How CalPERS CEO Marcie Frost’s Efforts to Organize Astroturf Support Are Compromising Her

CalPERS CEO Marcie Frost has been waging a concerted battle to keep her job after we documented multiple misrepresentations she made during and after she was hired at CalPERS, as well as misrepresentations made in her own handwriting on a 2013 form filed under penalty of perjury in the state of Washington. As Los Angeles Times reporter Mike Hiltzik stressed last week, even executives with long, celebrated careers have lost their jobs over resume lies.

In another sign of questionable leadership, Frost has been reactive when her own professional survival is at stake. As we’ll discuss below, Frost has been personally soliciting letters of support from organizations that are close to CalPERS. The fact that I am hearing about it at my considerable remove says people see this behavior as crass. In addition, a union leader issued a letter of support for Frost on behalf of other unions, when at least one was not consulted and not happy about that.

But first matters first, which is the desperate-looking enlistment of professional help.

Panicked hiring of a PR firm. We received this message from a CalPERS insider last Thursday:

Today, CalPERS was trying to hire a PR firm to do damage control against the media – i.e., you. They raced around this afternoon getting signatures for approval so they could hastily get someone in place. Not sure of any other facts yet – but Kim Malm was doing the running around to make it happen.

First, as we have repeatedly said, CalPERS senior management and its board appear determined to double down on poor governance, weak controls, repeated instances of failure to act in accordance with their fiduciary duty, and casual lying. Rather than tackle deep-seated problems, CalPERS has convinced itself that more liberal applications of porcine maquillage will suffice.

But second, it’s sheer ineptitude to be bringing in a professional flack now. The bad news horse has left the barn and is now in the next county.1 Specifically:

– How can CalPERS not have a PR firm capable of doing damage control on retainer already? And if they aren’t up to this task, why weren’t they replaced long ago?

_ CalPERS has made so many mistakes and created so many additional bad facts that it is hard to see how a media fixer could clean things up. CalPERS’ communications staffer Wayne Davis was first telling reporters that I was “crazy,” which only served to tell the press that CalPERS could not dispute anything I had published. The next line was for Board President Priya Mathur and Vice President Rob Feckner to depict us as “spiteful” while CalPERS confirmed our reporting by admitting that Frost had not taken any classes at The Evergreen State College since 2010, and later, that she’d only attended for two quarters.

Then CalPERS’ Davis tried lying for Frost, saying he was the source of the misrepresentations in CalPERS’ press release and on its website, which still failed to explain the misrepresentations on the Heidrick & Struggles resume and on the 2013 form in Washington. The Financial Times shredded Davis’ claims, showing among other things that Frost was actively involved in the rollout of her hiring announcement.

Just last week, awfully late in the game, Frost has now tried claiming that Heidrick & Struggles wildly misconstrued her statement of a fond wish to eventually get a degree. Good luck with that. CalPERS is now way ahead of the Bush Administration’s rate of generating pretexts for the war in Iraq.

Shorter: It’s hard to see how a PR firm can counter the hash CalPERS has already made of things.

– If they are instead hiring an online “reputation defender” firm, good luck with that. Even small businesses have found they do as well on their own implementing strategies to try to crowd out negative information online as they could by hiring consultants. Reputation defense is, at its core, a war of attrition. So if CalPERS with its large, in-house communications team isn’t able to accomplish this task, it is questionable how much difference an outside firm could make.

Frost’s personal muscling of members of the CalPERS network for supportive press releases and letters. Frost has been trying to orchestrate a show of support to offset the deserved negative press she has been receiving. Someone with knowledge of her efforts compared it to a high school teacher who is up for dismissal by the school board because he leaked the questions to a statewide exam to his students in advance getting his students to lobby their parents to tell the board how much the kids like him and what a great teacher he is.

But what Frost is doing is even worse, since in many if not all cases, she is using CalPERS’ assets, namely, its reach and its resources, for her personal benefit.

Frost called both the head and the lobbyist of one influential group which has CalPERS staff participate at some of its events to ask the organization to issue a press release expressing support for her as CEO. At a second group, Frost has dangled the possibility of hiring its lobbyist to work for CalPERS, even though the unions would be sure to bar his appointment. Not surprisingly, his organization has issued a statement backing Frost.

Issuance of Labor Coalition letter of support by David Low without the backing of members. On September 5, the Executive Director of the California School Employees Association David Low sent a letter to CalPERS board president Priya Mathur on the letterhead of the Labor Coalition. The Labor Coalition is a longstanding, influential group of California labor lobbyists….even though the organization does not have a website or an office, and may not even have a formal organization.

When I received a copy of the letter on September 6, I knew it was intended for use by Adam Ashton of the Sacramento Bee, so I was not surprised to see it serve as the centerpiece of a September 14 article, which was originally titled, CA unions defend CalPERS CEO Marcie Frost, but the current title is CalPERS CEO with no college degree: ‘Integrity’ or ‘sad, sad circus?’

The wee problem is that some, and perhaps many, of the 28 members of this organization did not consent to Low’s issuance of this letter.

We published the post that Low takes issue with and quote in his letter on the Tuesday before the Labor Day weekend. Low could not have begun drafting his missive until he had read my post, yet his letter went to CalPERS on the Wednesday after Labor Day. Given the intercession of the long holiday weekend, it is hard to see how Low could have circulated the letter to all the 27 members in addition to his union and gotten their consent in such a short time.

So it should come as no surprise that I received this e-mail from a board member of a reasonably large union in the Labor Coalition roster:

When the Dave Low letter was orchestrated and released, I immediately pointed it out to my board – we found out about it by receiving it days after its inception. Not one board member knew anything about Low’s letter.

I have asked some of our board members to send a letter to Low to find out what the heck is going on. That discussion has been postponed because some of our board members do not want to be perceived as negative against CalPERS. Under the table though, there is talk about the way in which Low is pushing his agenda.

Finally, I’m unaware of others in the coalition that are supporting Low.

And from a later e-mail:

I’ve asked around my contacts in CSEA and in my own union – no one is even aware of this letter that Low created to support Marcie. My lobbyist said he did not receive an individual request to write a letter in support of Frost.

We think that the effort to support Frost’s image is coming from Low and the lobbyist CHSWC member Christy Bouma. Possibly SEIU also. They are the folks that work closely with running their favors through Priya and Rob Feckner.

There is no comrade collaborative approach to support Marcie in my organization.

It is hard to prove a negative, but one important union being kept completely out of the loop is significant in and of itself.2

Moreover, the power implications of Low presenting himself as the labor’s savior of Frost, if she survives the resume controversy, are not pretty. As one former California state official put it. “Dave Low will own Marcie.” It’s one thing for a significant and legitimate interest group like the labor unions with CalPERS members to have a seat at the table. It’s quite another for the leader of one union to be calling the shots.

The implication is that with Frost orchestrating this display of support, the exercise is now tainted. There’s no way for the CalPERS board to know how much of this is genuine, versus cynical efforts to get leverage over Frost in an hour of weakness or compliance by people who are afraid of the consequences of not having backed her if she survives. How many people will Frost owe big favors if she manages to get through the next few months? And how can it possibly be good for beneficiaries and California taxpayers to have them demand repayment from CalPERS?


.1 Unless CalPERS is expecting more negative exposure.

2 I contacted Low with questions about whether he had issued the September 5 letter in a personal capacity, and if so, why the letter had not made it clear, and if not, why had he not consulted all the members of the Labor Coalition before sending his letter. I did not receive a response by the time I launched this post. I will update it to incorporate any information and/or comment by Low.

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  1. Tom Stone

    I think it’s time for Marcie to look for a new position, is Theresa May hiring advisors?

    Attorney General Becerra is gonna be all over this!

    Real soon.

  2. ChrisPacific

    So far this response is showing some typical CalPERS characteristics:

    1. Preserve the status quo at all costs, even if the status quo is terrible.
    2. If something is too hard, outsource it.
    3. If choosing an outsourcer is too hard, see rule 2, which can be applied recursively (‘private equity fund of funds’).

  3. Tom Stone

    A non snark remark.

    Low lived down to his name, the fact that he was comfortable doing this surprises me and tells me how much times have changed.

    Over the years I have hung out with some union members, mostly ILWU and Ironworkers, a few Wobblies when I was young ( My Dad’s friends)

    They would have expressed their displeasure in a very direct and personal way.

    There will be blowback for Low, he displayed a lack of respect that the other Union leaders can’t afford to ignore, if for no more reason than that they can’t afford to look weak to their members.

    The next few weeks will show just how big a dog Low is.

  4. The Rev Kev

    Too little, too late. The damage has already been done. Not only to Frost but also for CaLPERS’ reputation (for whatever that is worth lately). It won’t matter what Frost does to try retrieve the situation. I mean, it’s not like that she will have 65 women from her past come forward to support her and say what a great person she is. Heidrick & Struggles can’t be happy either though in all fairness, if they had done their job properly, Frost’s resume would have been dropped down a shredder instead of being pushed forward. I wonder if CaLPERS can try to sue them for this?

    With the trend to bring in incompetent managers into CaLPERS, it seems to have bitten them on the backside going by their flaky response to this self-created crisis. Probably why they tried to outsource the handling of this to a PR firm – because they knew that they were just not up to the job. CalPERS’ communications staffer Wayne Davis response can be seen as an example of that. Wayne should know when being surrounded by sharks, don’t try to add chum to the mixture.

    David Low’s letter too was a bit ham-fisted. Reminds me of how with the teachers’ strikes, the teachers were not only fighting their States but also their union leadership. The same sort of leadership is being shown here. If things go south real bad with CaLPERS, having Low drag the Labor Coalition into the mix will make for a lot of unhappy faces with his 27 fellow board members. As for Frost’s attempts to make this all go away, well…

    1. flora

      +1. If CalPERS board was doing its job – its real job – it wouldn’t need to hire a PR firm because poor and unqualified hires wouldn’t happen. imo.

      Thanks to NC for continued reporting on CalPERS, pension, and PE.

  5. Anon

    Boy, life in California gets weirder and weirder every day. How this CalPERS fiasco continues without the Governor calling in his appointees to the Board for a chit chat and explanation baffles me. Oh wait, he’s busy making a Star Turn at the Global Climate Conference in SF. He needs to expend some heat on the CalPERS situation. (Or maybe he’s a closet resume’ fabrication denier.)

  6. David in Santa Cruz

    It’s funny to read about the qualities that CalPERS demands of other organizations as far as board governance goes. A lying CEO just doesn’t cut it. This is simply more evidence of the Board’s abandonment of their fiduciary obligation to prudently oversee the fund. It is they who will eventually be sued into personal bankruptcy by the beneficiaries when more big losses show up, not the staff. But staff are apparently still running a cover-up for the Zephyr Cove Party Crew.

    Follow the money.

  7. vlade

    Frost sounds pretty desperate – or just the usuall incompetence (or both, who knows). Isn’t it the meme that “X has my/our full support” is usually the last thing X hears before being shown the door?

    That Low bloke is also going to have some fun, as I doubt other unions will be happy with them being unknowingly dragged into a fight that’s lost and a bad PR on the top of it.

    BTW, SacBee’s tab-headline is still “CA union defends.. “, so shows it was changed later on.

    1. PlutoniumKun

      Yes, that issue with Low struck me as strange. I have zero knowledge of Californias Labor Union structures or internal politics, but in any ‘partnership’ style organisations I’ve been involved in, everyone is hyper aware of the need to ensure everyone is on board with any official statement or policy, even the most innocuous ones. This is why this sort of structure can be so unwieldy.

      To do what he seems to have done – essentially tie a lot of apparently unwilling Unions to the sinking ship of Marcie Frost – is not something that will be forgotten or forgiven easily. Its a sign of either political incompetence or desperation. And people rarely get to be the head of a powerful Union by displaying political incompetence. I wonder if Ms. Frost knows where a few bodies are buried.

      1. Yves Smith Post author

        It’s amore complicated than that, and I don’t claim to be an expert on union politics in California.

        Low and Terry Brennand of SEIU have long been the two big players at CalPERS. So Low may have thought he was entitled to deference on a CalPERS matter due to his supposed heavyweight/privileged insider status.

        The flip side is that Low may be overeager to show his clout. One of the six board members elected by various groups of CalPERS beneficiaries is the “school employees” seat. CSEA, Low’s union, has long treated that seat as its property. But the former CSEA president Michael Bilbrey, who was endorsed by the unions (and hence Low’s man) was ousted by Margaret Brown last year despite Bilbrey being endorsed by CSEA and having been able to raise much more money by virtue of having CSEA support.

      2. David in Santa Cruz

        I suspect that Low’s move was out of desperation rather than incompetence.

        You have to understand this as an attempt to curry favor with Frost in light of June’s Janus vs. AFSCME U.S. Supreme Court decision, banning Agency Shop agreements in the public sector — allowing employees to be “free riders” on union collective bargaining and grievance representation without having to pay dues.

        Public sector unions need to show that they have “juice” with the state, and this was a cheap way to buy Frost’s ear if she stays — as certain CalPERS Board members have been stupidly spouting-off that she will do. Low’s letter left him an “out” by limiting his support to what was “understood” by the Board about Frost’s education. If, as seems to be the case, they were intentionally mislead by falsehoods, his support will melt away.

  8. Watt4Bob

    I’m still waiting to learn the identity/identities of Marcie Frost’s actual boss/bosses, it is obviously not beneficiaries.

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