CalPERS Pays $3.4 Million to Dow Jones to Settle Massive Copyright Infringement That We Exposed

Last year, we exposed the fact that CalPERS had been engaging in massive, systematic theft of copyrighted material for many years, via an in-house website that reproduced the full text of article from major and even minor publications, ranging from the Wall Street Journal, the New York Times, the Los Angeles Times, to your humble blog.

We predicted that CalPERS would pay a large settlement to Dow Jones, which has been particularly vigorous in pursuing copyright abuses, and indeed that happened. As Pulitzer Prize winner Mark Maremont tweeted:

From the Dow Jones press release:

Dow Jones will receive a total of $3.4 million to settle claims that CalPERS, the California Public Employees’ Retirement System, improperly republished its content, including full-text articles from The Wall Street Journal…As part of the settlement, CalPERS will pay Dow Jones $2 million in cash, and will purchase an additional $1.4 million in products and services from Dow Jones over the next two years.

Note that taking part of the settlement as product sales is less of a concession than one might think. The perverse incentives of public ownership mean that subscription growth is more valuable to Dow Jones’ parent, News Corp, than a one-off cash payment.

Keep in mind that this loss to CalPERS beneficiaries and California taxpayers was completely unnecessary, and follows smaller settlement by the less bloody minded (and possibly less willing to create enemies) New York Times and Los Angeles Times.

As we described when we first publicized CalPERS’ systematic copyright theft, the California pension fund had been republishing the full text of articles from a huge number of publications for years. The general counsel, the CEO, board members, IT staffers, and plenty of other saw this going on yet did nothing to stop it. It was yet another manifestation of CalPERS acting as if it was above the law.

But what got my dander up was after we exposed that CalPERS was stealing from publishers all over the US, CalPERS refused to take its rogue website down. Our first article ran before the start of business on Friday, June 9, and the site was still up and even still un-password-protected as of the weekend.

So I enlisted tech maven, now INSEAD scholar Micheal Olenick to download and analyze the site, which he completed over the weekend.

On Monday June 12, the Daily News Summary site was still up and CalPERS had added yet more articles to it. That day, I e-mailed contacts at the New York Times, the Wall Street Journal, and the Los Angeles Times with the spreadsheets showing all the articles that had been taken from their publications and others.

On Wednesday June 14, before the start of business, the New York Times sent a cease and desist letter to CalPERS. From our post:

In the early morning on June 9, we reported that CalPERS had engaged in systematic copyright infringement by operating a daily news site that had published the full text of news stories from many publications for years.

Because CalPERS refused to take down its website even after it was caught out, we set out to determine the full extent of the misconduct.

From the inception of the site on August 2, 2009 through June 9, 2017, CalPERS has published the full text of over 50,000 articles. These articles were on an internet address open to any member of the public. All the articles were in a standardized format. None had any indicators that the CalPERS had paid the license fees to allow it to present them to its roughly 2,700 employees and board members, such as notices of copyright that publishers typically require for authorized republication.

Understand what happened: despite the brazenness of CalPERS’ copyright theft, I was willing to let the matter go if CaLPERS did the right thing when caught out and stopped ripping off journalists. But when CalPERS continued to add new articles to its purloined site, I took the steps necessary to enable the big dogs to go after CalPERS, as they did.

Put it more simply, if CalPERS had taken my original post seriously and had done the right thing, they’d have saved their pensioners at least $4 million1 Keep in mind the magnitude of the Dow Jones settlement, plus the fact that the Los Angeles Times also got $445,000 when they have been much less aggressive about charging for content than Dow Jones, might lead other publishers that have sat on the sidelines to saddle up. That could include not only McClatchy (publisher of the Sacramento Bee and other publications that CalPERS ripped off) but smaller ones that are very restrictive about access and have very high subscription prices, like Private Equity International.

We also described last June who should be held accountable for this fiasco:

CalPERS will be inclined to throw the current head of the Communications and Stakeholders, Brad Pacheco, who is a direct report to CEO Marcie Frost, under the bus. That would be scapegoating. The news site was launched in 2009, long before Pacheco in charge of the communications function. The media department did not launch its Daily News Summary in the dark of night. Its budget had to have been approved at a higher level and the development of the site fell to IT personnel, or in current CalPERS-speak, members of the Operations & Technology Department.

Moreover, Pacheco is not an attorney. His former boss and predecessor, Robert Glazier, was an attorney and was in that role from at least 2012 through 2015. The former Chief Executive Officer, Anne Stausboll, was also an attorney…

In other words, even though Pacheco is technically responsible, media relations is politically weak and not a control function. Even if Pacheco had cleared his throat, the odds were high that he’d be accused of being a worrywart…

The most clearly culpable party is the General Counsel, Matt Jacobs. He joined CalPERS in July 2014. One of his most important duties as incoming General Counsel was to review the adequacy of controls. As we stated in our companion post, an intellectual property audit is a standard housekeeping procedure in any well-run large organization. For non-tech companies, the main purpose is to assess the exposure to intellectual property claims from outside parties and take preventive steps.

And independent of an IP audit, it is inconceivable in the course of the last three years that Jacobs did not see the Daily News Summary. His failure to take notice of the flagrant copyright abuse is incompetence of the first order…

Another group that bears direct responsibility for the huge bills that CalPERS is likely to face comprises the board members on the Risk and Audit Committee. Their duty is to make sure that CalPERS has adequate controls in place. CalPERS appears to have neither an intellectual property nor an information technology audit….

The members of the Risk and Audit Committee are:

Dana Hollinger, Chair
Ron Lind, Vice Chair
Rob Feckner
Richard Gillihan
Priya Mathur
Bill Slaton
Betty Yee

The worst of this shameful affair is that Marcie Frost is likely to refuse to hold anyone accountable, and might even try running the barmy defense that CalPERS got off well for paying comparatively little for its brazen theft. CalPERS had the Attorney General handle the negotiations, and it’s possible that copyright theft is so pervasive in state agencies that the AG gave Dow Jones the impression it would fight the publisher all the way even if it was assured an ultimate loss as a way to cut the damages Dow Jones almost certainly could have gotten more; someone with direct knowledge of past Dow Jones settlements said in similar cases Dow Jones had gotten much more than it agreed to take from CalPERS.

I hope that CalPERS beneficiaries will do what they can to hold CalPERS accountable. If you live in California, please forward this post to your state Assemblyman and Senator, as well as to the two state-wide officials on the board, Controller Betty Yee, who is up for re-eletion, and Treasurer John Chiang.

Note also that Board President Priya Mathur, who was asleep at the wheel at the Risk and Audit committee, is up for re-election for her seat as Public Agency representative. If you know anyone who is an employee of a California public agency, they are eligible to vote this fall. Alert them to Mathur’s dereliction of duty that has cost pensioners serious money and urge them to consider the challenger Jason Perez. The fastest path for fixing CalPERS is to get rid of the dead wood on its board.


1 The New York Times settled for a mere $150,000 when CalPERS had misappropriated 6,878 articles. Why they accepted so little is beyond me. The Los Angeles Times, which I believe was later to move to a subscription model than the New York Times, and had 5,575 articles stolen by CalPERS, got $445,000. And no, we did not get nor did we seek any compensation for passing Olenick’s spreadsheet to them, even though we paid him hard dollars to download and analyze the site. We may post the Dow Jones settlement agreement when we get it via a Public Records Act request, but for the meantime, here are the ones from the New York Times and Los Angeles Times.

New York Times-CalPERS copyright settlement
Los Angeles Times-CalPERS Copyright Settlement Agreement_3.29.18
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  1. vlade

    Another scalp.. Should not DJ pay you whistleblower fees? ;)

    I still don’t understand how come that the CalPERS total inability to manage a lemonade stall is not a political issue in Cal though.

  2. Jim Haygood

    Just for perspective, this article came out two weeks before Yves Smith’s June 9, 2017 post about CalPERS’ internal news site:

    For years, one of the best/worst kept secrets in media circles was a login that unlocked the Wall Street Journal’s formidable paywall. Username: media. Password: media.

    For an industry filled with insatiable loudmouths and gossips, media-media was kept impressively quiet, shared among reporters, but not so widely that it became public knowledge. Reporters outside of the Journal’s Midtown headquarters were so tight-lipped that many WSJ reporters had no idea that media-media even existed.

    But the party is over. Media-media is dead, as reporters across the industry recently noticed. Free access to such a tightly guarded site was a rare blessing, and one whose details were kept surprisingly quiet by the legions of media-media users. Now that it’s gone, its users — from outlets including Fusion, The Intercept, The Daily Beast and Marketplace — are breaking the unspoken code of silence.

    Media ripping off other media — SAD!

    I’m in mourning myself, having just lost WSJ access through a business school website where it was only necessary to enter a professor’s name — no password required — to login to the WSJ. The faculty roster easily yielded a name that worked.

    Oh well, some other kludge will turn up in due course. Don’t feed the media.

    1. Yves Smith Post author

      I despise your attitude. By what right do you expect journalists and editors to work for you for free? You’ve just said you hold what we do here in contempt and are advocating that we go die.

      You are no longer welcome here.

    2. ChiGal in Carolina

      You should have specified the corporate media if that’s what you meant. I have always assumed that you were a generous contributor to NC.

              1. Yves Smith Post author

                Thanks for asking.

                We have a tip jar at the top of the right column. You can click on the Donate or Subscribe link under the snow leopards.

    3. skippy

      Jim what were you thinking….

      Come on…. you can’t hold your views on 2nd – 3rd world austerity bonds having sanctity of contract due to – perceptions of value – to the ***holder*** and then rubbish contracts to other peoples value when it suits your whims….

      Some times I review the list of the NC grave yard and ponder…..

      1. vlade

        Unfortunately, this is a very common attitude, even with people who should know much better. I have a friend who’s normally smart, kind and everything. Except he believes pretty much everything that has close to zero cost of copying should be free. That is, unless it’s something he created.

        For years I wasn’t able to make him see the glaring inconsistency, and I gave up.

        1. skippy

          Tell me about it vlade….

          I knew B. Gross back in his heyday…

          Direct government money to invest in an asset pumping splurge and he thought he was dawg. Affable bloke in a social setting but considerable questions about ethical standards with anything that bummed out his personal buzz – including family. On the latter was just another sign post for me, in my portfolio of experiences, in making choices about how myself would move forward with my life,

          I guess its the same with Jim, so much acumen in market machinations, but conflicted with doctrinaire attitudes and special heaping of atomistic individualism, and a side of antiquarian platitudes.

  3. The Rev Kev

    Difficult to account for CalPERS management’s attitude of trying to blow the whole thing off. You would reckon that they would have taken the Daily News Summary site down as soon as somebody noticed but instead persisted in their copyright infringements. I can only surmise that they thought that they had more political cover than what they actually did.
    I can understand why the New York Times and other publications settled for amounts smaller than what they did. Not a good look taking the money from CalPERS when it is essentially pensioners that you are taking it from. Yes, it is a win for these judgements being held against them but it will not be complete until some decision-makers fall on their swords over this unnecessary fiasco. In other words. the other shoe has yet to drop.

    1. flora

      Difficult to account for CalPERS management’s attitude of trying to blow the whole thing off.

      Yes, especially considering the big Cali based companies that live or die by intellectual property/copyright laws’ enforcement: Silicon Valley, Hollywood, and the music industry. I’d think CalPERS would be alert to copyright infringement.

  4. Michael Olenick

    What a fun post and great outcome! I should create a research company. (And Jim – it’s good to feed the media – why in the world would you say that? And why was The Intercept especially, with their bottomless pot o’ gold, refusing to pay for a WSJ subscription?).

  5. Doug Hillman

    Bravo, Yves. I trust NC also received a settlement. But then again you probably wouldn’t be allowed to say so in public, or be allowed to continue to tell the truth abut CalPERS.

    1. ChiGal in Carolina

      Why would NC get a settlement? Did CalPERS feature their posts on their website? Seems unlikely…

  6. flora

    Put it more simply, if CalPERS had taken my original post seriously and had done the right thing, they’d have saved their pensioners at least $4 million

    Yes, if CalPERS would take your posts on PE seriously they’d save their pensioners beaucoup big bucks, too. They are determined not to listen. The DJ settlement *might* get the CalPERS’ board attention.

    Thanks for this report (and congratulations) and for your continued reporting on PE, CalPERS, and pensions.

  7. David in Santa Cruz

    Thank you for all your diligent work exposing this train-wreck. However, I’m a CalPERS beneficiary and I don’t know who to write outraged letters to any more. The State Auditor tells me that their office has zero enforcement authority. The Governor, the Treasurer, and the Controller say and do nothing when I write to them. My state senator and assembly member don’t respond to my correspondence, and in media reports appear to be more concerned about increased contributions. The Attorney General is actually negotiating the settlements that CalPERS’s overpaid General Counsel doesn’t appear to be competent to handle — rather than investigating as the AG would have done in years past.

    Follow the money. The public officials charged with oversight must be looking the other way for a reason, and that reason always seems to boil down to political contributions. If these contributions come via lobbyists associated with CalPERS investments, they are nothing more than kick-backs and bribery — which would explain how the plainly evident gross incompetence of the CalPERS CEO, General Counsel, CIO, CFO, and Board continue to be tolerated (and apparently even nurtured) by the Sacramento political establishment.

    1. Yves Smith Post author

      Thanks for your efforts. CalPERS is afraid of the legislature, and the two elected officials on the board (the state Controller and Treasurer) are also accountable to voters. So I would concentrate on them.

      CalPERS is also afraid of bad press, so I might also try sending info to the editors of your local paper and TV station.

      We were able to pressure departing Treasurer John Chiang into sponsoring private equity transparency legislation, so letters from readers do work even if they don’t respond. Recall what our reader Richard Kline wrote a while back:

      The nut of the matter is this: you lose, you lose, you lose, you lose, they give up. As someone who has protested, and studied the process, it’s plain that one spends most of one’s time begin defeated. That’s painful, humiliating, and intimidating. One can’t expect typically, as in a battle, to get a clean shot at a clear win. What you do with protest is just what Hari discusses, you change the context, and that change moves the goalposts on your opponent, grounds out the current in their machine. The nonviolent resistance in Hungary in the 1860s (yes, that’s in the 19th century) is an excellent example. Communist rule in Russia and its dependencies didn’t fail because protestors ‘won’ but because most simply withdrew their cooperation to the point it suffocated.

      1. David in Santa Cruz

        Thank you for these words of inspiration and encouragement. I’m joining with other beneficiaries to lobby vulnerable officials.

        Sadly our local media was gutted by the Singleton bankruptcy/Gates Foundation/Alden Global Capital PE mass-layoffs. The printing presses were literally carted away. However, as they used to say in Paris back in ’68, la lutte continue…

      2. Richard

        Lose, lose, lose, lose, they give up. Well that’s a little heartening, and Kline’s reasoning rings true with me. Thanks, Yves.

  8. Judy Sixbey

    Congrats. Knew this was on the back burner somewhere. You lose, you lose, you lose, until you don’t.

  9. Tony Butka

    So where is the fiduciary duty of the Board in this mess? How about opening an investigation as to all of this could have happend, who did what, and opening up the question of whether or not Matthew Jacobs should remain General Counsel to CalPERS. His watch, his mess…

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