Charles Asubonten Has Left CalPERS; Los Angeles Times’ Mike Hiltzik Questions Competence of Executives

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Late last Friday, we noticed that the page for Chief Financial Officer Charles Asubonten was not up on the CalPERS website. It turns out Asubonten is indeed gone from CalPERS, but that may not mean he is done with CalPERS.

Recall that following our extensive documentation of discrepancies on his resume and financial conflicts of interest filing (Form 700), Los Angeles Times reporter Mike Hiltzik confirmed our reporting and voiced his own concerns. A few days after Hiltzik’s story ran, Adam Ashton of the Sacramento Bee reported on April 20 that CalPERS was investigating Asubonten.

We were thus alarmed to see that Asubonten was set to present on a business as usual basis at a May 15 board meeting and wrote up the development. On May 14, in response to an e-mail from reader Brandon, CEO Marcie Frost stated that “Officer in Charge, Marlene Timberlake D’Adamo, is presenting to the Finance and Administration Committee tomorrow.”

On Sunday late in the evening, we e-mailed CalPERS head of Stakeholder Relations, Brad Pacheco, asking “Am I to assume he is no longer CalPERS’ CFO? If not, when will the page be restored?”

On Monday, at 12:55 PM Pacific time, Pacheco confirmed Asubonten was no longer with CalPERS. That was before employees received an e-mail, at 1:10 PM PDT, announcing that Marlene Timberlake D’Adamo would serve as CalPERS’ interim Chief Financial Officer. Hiltzik and Ashton reported on the development shortly thereafter. Both stories credited Naked Capitalism as having raised the red flags about Asubonten’s misrepresentations about his record.

Hiltzik lambasted CalPERS’ “move along, nothing to see here” posture, stressing that California citizens should be concerned about the caliber of leadership at the giant pension fund. From his account:

The circumstances of Asubonten’s departure from the CalPERS executive ranks are unclear. CalPERS made no announcement that he was leaving, but a spokesman acknowledged that he is “no longer with CalPERS.” The spokesman said Asubonten’s departure is being treated as a “personnel matter” and therefore no further information would be provided….

CalPERS also declined to discuss the timing of Asubonten’s departure….

Asubonten’s departure should intensify questions about whether CalPERS management and its board members are up to the task of overseeing a $350-billion retirement and healthcare system serving more than 3 million present and past public employees and their families. The questions apply not only to Asubonten’s qualifications, but the process that led to his appointment to a post with responsibilities requiring top-flight management skills and experience.

Treating his departure as a state secret won’t quell these doubts. That’s especially so given what appears to be CalPERS management’s complicity in exaggerating Asubonten’s work experience. CalPERS should come clean about the process.

Ashton emphasized the timing, although the reason CalPERS was forced to act was that the first Los Angeles Times story was too high profile for CalPERS to stand pat. Given how CEO Marcie Frost backed Asubonten to Hiltzik when CalPERS had clearly not done even the most superficial efforts to check our posts, like clicking on the many links that provided supporting evidence, Frost was clearly of the misguided view that she could brazen this one out. That response raises serious doubts about her judgement.

CalPERS’ efforts to pull a shroud of secrecy over this sorry affair strongly suggest that Asubonten did not go voluntarily. If that is the case, given his history of filing a lawsuit in South Africa against a former employer where he seemed to have very low odds of prevailing, Asubonten is likely to do what he can to fight.

If Asubonten was dismissed through a formal process, which includes a so-called “Skelly hearing,” he can appeal to the State Personnel board. Skelly hearings are private, while State Personnel board appeals are open to the public.

It is highly unlikely that Asubonten could prevail in this scenario. Since he was on probation, the only grounds for reversing a dismissal are that it was fraudulent or discriminatory. Given the overwhelming evidence that we unearthed, as one financial reporter noted, “He should just slink off into the night.” However, if our guesses are right, one upside is that a public hearing would air the evidence that CalPERS relied on its decision. So stay tuned to see if l’affaire Asubonten winds up having an additional episode.

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  1. The Rev Kev

    I would say that it would be a matter of interest to find out what severance package Asubonten was given, putting aside the matter that he should never have been offered he job in the first place. I guarantee to that it will be generous. Will his job be advertised? Or will the try to Board slip someone in the back door.
    Personally, I would not touch that job with a ten-foot barge pole – even if I had the qualifications. I suspect that that job may be a bit of a poisoned chalice here. Being the Chief Financial Officer for CalPERS can be dodgy because if CalPERS does a Bear Stearns, then all the major financial records would have the CFO’s signature all over it. And you can bet that California’s politicians will be looking for a scapegoat in such an eventuality.

    1. Yves Smith Post author

      I would not assume he was given any severance. He was at CalPERS less than six months. He was on probation, which means the bar for firing him is low. Fraud in obtaining employment is a clear-cut grounds for termination of employment for California state employees.

      CalPERS would also not be so closed mouthed if they’d reached a negotiated settlement. In those cases, both sides agree on an official statement. CalPERS’ uncomfortable silence is a strong tell that Asubonten’s parting wasn’t on friendly or mutually agreed terms.

      1. The Rev Kev

        Wouldn’t he be untitled to shut-up money so that he wouldn’t come out with his memoirs or a few articles on his six months at CalPERS? Would love to have know how he came to be offered his job originally. Either he is guilty of fraud, CalPERS is guilty of not taking due diligence, or it was some sort of gentleman’s agreement between the two.
        Him being given the boot is a good solid tactical victory but realistically it is not a strategic one. The main bad players are still in place and are still calling a lot of the shots – for now. The good news is that more and more people are paying attention to what is going on over at CalPERS and this does all add up over time.

        1. Yves Smith Post author

          He’s not going to have seen enough from where he sat, and the press would not report on his charges as a proven liar. He can’t pretend to have been fired for whistleblowing. Even bona fide whistleblowers have great difficulty getting press interest. And anything short of that will be dismissed as being what it is, an effort at revenge by someone who was in the wrong from the get go.

  2. Fiery Hunt

    Ms Smith,
    You are well deserving of our esteem and respect.
    Thank you!

    1. Yves Smith Post author

      It was CalPERS’ job, not mine, to verify his resume.

      You cannot verify college and grad school degrees without a Social Security number. His undergraduate school put out a press release when Asubonten joined CalPERS. As for Ross, he did have an entry in the notes for his class in the alumni magazine, IIRC, in 2004.

      1. DonCoyote

        Although, given that you did such a wonderful job, maybe you can bill them for it? :-)

        Naked Capitalism, speaking truth to power once again. It’s nice to see an occasional win.

  3. Clive

    First off, this is a scalp that Naked Capitalism took. Be under no illusions, CalPERS, Yves knows every murky corner of your cronyism and incompetence. If you think you can ignore her, stonewall her, not answer her questions when you have public hearings, not respond to her criticisms and generally treat her like nothing so much as an annoying humming sound you can drown out with your usual refrain of “la la la, we can’t hear you” you are sadly mistaken. Yves will not stop digging until you get with her program. I would suggest you try listening to what she has to say, now and again. But that’s up to you.

    Did I also neglect to mention that board member Brown has your number, too?

    Secondly, not so fast CalPERS. You’ve given Asubonten his marching orders and hope that you can be like it is in The Matrix where everything shimmers for a second or two then no-one notices how reality has changed. But every problem which you had before and which ended up with you getting saddled with Asubonten is still present, only now a little worse.

    Succession planning in large and politically exposed organisations is the subject of endless advice from well-established media sources, so everyone (well, everyone except CalPERS, apparently) knows the pitfalls and what they need to do to minimise the risks. But you, CalPERS, seem impervious to the well established body of experience. You do not have a pool of eligible internally developed candidates. You don’t, obviously, as Asubonten proved, know how to manage an external executive search. Your, a-hem, reputation proceeds you so you’re automatically on the back-foot when it comes to trying to attract a wide spectrum of potential talent.

    But far worse than any of these setbacks — and the severest of impediments to your attempting to not repeat your mistakes — is that you’re tone deaf and you don’t even know or can’t even admit to yourselves that you have issues in your management systems, experience and capabilities.

    As Yves has previously noted, state interventions are tricky and that’s what’s insulated CalPERS historically. But there comes a point when a bad situation does, finally, become completely untenable.

    1. EoH

      Succession planning is ordinarily a passion for those in corner offices. It’s an explicit job requirement. It’s important to the firm. It’s necessary to filter candidates for the appropriate characteristics, as defined by current management. It protects that management from the predations and exposure an unfiltered new hire might be willing to exact, either when s/he comes or goes. CalPERS’s seems to be doing this job badly, too.

      1. Anon

        From my experience in government (municipal and state): Asuboten-type hires are intentional. The hire knows they are only marginally qualified and will readily follow the “direction” of the Boss (Marcie Frost). The Boss gets a pliable underling AND a readily disposable scapegoat when things go bad.

        Succession? Hell, it’s about power, paycheck, and pension! A big F-U to anyone else.

  4. Colonel Smithers

    Thank you for the great news, Yves. Congratulations. NC and you can feel justly proud of this scalp, a shining example to most journalists.

    Having worked at the UK buy side trade association for 18 months, I noticed a somewhat unhealthy respect and even eagerness to lobby for the City asset managers by government pension funds. I did not get the impression that pension scheme staff were not honest. It seemed more naivete than anything malign, but the effect is the same. The same can’t be said of their masters, either politicians or trustees.

    The other situation where the public interest is badly served is the property development. At the annual MIPIM conference in Cannes, every spring, somewhat unscrupulous financial institutions, property developers and realtors would wine and dine, and perhaps worse, government officials. Think of the California senator’s husband.

  5. flora

    Your reporting is very beneficial to CalPERS members. An unfit-for-purpose CFO has departed. I hope this episode warns off other state pension boards from sleepily following CalPERS lead in investing.

    Thanks again for your continued reporting on CalPERS.

  6. Tom Stone

    Yves, thank you.
    Here’s hoping Chuckie displays his usual judgement and makes a stink about how he was dismissed.
    Raw meat in an election year…

  7. EoH

    When newly-hired CFOs, while still on probation, depart in the night, it is not a “personnel matter” that CalPERS can appropriately leave without comment.

    The passive voice description is a dead giveaway. But this CFO left under controversial circumstances. NC’s coverage demonstrates that he should have never been hired. The controversy is, therefore, about CalPERS’s apparent serial mismanagement. Yet CalPERS doubles down, pretending there is nothing to see. That should tell Californians that CalPERS’s mismanagement continues – as Rowan Atkinson’s Beelzebub would say – without relief.

  8. EoH

    If Asubonten is willing to fight when the facts and law are so much against him, is it just as probable that CalPERS will try to overpay him to leave without a word so that neither of them need wash the linen that will not come clean in public? Are Michael Cohen-style NDAs enforceable in such circumstances?

    1. Clive

      Yes. With a high profile executive departure, especially where the employer has a skeleton or two in their closet, pay offs are the order of the day. Not sure if the board will get to see any compromise agreement or equivalent let alone a chance to vote on it. Probably not, but usually there’s little that can be done other than to lament that as it’s CalPERS, it’s your money they’re wasting.

      The only good side is that if there is a NDA’ed settlement, we might well get to know of its existence even if we don’t see the content.

  9. Wukchumni

    I really haven’t got into the CalPERS gig too much, you can only spread resentment of the system so far.

    That said, good work on unraveling the Pawnzi scheme, and I hope those expecting their pensions don’t get rooked.

    Was hiking with my friend who is a 7th grade teacher, the other day, and he’s in CalSTERS, which is a pension just for teachers he related.

    Anything untoward going on there?

    1. flora

      These NC/CalPERS posts are defending a good retirement system from corruption and incompetence. Defending/warning a retirement system against corruption/incompetence is not ‘resentment of the system.’ My 2 cents.

      1. flora

        adding: I have lovely flower beds where weeds are always sprouting. There’s always weeding to be done. I don’t resent the weeds. I just pull them. It’s part of gardening. Gardening ‘due diligence’.

        1. E. Nigma

          Maybe Asubonten will claim he is on “Gardening Leave” before resuming his Managing Director position.

          (And let me add my thanks to the Chorus)

    2. John Zelnicker

      May 22, 2018 at 9:43 am
      I have a client who is also a beneficiary of CalSTRS.

      IIRC, Yves has mentioned that CalSTRS is pretty much run the way public pension funds should be run. Not perfectly, maybe, but without the corruption and mendacity of CalPERS.

    3. Yves Smith Post author

      CalSTRS has a vastly higher functioning board, which is a good sign, and has also a consistently better track record in investment returns. However, it is still pretty badly underfunded, which says some people in the past made the same bad choice CalPERS did, of (at least) being in denial that the new normal of low returns was not going to change any time soon and therefore not increasing required pension contributions as soon as they should have.

  10. Matthew G. Saroff

    My question, as always, is cui bono?

    As Bill Black notes, if there is an opportunity fraud, it likely has already happened. (Could someone get me the exact quote please?)

    Someone, in the organization is somehow benefiting from this.

    Whether this is regular corruption, or an implied sinecure from hedge funds upon retirement, I would like to know who and how.

  11. Brooklin Bridge

    What a great job! You are one of the few (analysts, reporters, blog maestros) where Intrepid can be used without irony. Many congratulations.

  12. Susan the other

    Thank you Yves. I remember when this endeavor started and I was horrified that PE could weasel its way into pension funds at all. I didn’t want PE anywhere near pension funds. The only thing I could think was Get them out now! Naive me. It took a dedicated soul years of hard work to do this. It’s wonderful reading.

  13. John Zelnicker

    Yves – Great work!

    You definitely deserve a victory lap.

    I hope fervently that at some future time you will be recognized for all the work you have done to try to get CalPERS to operate for the benefit of the participants rather than for the benefit of the staff and consultants. All of the participants owe you a big THANK YOU for exposing the problems at CalPERS.

    If sunshine is the best disinfectant, you have done a masterful cleaning job. :-)

  14. Elizabeth

    Congratulations Yves! Your investigative postings are making a difference and educating people of what a terribly/criminally? mismanaged public retirement system CalPERS is. A couple of months ago, I e-mailed my congressman about the situation going on there (about the private equity issues), but never heard a thing back. Thank you so much – maybe one day it will get its act together – they know they’re under scrutiny.

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