Readers may recall that in April, we e-mailed CalPERS CEO Marcie Frost and the CalPERS board about numerous and significant misrepresentations in the resume of the fund’s recently-hired CFO, Charles Asubonten. The result, after the Los Angeles Times’ Pulitzer Prize winning reporter Mike Hiltzik confirmed our reporting, was that Asubonten was dismissed from CalPERS on May 16, 2018.
Ausbonten’s appeal to the State Personnel Board, which we’ve embedded at the end of this post, confirms that he played Marcie Frost not once but twice. Note that the embedded record contains two parts: CalPERS’ “Notice of Rejection During Probation,” which is the fund’s bill of particulars against its former CFO, and “Charles Asubonten’s Appeal to Notice of Rejection During Probation.”
The first time was in the hiring process, which CalPERS conducted on its own, with no potential for blame shifting use of a professional search firm. Asubonten had a remarkably sketchy background, with readers with financial services experience gobsmacked that he’d gotten serious consideration, much the less hired. There were numerous warning signs in his resume alone, such as a very thin description of his “private equity business,” particularly when the description of activities didn’t correspond to what private equity firms actually do, as well as a grandiose tone to his claims about his purported accomplishment. That didn’t necessarily mean someone with a complicated background should be ruled out, but any sensible employer would have scrutinized Asubonten’s background, instead of giving him a free pass.
The second time Asubonten conned Frost was when we presented our detailed outline of findings to Asubonten, Frost, and the board on April 3, and followed them up with exhaustive documentation in a series of posts published on April 11 and 12:
Frost’s response? To have a chat with Asubonten and accept his airy denial.
Frost and the CalPERS board were only concerned about their image rather than protecting the organization. Frost’s reckless defense of Asubonten to the Los Angeles Times shows that she didn’t care that a hire who looked to have engaged in resume fabrications and perjury was in a senior role where integrity and competence are paramount.
Even if CalPERS was so deep in denial that it had convinced itself that no one in the mainstream media would pick up such a juicy story, Hitzik’s inquiries should have been a wake up call. She is so naive that not only did she think CalPERS could persuade a serious investigative reporter despite the overwhelming evidence we’d provided, but she foolishly staked her reputation on Asubonten by not merely giving a positive comment, but by participating with Asubonten in the interview, therefore making herself an active participant in his dodgy self-defense.
The detail of CalPERS’ “Statement of Causes” against Asubonten shows that CalPERS did not deign to investigate Asubonten until Hiltzik put paid to some of Asubonten’s nonsensical claims and published Questions about new CalPERS CFO’s background and experience should be taken seriously by the pension fund.
In another sign of organizational dysfunction, Board President Priya Mathur praised Asubonten to the Sacramento Bee on April 20, a full four days after Hiltzik’s piece ran, in the very same story where CalPERS ‘fessed up that it had (finally) opened up an investigation.
As the State Personnel Board filing shows, once CalPERS started asking basic questions that it should have raised during its hiring process. Asubonten’s answers were a bizarre mix of inconsistent bafflegab and Nixonian “I am not a crook.”
The fact that Asubonten fought his termination is another sign of his poor judgment. Even though he had departed abruptly, his departure was a confidential personnel matter and CalPERS was in zipped lips mode. Asubonten could have spun the story that he was maligned by the press and felt he has no choice other than to resign for the good of CalPERS. But appealing his rejection during his probationary period made it public that Asubonten was pushed, as opposed to jumped.
As the second embedded document at the end of this post shows, CalPERS and Asubonten entered into a settlement in which it appears that all that Asubonten got was an agreement by CalPERS to say in response to inquiries that Asubonten resigned.1 Given the public record to the contrary, Asubonten is in worse shape reputationally than he was before making his appeal, since it is inconceivable that anyone interested in hiring him will not do a basic Google search and uncover the State Personnel Board records.
We’ll discuss what the appeal filings and the settlement show in more detail.
CalPERS’ Way-Too-Late Investigation Confirmed Our Reporting and Raised Even More Red Flags
As the document below shows, CalPERS didn’t rouse itself to investigate Asubonten until April 20, after the Los Angeles Times story appeared.
The “Statement of Causes” highlights the fact that Asubonten provided inaccurate information on his employment application about his supposed private equity firm, Transmax, when that document is filed under penalty of perjury. Remember that we had pointed out that if you took Asubonten’s description of its activities at face value, his business was not a private equity firm which engaged in buying and selling companies with dedicated investor funds, but a consultant.
Asubonten claimed he received a salary of $23,750 a month from Transmax. 2Not only is an amount this high wildly implausible for a business that didn’t even have a mailing address, but recall that we were unable to locate a Transmax legal entity, and Asubonten’s response confirms that there was none.
Sole proprietorships, which is what Asubonten admitted he had, do not issue salaries. The owner takes a draw rather than paying himself a salary. Given that the application was made under penalty of perjury, Asubonten could have asked how to respond or have footnoted the information.
And perhaps most important, the income that Asubonten claims he earned in 2017 was by his own admission not from anything related to private equity, and on top of that, some of it sounds fantastical.
From the CalPERS document (I’ve omitted references to attachments and exhibits since Asubonten did not include them in this State Personnel Board filing):
….b. During your April 20, 2018 interview, when asked to explain the monthly salary listed on your Application, you stated the money is “paid to me or it’s paid to my
account,” or words to that effect. You further stated that you received payment
from “the individual companies that I get the money from would pay the money
to me directly,” or words to that effect.
c. However, during your April 23, 2018 interview, you provided three 2017 W-2s from employers other than Transmax/RSA Capital. You stated that the salary reflected on your Application was based on the total of the three W-2s, which was then divided by 12, to get to around $23,790.03.
d. As noted above, the 2017 W-2s you provided were not from Transmax or RSA Capital. Rather, you identified the W-2s as being from CF A Institute – for whom you grade papers – and Rio Tinto – your former employer.
e. In your April 23, 2018 interview, you indicated that the income reflected on the 2017 W-2s from Rio Tinto was earned in 2007-2009, not in 2017 (the year it was received). According to your Application, you were employed by Rio Tinto/Palabora Mining Company between 2006 and 2010 as its Chief Financial Officer/ Director.
f. When asked during your April 23, 2018 interview how the W-2s you provided from Rio Tinto were connected to Transmax, you responded “I am Transmax and RSA,” or words to that effect. You further stated “I consider everything as Transmax,” or words to that effect.
It is absolutely inconceivable that Rio Tinto, or any large company, would make a payment to a former employee over eight years in arrears, particularly when
1. Rio Tinto had entered into a settlement agreement with the Asubonten in early 2010 and
2. Violating the terms of that agreement, Asubonten tried getting more money from Rio Tinto in the South African labor court and lost.
Further, it seems highly unlikely that the CFA Institute gave Asubonten a W-2, which means they had hired him as an employee. Asubonten listed his earnings from the CFA Institute as less than $10,000, meaning he was grading for the CFA on a part-time basis. There are huge disincentives to companies taking on workers as employees; it’s vastly easier to engage them on an informal basis and report the income to the IRS on a Form 1099. Although I was not able to get a response from the CFA Institute, people who’ve worked as graders for other organizations say they receive 1099s, not W-2s.
In other words, these questions raise huge red flags about the authenticity of the W-2 forms that Asubonten provided to CalPERS.
Asubonten also said he made no money from Transmax (even if there was a Transmax; recall we found Asubonten using different business names over time and never publicized “Transmax,” as you would expect for someone trying to build a consulting or a private equity firm) and then tried walking back that answer. More from the filing:
a. An internet search of “Transmax” in combination with “Charles Asubonten” was
conducted and no connection was found….
c. You provided conflicting information as to the type of business entity Transmax was. In your April 20, 2018 interview, you stated you were “employed” with “an entity we called Transmax,” or words to that effect. You further stated that you were “on [your] own” with Transmax, but had “affiliates” or “directors,” or words to that effect. You then stated that “Transmax” and “RSA Capital” were “dbas,” meaning “doing business as,” or words to that effect. You stated that you file taxes in your own name, and have never registered Transmax or RSA Capital…
1. You provided no records that documented receipt of any salary or payments from
Transmax or RSA Capital between June 1, 2013 and July 12, 2017.
That matters because one is then left with the question: “So how did Asubonten support himself, a wife, and six kids, when he and his wife do not appear to have inherited wealth, Asubonten never had outsized earnings, and he was unemployed from 2010 to mid 2012, and then has no visible means of support from mid 2013 until he was hired by CalPERS in October 2017?”
Asubonten goes into full blown Nixon “I am not a crook” mode to forestall this line of questioning:
9. In addition, the investigators did not find you to be credible during the investigation. Specifically, you were evasive, failed to answer questions directly, and gave inconsistent answers to similar questions. During your April 20, 2018 interview, you stated that the monthly salary listed on your Application was based on money received directly from the individual companies with whom you worked, or words to that effect. You also stated that clients paid you directly or to your bank account, or words to that effect. You stated that you would look for bank statements to support this statement, but never provided them to the investigators. Instead, on April 23, 2018, you provided W-2s from your prior employer- Rio Tinto – and stated that the money from Rio Tinto was earned in 2007-2009, but paid in 2017, or words to that effect…..
b. After stating that the money you received from Rio Tinto (your former employer) in 2017 was actually earned in 2007-2009, you were asked if you did any work in 2017 for which you were paid. You failed to answer the question directly, instead stating “this is my money for 2017. Now, again, that’s the sole strategy,” or words to that effect. You further stated that you did not want to receive more money because “it creates me [sic] problems in 2017,” or words to that effect.
c. When asked again how the money you purportedly earned from Rio Tinto in 2007 related to Transmax, you stated “And this is the biggest problem. And this is why I have said time and again, people who are in business with private equity do things different. Not illegal, but different things,” or words to that effect.
d. You further stated “I did not lie on the money. I made the money in the year that I made it. I am representing myself as not a company, as not a State Agency, and so on and so forth,” or words to that effect. In further describing your earnings, you stated ”and this is why we don’t put it easily in the public domain. It’s not for the faint of heart,” or words to that effect.
e. In describing your decision to put Transmax on the Form 700, you stated “Because knowing that I’m getting this, there are monies I have not received, which I’m going to be receiving subsequently. So, to protect myself, I thought that if I put down there is a possibility I could receive a million or more than a million in the future from this entity called Transmax, when I receive the money, nobody would say, I had a kick-back or any illegal stuff. That’s what I was drying [sic] to do. And, in fact, one of the things I put here being a neophyte of the government, if that breaks their rules or laws, I’m willing to revise that. But there’s no – there’s no illegality. There is no criminality. There’s no dishonesty. It’s just the way it is presented. And sometimes an explanation is needed,” or
words to that effect.
f. After refusing to provide additional documentation to support your statements, you stated “I want to prove I’m not a dishonest person. I may be smart, but I’m not dishonest,” or words to that effect. You further stated that you were not “dealing drugs” or “money laundering,” or words to that effect.
There’s even more eye-rolling material in the CalPERS document. How did this guy get through the door?
Asubonten’s lawyer’s response amounts to an indignant handwave. He ignores the fact that Asubonten perjured himself on his employment application. He does not dispute in a serious way that Asubonten made false statements on his Form 700, a required California filing of political interests. His argument is that CalPERS can’t enforce that law and in any event, the dubious information was on matters Asubonten was not required to disclose. That’s irrelevant. CalPERS is rightly concerned about what providing false information in a sworn statement says about Asubonten’s integrity.
He also ludicrously attempts to defend Ausbonten’s valuation of “Transmax” at over $1 million even though Asubonten falling back on questionable W-2 is an admission that his private equity business had no business. And even if Asubonten really, truly had generated $285,000 in consulting fees, guess what? Consulting firms trade at one to at most two times revenue, and the two times is attainable only when the firm has a well-recognized brand name and/or a solid backlog of business.
But the most laughable part is Asubonten’s attorney whinging that someone like Asubonten, who has an MBA, a CPA, and a CFA, can’t be expected to understand legal structures or fill out forms correctly. So if he can’t handle that, how is he possibly qualified to serve as CFO?
The One-Sided Settlement Agreement
As you can see below, the settlement agreement is exceptionally thin and does not give Asubonten any cash nor any payment of attorney’s fees. Consistent with his weak position, Asubonten did not come out ahead and assuming his attorneys did not work on spec, he’s only dug his hole deeper.
All Asubonten appears to have achieved is getting CalPERS to take the position when asked that Asubonten resigned. But that is not a win since CalPERS had been treating Asubonten’s departure was a confidential personnel matter. Even though that silence could be read unfavorably, it falls short of proof that he was ousted. Asubonten could have spun that he could not beat the unfavorable press and his position had become untenable as a result, forcing him to leave.
As a result, Asuboten’s challenge to CalPERS’ dismissal was a big mistake, since the fact of his appeal, which is now a California public record, makes clear that Asubonten was expelled pursuant to a disciplinary process. CalPERS can play along with Asubonten, but neither Asubonten nor CalPERS can expunge the records to the contrary at the State Personnel Board.
CalPERS also did not provide some things that one commonly sees in termination settlements, such as:
A commitment not to challenge a claim for unemployment insurance
A specific statement the employer provides about the former employee’s performance
And CalPERS did get a concession from Asubonten in the form of a “loser pays” provision if either party challenges the settlement agreement in court.
It seems very much out of character for Asubonten to have settled without getting any compensation, given that he breached a settlement pact in South Africa to sue Palabora Mining Company, arguing he had been short-changed on pay and on relocation bennies when he had no credible case.
The flip side is Asubonten changed attorneys even during his short campaign against CalPERS, suggesting he was not satisfied with his first lawyer’s advice.
On top of that, the only reason for CalPERS to buy off Asubonten would be to escape more bad press, and given Mike Hitzik’s tough April story, CalPERS probably felt it had already taken most of the damage it would suffer once Asubonten departed, and conversely, would take more heat from paying him cash than from toughing it out with him.
But again, the speed with which Asubonten’s story and then his appeal fell apart confirms that no one at CalPERS bothered making the most cursory checks before he was hired. And CalPERS’ history indicates that the fund prefers to stick to bad habits rather than learn from its mistakes.
1 CalPERS spokesman Brad Pacheco confirmed that Asubonten had executed the settlement agreement and he also provided documentation showing that Asubonten had withdrawn his appeal.
2 Asubonten could try claiming that instead of “salary” as set forth in the form, he meant “income”. That does not wash. First, he could have footnoted the entry or provided a cover note with the application to make clear what he meant. Second, we obtained in an earlier Public Records Act request, all of the e-mail correspondence between Asubonten and CalPERS prior to his hiring. He did ask how to fill in other sections of the employment application where he went on at great length how his situation was complicated, but not this one. Third, the form allowed him to choose the period of time, as in one box asked for the salary, and the next box had “Per” at the top, with the applicant to specify the period, as in “Per Every Two Weeks” or “Per Year”. By choosing to present his business as able to pay him a steady and high monthly salary, as opposed to stating his income on an annual basis, he made it appear far more stable than it was.18-0830 Asubonte, Charles (secured)
Asubonten Settlement Agreement