Sacramento Bee Fingers CalPERS CEO Marcie Frost, General Counsel Matt Jacobs, and Board President Priya Mathur in Asubonten Resume Fabrication Scandal

The Sacramento Bee’s Adam Ashton published a solid piece, Ousted CalPERS CFO fought to keep job after inquiry found resume embellishments, on the dismissal Charles Asubonten.

Ashton brought the story to its final chapter by describing how Asubonten made the facts of his sudden departure public by contesting CalPERS “rejection” of him during his probation. Ashton also gave our role in exposing Asubonten’s resume fabrications prominent play, which was sporting of him given that we’ve given him a hard time for other stories that looked to hew too closely to the giant pension fund’s spin.

Key portions from his story:

Charles Asubonten was in a corner by the time CalPERS dismissed him from the high-paying job he’d just started as the chief financial officer for the nation’s largest public pension fund…

His last-ditch appeal to the State Personnel Board reiterated his contention that he accurately described his work experience, and that CalPERS’ own executives failed to ask him during interviews about the questionable period of his career that drew the attention of Naked Capitalism blogger Susan Webber.

Ashton also included how CEO Marcie Frost and Matt Jacobs failed to do adequate due diligence on Asubonten, and how Frost and Board President Priya Mathur defended him despite the voluminous documentation of on Asubonten’s misrepresentations that we’d published:

Their failure to question him, Asubonten’s attorney wrote, mattered because it showed that Asubonten did not attempt to deceive CalPERS Chief Executive Marcie Frost and Chief Counsel Matt Jacobs when they interviewed him in August 2017…

Before Webber’s report, Asubonten had been developing a good reputation at CalPERS. Frost defended him when Webber first raised questions about him. So did CalPERS Board of Administration President Priya Mathur.

There are nevertheless two curious aspects to this story. The first is that it does not mention Mike Hiltzik’s articles in the Los Angeles Times, particularly his first piece, Questions about new CalPERS CFO’s background and experience should be taken seriously by the pension fund, which was clearly what forced CalPERS to investigate Asubonten. That fact should alarm CalPERS beneficiaries and California taxpayers. Frost, other CalPERS executives, and the board were circling the wagons behind someone who had among other things filed false documents that had been sworn under penalty of perjury in a role that put him in charge of banking relationships. Resume fabrications are unacceptable in virtually any position for good reason, and they should have set off alarms for someone in a role with financial responsibilities. Yet it was only when l’affaire Asubonten became too high profile did CalPERS decide to investigate.

The second is the timing of Ashton’s story. We posted on Asubonten’s State Personnel Board filing on July 31 and Hiltzik followed up almost immediately.

Perhaps Ashton was waiting for a slow news day and it took longer to arrive than he expected. I’ve found myself in the position of writing about something later than I wanted to because more pressing stories got in the way.

However, another possibility is that Ashton was planning to write a somewhat different piece and got left in the lurch by CalPERS. On Tuesday, CalPERS had the innocuous-looking item 8d on its Board of Administration agenda, an “oral report” by board member Bill Slaton on the Performance, Compensation & Talent Management Committee. I had been told that CalPERS would present what it intended to do about its recruiting practices so as to prevent another Asubonten-like episode.

As one person who sat in on the meeting told me, “What Slaton said came and went so fast that it was over before I realized it had begun.” Another stated that Slaton said that he and board member Richard Costigan had discussed the matter with staff and were satisfied with what they intended to do.

I don’t put much faith in tea and cookies conversations like this. And it may be that CalPERS did itself a PR disservice yet again by opting for secrecy. Ashton may have been holding back on his final Asubonten report to spin it with, “CalPERS has learned a lesson and here is what it is doing.” Thus it may be that being deprived of a more positive spin led to CalPERS getting yet another rehash of an episode that reveals a dangerously lax attitude towards checks and controls. And if CalPERS has made at best minimal changes, it’s sure to gin up even more visible and costly mistakes down the road.

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  1. vlade

    “it’s sure to gin up even more visible and costly mistakes down the road.”

    Well, it could start replacing Frost and Mathur, although I’m not entirely sure how that could show more costly at least medium term. Yes, it could be worse, but sure, making it even worse than that would finally wake up the Cal legislature/voters/beneficiaries ?

    TBH, at this stage, I came to expect nothing from CalPERS. That said, SB starting to put out not-so-hot CalPERS stories might be the end of the beginning?

    1. EoH

      There are those billions of assets under helm, and the billions in payouts that California citizens expect to receive. Someone in state government, and its congressional delegation, ought to start worrying about that. Seriously.

  2. Clive

    As a minimum when there’s been mess ups like the Asubonten recruitment shambles any enterprise that rises above the bare-minimum competence threshold (like you’d imagine an organisation with the responsibility CalPERS has would do, but perhaps I imagine too generously) would promise to update its procedures and “learn lessons”.

    For the staff to apparently think they need do nothing more than tough it out and for the board to do nothing more than a whistle-stop run through of any changes in CalPERS’ recruitment policy and hiring safeguards shows they intend to learn little, if anything, from the whole debacle.

    And, stating the obvious, if Naked Capitalism managed to catch Asubonten out in his fabrications, what faith would one have in any previous CalPERS recruitment? As with any fraud, whenever you find one instance, there’s always more lurking. It’s just a matter of time until it all comes out into the open…

  3. The Rev Kev

    When Asubonten disputed CalPERS sacking of him, I thought at the time that he must be getting really bad legal advice – that or else he was taking his own council. This maneuver allowed the whole dispute to go onto a publicly available record and blew up both him and CalPERS into the bargain. I began wondering tonight if perhaps he did not have much choice. He was several months into the job and, apart from the Bodgy Brothers interview process, seems to have been making a good impression. It is possible that thinking of his future pays, he may have committed himself financially to buying a place to live and maybe a decent car. The loss of his job would have wrecked this whole position so perhaps his disputing his sacking was his only chance to make good on his financial commitments. It is just a theory but it might explain his actions here.

  4. Brian

    Unless CalPers has no oversight by the state, some state workers know what is going on inside this entity and are keeping quiet. It reminds me of Watergate and it appears that we should take heed and “follow the money”. Since this involves a large quanta of money, it is illogical to assume the highest levels of state government are not aware of what is occurring.
    Yves has become Woodstein in this saga! Thanks for the reporting.

    1. Yves Smith Post author

      CalPERS has no oversight by the state. That is what makes this situation so troubling, The only “oversight” is the see-nothing, do-notthihng board, which effectively means you have no one supervising $350 billion in retiree money.

      1. Jeff

        The silence from the public employee unions is breathtaking. Are they not concerned with member retirement funds?

  5. EoH

    Good parallel with the bank fraud charges against Paul Manafort, now in the hands of a jury in EDVA. They relate, in part, to allegedly fraudulent loan applications for $16 million to The Federal Savings Bank.

    Manafort’s defense was that the TFSB’s CEO knew the apps were fraudulent, but chose to extend the loans anyway – despite unanimous recommendations from all of TFSB’s staff, loan officer to president, not to grant the loans. Manafort claims that that knowledge voided the fraud. (The feds also claim that the TFSB CEO granted the loans because he wanted a plum job with the Trump administration, a corrupt purpose.)

    Arguably, rather than void the fraud, the CEO’s knowledge of it – in the context of his duties to his bank employer – makes the CEO a participant in it. Besides, the fraud was attempted the minute Manafort submitted fraudulent documents, irrespective of what the CEO knew.

    In Asubonten’s case, it would seem that his dismissal was heartily deserved, regardless of whether the CEO, president and GC knew about or aided his fraudulent application. Their knowledge would make them complicit in the wrong, not void the wrong. Their knowledge of and acts to further Asubonten’s wrongs would also be independent violations of their obligations owed to CalPERS.

    No surprise, I suppose, that CalPERS is doubling down on secrecy and its, at best, reckless hiring processes. That would ordinarily bring many of their management practices into question.

  6. David in Santa Cruz

    I have to agree with the commenters above: Asubonten’s hire was “a feature, not a bug.” In the documents obtained and published by Yves, we see that Asubonten’s interview committee was headed by the CalPERS General Counsel, a white-collar criminal defense specialist with zero background in pension governance or finance. CalPERS is being systematically looted and as Asubonten inadvertently tells us in his appeal, the General Counsel keeps bringing in under- and un-qualified managers and board members who appear to be united by their stubborn willingness to look the other way. This cover-up started when the former CEO and a former board member were indicted by the Feds; state government officials have still never lifted a finger to investigate.

    Who is the GC really working for? Not the members and beneficiaries, that’s for sure.

    Follow the money.

  7. flora

    The SacBee publishing this indicates the light is slowly dawning in Sacramento. Ashton crediting your work is good news; it means your reporting is no longer considered some ‘fringe blog that must not be named’.

    Thanks for your continued reporting on CalPERS, PE, and pensions.

  8. CalPERS Auditor

    Word around the CalPERS Office of Audit Services is that high-school-educated Marcie Frost serves as a sort of straw (wo)man which allows former US Atty Matt Jacobs to run the show. Hard to say how much truth there is in that, but people are leaving left and right from this dismal environment that was pitched to us as a “destination employer.”

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