Los Angeles Times Slams CalPERS for Vetting Failures That Led to Exit of CFO Asubonten for Resume Misrepresentations, Doubts Whether CEO Marcie Frost Has Made Needed Changes

Pulitzer Prize winning reporter Mike Hilzik returned to the sorry affair of CalPERS’ hiring of Charles Asubonten, an unqualified Chief Financial Officer candidate, in an article titled CalPERS says its ex-CFO misrepresented his background — but how did he get hired in the first place?

We published a series exposing the numerous fabrications on his resume. Yet despite the obvious danger of having a senior executive who appeared to have committed perjury by making false sworn statements during his application process and after his hire, CalPERS doubled down and kept defending Asubonten even though Hiltzik had started investigating.

Only after Hiltzik published a critical article did CalPERS do what it should have done in the first place, which is examine Asubonten’s claims. Asubtonten’s appeal to the State Personnel Board appeal of his “rejection during probation,” which we published earlier this week, made clear his story fell apart as soon as CalPERS started asking serious questions.

As he has consistently, Hiltzik gave us prominent credit for breaking this story and for our later reporting.

Hiltzik spoke to CalPERS CEO Marcie Frost about CalPERS settlement with Asubonten, in which he received no monetary damages and CalPERS agreed to say that Asubonten resigned. He was not impressed with what he heard. Key points from his story, which I urge you to read in full:

CalPERS has now reported that its former chief financial officer, Charles Asubonten, misrepresented his work history and earnings before he was hired in October 2017…the giant pension fund plainly desires to close the book on this disastrously botched appointment of a top-level official…

CalPERS made a big noise last September when it hired Asubonten…The [news] release said that “most recently, he was the managing director in a private equity firm.”

As we reported, the “private equity firm” mentioned in the release was nothing of the kind, at least not as that term is commonly understood….

Once Webber started blowing the whistle on Asubonten’s background, CalPERS closed ranks behind him. He had dismissed her questions as “character assassination,” an assertion later repeated to me by a CalPERS spokesman. In a phone conversation, with Asubonten on the line, Frost gave him an unqualified endorsement. “We thought Charles would be an excellent candidate,” she said, “and over the last five months that has proven to be exactly true.”

But she also initiated an investigation into his work history. CalPERS investigators interviewed Asubonten on April 20 and 23. According to their account, his story appears to have come apart almost instantly.

Hiltzik hits the high points of Asubonten’s fabrications, such as presenting W-2s from unrelated activities and arguing they should be attributed to his apparently non-existant consulting business, his presenting a sole proprietorship as a partnership, his claim that “I am Transmax and RSA” when CalPERS got no hits when it put “Transmax” plus “Charles Asubonten” in a web search.

Back to Hiltzik’s article:

Asubonten also cited Frost’s unqualified expression of support in their April conversation with me. That’s embarrassing for her, at least, but also brings us back to what kind of hiring process was in place when he was recruited. Webber calls this a “due diligence failure,” and she’s right.

“There was vetting,” Frost told me this week. But what kind of vetting? She said Asubonten was interviewed and his references checked, and was found to be “technically qualified for the job” of CFO.

Hiltzik didn’t contest these claims, but our earlier posts show they are bogus. We wrote an entire post on why Asubonten was not qualified for the job; it’s a mystery how he could be deemed to be “technically qualified” unless she is merely referring to his professional credentials (MBA, CPA, CFA).

But how can Frost possibly claim that what CalPERS did rose to the level of vetting when the fund apparently didn’t do basic searches, which among other things would have uncovered the suit he lost contesting the lapsing of his contract with Rio Tinto-Palabora Mining Company? Reading that alone would have revealed numerous falsehoods on his resume, like claims of exemplary performance when he’d gotten poor reviews for the last two years of his three and a half year tenure, as well as him not being a man of his word (he signed a separation agreement waiving all rights to pursue claims, yet he broke that via his legal action).

CalPERS didn’t even have the nous to check if Asubonten’s references were legit. As we wrote:

Through JJ Jelincic, Marcie Frost offered to have the CEO of Palabora contact me and reassure me about Asubonten after my posts ran….

But even more bizarre was that the idea of speaking to the Palabora CEO was nonsensical. Asubonten left Palabora at the end of 2009. Palabora now has a Chinese CEO who worked previously in the steel busines. Most important, the South African court decision in Asubonten’s dispute with Palabora made clear that Asubonten’s personnel records were at Rio Tinto, not Palabora. So current Palabora management could not possibly have any information about Asubonten beyond what was in past company annual reports that were already available online.

I called a contact who had taken interest in this situation to sputter about it. He too had been encouraged to speak to a Palabora CEO…and he was not Chinese. He sent me the references CalPERS provided for Asubonten by e-mail:

Dennis Brazier
Palabora Mining Co.
+27 83 634 0758 Australia

Peter Daniel
Sr. VP & Corp. Controller
Ford Motor Co.

Gunter Dufey
Prof. Emeritus, Finance & International Business
Univ. of Michigan
+65 9654 7505 Singapore

The “Australia” bit is puzzling, particularly since Palabora never had operations in Australia and the number provided for Brazier is in South Africa (country code +27), not Australia (country code +61).

But the far more important part is that Dennis Brazier was never CEO, Managing Director, or even a board member of Palabora. Marcie Frost can only have gotten this information from Asubonten, and it is flagrantly false. Worse, the fact that she would try to fob off a bogus reference on me and an independent party shows she continues to rely blindly on information Asubonten has provided even after his honesty has come into question by virtue of anextensively-documented series of posts.

Dennis Brazier was only “general manager – Copper Processing” from August 2004 through all of 2007 as Palabora’s 2007 and 2008 annual reports show. The 2008 annual report does not list Brazier as part of the management of Palabora but does describe Bill Scheding as having been “appointed General Manager – Copper Processing and Magnetite business in October 2008.” This is consistent with Dennis Brazier’s LinkedIn profile, which show him joining Palabora in January 2001 and rising through the ranks to his promotion to General Manager of Copper Processing in August 2004, a position he held though June 2008, when he left for Union Copper. LinkedIn also shows Brazier as back in South Africa, and the phone number for him is from South Africa…

Consider what this means. Asubonten and Brazier together are misrepresenting to CalPERS that Brazier was the CEO of Palabora…

Bear in mind that if Asubonten listed Brazier on his employment application as his supervisor, that is perjury, a felony in California.

It is also worth noting that CalPERS’ due diligence is so wanting that the phone number it gave for Peter Daniel at Ford is out of service.

That means Hiltzik’s skepticism is fully warranted:

It’s certainly encouraging that CalPERS has “has taken a serious look” at its procedures in the wake of the Asubonten botch, as Frost says. “We have found areas where we can strengthen the process,” she told me, though she wasn’t very specific.

Maybe the CalPERS board can get a more complete answer, but to do so it will have to start asking questions and devoting serious time to figuring out what due diligence is performed on high-level CalPERS applicants. Or doesn’t it think that the way CalPERS fills some of its top jobs is important?

Sadly, I’m not holding my breath that CalPERS will change its ways until it has more changes in key players, particularly on its board.

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  1. Clive

    Frost’s response is the corporate-speak equivalent of “yeah, yeah, yeah, I’ll do the dishes and sort out the laundry a bit later”.

    Even the most basic of big-company PR advice would be telling Frost that CalPERS needs to throw a few bones to the wolves on this one. Standard talking points are to have independent counsel from a white-shoe law firm compile a report (that’s the one which gives CalPERS the most autonomy over and usually achieves little but it sounds good) or get a consultancy firm to do similar. Even if it’s someone like Promontory (“we’ll whitewash it for you, wholesale”) would come up with something semi-meaningful and top-flight names like McKinsey would have a fair bit more credibility. You then commit to publishing the report (of course, you get to influence it first, so it is unlikely to be chewing the scenery too much).

    If you want to really show you’re taking the problem seriously, you get someone from the ranks of The Great and the Good to lead an enquiry (a retired congressional member or a well-regarded judge) and promised to publish the findings without any influence or editing (i.e. you get to read it when then press does).

    Instead, Marcie has “looked at it”.

    Oh. So that’s alright, then. I don’t know why I’m worrying about this. Silly old me, I know how well CalPERS likes to look after its reputation and is so responsive to public concern.

    1. Yves Smith Post author

      It takes a CEO going to Federal prison to rouse this level of response. And then CalPERS would hire a law firm to do the report so the investigation would be attorney-client privileged and exempt from a Public Records Act request.

      1. Clive

        Depressingly correct. I had for a moment ignored the fact we all live in banana republics now, and hope tormented me. I really must stop living in the 1960’s.

      2. David in Santa Cruz

        Steptoe & Johnson still have buckets of whitewash laying around!

        No worries. According to Asubonten’s State Personnel Board Appeal (posted earlier on NC), the white-collar criminal defense specialist brought in to run cover-ups for CalPERS led the interview committee that hired him. CalPERS was probably going to try to claim Attorney-Client Privilege for the whole hiring process — until Asubonten spilled the beans by filing an appeal!

        It’s problematic that Mike Hiltzik proposes an investigation by the Board of Administration, when the same white-collar criminal lawyer who ran Asubonten’s interview appears to run the Board as well. No conflict-of-interest there!

        The next Governor must thoroughly clean house at CalPERS, because “The Fish Rots From the Head.” Follow the money…

        1. flora

          CalPERS hired a white-collar criminal defense specialist to lead the interview committee that hired Asubonten? They OK’ed this unqualified guy. Now the guy files an appeal and blows the cover on the whole process (he isn’t all that bright, maybe) which exposes questionable management.

          The phrase that comes to mind in this case: They were hoist on their own petard.

          Thanks for NC’s continued reporting on CalPERS, PE, and pensions.

            1. Procopius

              I love the phrase, “white collar criminal attorney.” Brings to mind Mark Twain’s description of school boards as idiots, “…but I repeat myself.”

    2. Pat

      I thought of this when I read the news that the CBS Board had hired TWO law firms to investigate the allegations against Les Moonves and the atmosphere at CBS. Seems like the Board is now under fire for not asking him to step down immediately, but they really can’t asa he is leading the fight against Shari Redstone’s legal battle to basically throw out the decision to split CBS and Viacom. There are two possible outcomes, but I’m betting on the whitewash with a few lower level sacrificial lambs all vetted by these ‘outside’ law firms. .

      And I hadn’t even thought about Yves point about the real details of the investigation being privileged.

      To bring it back on topic, that Calpers is so arrogant and well incompetent is just further proof that any and all observers not calling for Frost’s ouster are not paying attention.

  2. The Rev Kev

    Looks like the Blog That Cannot Be Named has coming roaring out and making its presence known on the US west coast. Good to see in that article the number of complimentary mentions there are of Yves and NC. The sad thing is that CalPERS is not even really trying to defend their conduct, mostly because they can’t. If the whole CalPERS hiring process was so broken and so amateurish, then perhaps it might be an idea to go back and see about other hires that CalPERS made under the same regime. I would judge that a two-year period to go back and check past hires would be fair. Just to make sure that there are no other dodgy hires you understand. Of course it is just a coincidence that Marcie Frost was only hired in October of 2016 – 22 months ago.

    1. ChiGal in Carolina

      congratulations for the reporting and the recognition. you should at least be in the running for whatever the financial news equivalent of Pulitzer is!

  3. Mark Gisleson

    Congratulations. This ranks right up there with exonerating prisoners on death row, in my opinion. You have accomplished something of significant consequence with your reporting. You should be very proud.

  4. Synoia

    One small quibble, the use of “Exodus” to describe one person. Exodus is for many people.

    Ejection would be both more precise, and accurate.

  5. Pat

    It might only be a small portion of Calpers being called to account, but congratulations Yves on managing this much. In this day and age it is a small miracle resulting from long and hard work.

  6. RUKidding

    Once again, thanks Yves for doing Yoeman’s work on exposing all of the ??? dysfunction, incompetency, general all around terrible work habits and decisions that go on and on and on and on there day after day, week after week, year after year, decade after decade at CalPers.

    As a current CalPers contributor and future annuitant, it’s ongoingly galling and exaperating to read about the numbskulls that run this organization.

    As a manager, myself, who has hired and fired numerous staff over the years, it’s abundantly clear that Frost in no way did her due diligence on Asubonten. It’s enraging as a CA taxpayer that this level of sheer incompetency and LAZINESS exists at CalPERS. WTF?

    And Frost compounds her numerous lazy errors by continuing to send out the clearly false bogus info that Asubonten sent her. What a worthless, incompetent manager she is.

    It would be “nice” to think that something like this will result in CalPers hiring competent, honest, diligent, really hard working staff, but clearly, I’m not holding my breath.

    I’ve sent numerous emails and letters to the PTB in CA. They are obviously willing to remain completely oblivious to this MESS, no matter how many articles are written in a variety of platforms. Frustrating!!

    Carry on, nonetheless.

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