalPERS over the last few years, do you think there is any chance this information would ever get to Brown? Not only would it be withheld from her but CalPERS is likely to try to identify the whistleblower and if it were an employee, to retaliate, as it did with three employees who called out an incident of insider trading.
Violates the law. Federal courts have established two common law privacy claims, namely, “intrusion upon seclusion” and “public disclosure of a private fact.”2 The rulings on “intrusion upon seclusion” are based on the standard of an employer invading the privacy of an employee in a way that third parties would find offensive. The parties to whom I have spoken to so far, including attorneys, find the idea of someone else’s mail on a a wholesale basis to be offensive, and even more so when they persist in the face of a written objection.
And that’s before you get to the fact that Brown is in a supervisory capacity. Impeding her receipt of information will impede her effectiveness. In the case that led Brown to find out about this abuse, the Board Services unit dropped the ball on replying to a constituent, which hurt Brown’s credibility. One has to wonder if that was by design.
On top of that, CalPERS staff taking possession of Brown’s mail is larceny. Not only might Brown be sent items with monetary value (personal gifts from relatives, passes to conferences), but she has property rights to the documents themselves, even junk mail.
As an aside, this Mafia-like style of operating means whistleblowers with any sense won’t bother with inside channels but will go straight to the press, which works to my benefit.
Denial of Access to Transcripts
Brown requested access to a full year of closed session transcripts, since she realized after her first set of closed session board meetings in February that there was a great deal of history behind many of the issues under discussion. She needed to have the backstory to be adequately informed and make good decisions.
Brown has been given the runaround for months by the staff and the board. Board President Priya Mathur insisted she’d understand the transcripts better if she was briefed first by Chief Investment Officer Ted Eliopoulos about CalPERS’ vaunted research into private equity business models. Not only did she never get that talk, when she finally meet with CEO Frost and John Cole of the Investment Office, they admitted there was no information or documents to review.
Brown has also been subjected to limits on access to records. Recall that law professor Bill Black has said a board member has a right to see any record of the organization they demand. Attorney James Moody reaffirmed that reading.
Yet Board President Priya Mathur dictated impermissible restriction. From her e-mail in February:
Karen [Perkins] shared your request for closed session items to me.
As I’m sure you can appreciate, it is essential to protect the confidentiality of closed session items and to avoid the unnecessary expenditure of our already busy Board Services Unit resources.
Our practice with archived closed session materials is as follow:
State a specific purpose for your request for closed session materials.
Include in your request specific details, including the committee or Board, the date and the agenda item.
You may review the materials in Karen’s office at CalPERS headquarters, but may not copy them or remove them from site.
Please don’t hesitate to contact me with any questions.
Mathur’s use of the word “practice” is a tacit admission that she has no legal foundation for her arbitrary and unreasonable demands. Brown does not have to explain herself. Brown can go on a fishing expedition if she sees fit.
In fact, Brown has to go on a fishing expedition. Since closed sessions are secret, she can’t know what she doesn’t know. The idea that she can specify what records in a black box might be useful to her is absurd. Even though the CalPERS hews to the form of preparing an agenda of the items to be discussed in closed session and providing the legal citations justifying why they are not being shared with the public, past board members say that closed sessions regularly range beyond items on the agenda.
Similarly, the notion that a board member’s information requests should be compromised because it might tax the oh so busy Board Services team is offensive. Board members performing their fiduciary duties properly is of paramount importance to CalPERS. Mathur explicitly stating otherwise is proof that she is unfit to serve on CalPERS’ board.
Note also that the excuse of difficulty is a fabrication. It would take all of 15 minutes at most for Karen Perkins to burn a disk with all the closed session transcripts that Brown wanted. If there is any reason for Brown’s request to take an undue amount of staff time, it is because Mathur and Frost are working to keep Brown in the dark and render her less effective
To make a very long story short, Brown has been allowed to read only very limited printouts of closed session transcripts, and then only in the office of the head of Board Services unit head Karen Perkins, as if Perkins were a prison guard ward.
Perkins has offered Brown very few time slots, and ruled out an entire week, even though Brown is regularly in Sacramento. As a result, Brown has only had one reading session in which staff cherry picked what she saw. That amounted to only about 50 pages of transcripts, with some pages partially redacted. Moreover, Karen Perkins failed to provide slides and reports that were an integral part of the discussion that Brown reads, despite repeated requests by Brown.
As you can see from the letter below, attorney James Moody has demanded that this governance travesty stop. The mail interception, transcript foot-dragging, and other types of harassment are part of a campaign to hamstring Brown.
The fact that CalPERS is so desperate to thwart Brown, as it tried to do with former board member JJ Jelincic, in getting access to information and answers to reasonable questions should alarm CalPERS beneficiaries and California taxpayers. Only an organization with lots to hide would fight transparency this hard.
1 This is the current version of the Chief Executive Office’s delegated authority, from CalPERS’ website (emphasis ours):
2. Conduct, approve and oversee the administration and management of all functions within CalPERS, including without limitation all actuarial, audit, financial, investment, and legal functions with independence and in conformance with professional standards, and in conformance with the direction of the Board.
3. Conduct, approve and oversee the administration and business continuity of all units and functions within CalPERS and the operation of CalPERS headquarters’ facility, including provision for sufficient information technology, facilities, and equipment to support CalPERS business and operational needs, operating within the resources, delegations of authority, and fiscal limits set by the Board….
Staff Resources and Organizational Structure
8. Approve all personnel decisions, including hiring, disciplining, and terminating, for all employees listed in Government Code section 20098 and those in Career Executive Assignments. The Board and the CEO share responsibility for hiring, evaluating (including base salary and incentive compensation), and terminating the Chief Investment Officer (CIO). The Board retains veto authority over CEO decisions for hiring, evaluating (including base salary and incentive compensation), and terminating the Chief Financial Officer, Chief Actuary, and General Counsel.
While there is a carve out for the Board to retain some authority, it does not apply to the Board Services unit. Moreover, any such authority rests with the Board as a whole, and not with the Board President.
Here is the Board President’s delegation. You can see there is no mention whatsoever of the supervision of CalPERS staff:
RESOLVED, (A} That, pursuant to the foregoing, the Board hereby authorizes the Board President to act, and to act finally, for the Board with respect to the following activities:
(1) Call and schedule regular and special Board meetings;
(2) ln coordination with Committee chairs, call .and schedule meetings of the Board’s Committees, both standing and special;
(3) Conduct all Board meetings In conformity with the Board’s rules of order and other applicable policies;
(4) Appoint members of Board committees, both standing and special;
(5) After consultation with Board members, appoint members of Protest Review Committees, upon the recommendation of the General Counsel that such a Committee should be constituted;
(6) Review and approve requests from Board members to represent the System on out-of-state trips;
(7) After consultation with the Chief Executive Officer, determine the appropriate Board and/or staff member to represent the System on trips outside of the United States, when the costs of .such travel (in whole or in part) is being provided by a third party as a gift to the System, and accept, on behalf of the System, gifts of travel made by such third parties;
2 Readers may be surprised to learn that deliberately opening someone else’s mail isn’t criminal. The Postal Service has tried to stay out of this matter. From the USPS “Domestic Mail Manual” which has the force of law, by virtue of being incorporated into the Code of Federal Regulations (CFR) at 39 CFR 111.1:
508.1.6 Delivery to Individual at Organization
1.6.1 To Address
All mail addressed to a governmental or nongovernmental organization or to an individual by name or title at the address of the organization is delivered to the organization, as is similarly addressed mail for former officials, employees, contractors, agents, etc. If disagreement arises where any such mail should be delivered, it must be delivered under the order of the organization’s president or equivalent official.
However, this regulation leads to the same result as CalPERS’ own delegated authority: CEO Marcie Frost, and not Board President Priya Mathur, is the responsible party. The only other possible reading is that by virtue of CalPERS board members being designated in the California Constitution as state officials, and not merely officials of CalPERS, that the Governor is the decider. But either way, Frost trying to depict herself as powerless is obviously false.180413 - jam to calpers re brown