CalPERS’ Story About Sudden “Resignation” of Star Hire Elisabeth Bourqui Falls Apart as Bourqui Comes to Board Meeting With Heavyweight Employment Lawyer

On Tuesday, we learned that CalPERS’ former Chief Operating Investment Officer, Elisabeth Bourqui, who resigned suddenly in early January, attended the CalPERS offsite in Rohnert Park, with heavyweight employment lawyer Elisa Stewart of Stewart & Musell at her side in the morning (Bourqui’s husband joined her in the afternoon). Bourqui declined to speak to the press and public but was giving her card to interested board members.

Recall that Bourqui’s sudden departure didn’t smell right. CalPERS made no announcement; members of the press found out via employees leaking the e-mail sent by the new Chief Investment Officer, Ben Meng. As we wrote then:

The fact that Bourqui left without any transition or advance warning means it is well nigh certain that she had a dispute with Marcie Frost. Recall that the departures of the head of private equity, Real Desrochers, the former Chief Operating Investment Officer Wylie Tollette, and Chief Investment Officer Ted Eloupoulos were all announced in advance.

Initial reports indicated that Bourqui was well liked and well respected by employees, so it seems inconceivable that her performance was sub-par. It seems pretty clear what the real issue was. As one said:

There is no way this is not about private equity.

By contrast, when Bourqui’s predecessor, Wylie Tollette, left, CalPERS issued the usual sort of press release, explaining why he was leaving, describing his accomplishments, including CEO Marcie Frost heaping a full paragraph of praise on him. Even in less friendly departures, the norm for an executive is a press release, with a terse explanation of the reason for leaving (“for personal reasons” or “to spend time with their family” is code for a defenestration). The lack of any official statement whatsoever suggests the circumstances of the exodus were so ugly that the employer wasn’t willing to spend the time to negotiate a minimal statement. 1

Even though the Ben Meng e-mail of January 7 started, “Elisabeth Bourqui has submitted her resignation as CalPERS Chief Operating Investment Officer (COIO) effective today,” tellingly, CEO Marcie Frost was using a different formulation to stakeholders on Tuesday: “I didn’t fire her.”

Bourqui’s remarkable public appearance sends a strong message that she didn’t regard her departure as voluntary and intends to Do Something about that. And Frost’s statement is awfully convenient. It leaves open the question as to whether someone else fired Bourqui, or whether she technically wasn’t fired, but was “rejected on probation,” which the term of art for how California civil service employees who have not finished the one-year probationary period are terminated.2

Bourqui had been at CalPERS for only eight months. Since she was on probation, her protection from dismissal is limited. If she were to appeal to the State Personnel Board, she would have the burden of proof. Normally the grounds for contesting a release from probation are discrimination, fraud….and retaliation. A source told us that Bouqui had raised serious issues about the private equity plan, and via a second channel, we understand that Bourqui objected to Frost and other senior staff members about how they were pushing the board to adopt the plan.

Bourqui was one of three presenters on the private equity plan in closed board meeting in November:

As we mentioned earlier, not only did Bourqui supervise risk modeling at ABB Group, Zurich-based engineering powerhouse that by virtue of operating in 100 countries had extremely complex exposures, but she also headed the Canadian pension fund practice for Mercer, which means she would have been familiar with how Canadian pension funds had successfully built up their private equity capabilities. It isn’t hard to imagine that Bourqui would have used her scarce face time before the board to raise concerns about the scheme, and that that would have enraged Frost, who has been hell bent to get the plan approved without the board doing an adequate job of kicking the tires.

Reporter Randy Diamond has gotten intel similar to ours. From Chief Investment Officer:

CalPERS sources have questioned if Bourqui’s detailed presentations on the potential investment returns but also risks of CalPERS’s planned direct investment-style private program in closed session meetings upset Frost, a big advocate of the program.

Most CalPERS investment officials had been telling board members in closed sessions the advantages of the program in terms of helping the system’s investment returns. Boruqui did so too, but she also expressed what she felt some of the risks of the program are, including potential millions of dollars in start-up costs.

As an aside, notice that CalPERS employees are reporting on closed session discussions to Diamond. Even though close session discussions are held in secret and supposed to remain secret, staff members see fit to publicize them without getting the required authorization on a regular basis. Here we see dissident staff members leaking. Yet CalPERS routinely tries to blame these unwelcome disclosures on board member who are not part of the power faction, when Diamond makes crystal clear his sources were employees, not board members.

But…you might be saying….what if Bourqui really did resign? It’s not so clear cut. California recognizes that there is such a thing as resigning under duress, which in California is called “constructive dismissal” and is categorized in the California Civil Jury instructions as a sub-set of the law on “wrongful termination”. A primer from Shouse Law Group gives an overview. Key sections:

The law of wrongful constructive termination (also known as wrongful constructive discharge) in California provides that you can sue an employer for wrongful termination even if you resigned rather than being fired.

In order to successfully sue an employer for wrongful constructive termination, you need to be able to show two things:

1. Your employer, through acts of workplace retaliation, intentionally or knowingly created working conditions for you that were intolerable, so that you would have no choice but to resign; and

2. Your employer did not have the right to fire you outright–and so if s/he had, you would have had a valid wrongful termination case against him/her.

From an attorney who spent his entire career working for California government bodies:

The law is pretty well-established, although it can often be challenging to prove-up. Employers have always used the strategy of forcing employees to quit, rather than firing them, in hopes of avoiding a wrongful termination suit. However, the courts have long recognized that if an employer knowingly and intentionally subjects an employee to working conditions that a reasonable person would consider to be so intolerable that they would resign, it is effectively a dismissal of the employee.

An important, although not essential, element of proof would be that the intolerable working conditions were imposed as retaliation for conduct of the employee, especially whistle-blowing. Evidence of favorable performance reviews leading up to the imposition of retaliatory intolerable working conditions also makes a stronger case. Intolerable working conditions can include imposing hours where an employee can no longer pick her children up from school, or placing a senior manager in a menial position. It’s simply a “reasonable person” standard and can include, demotion, failure to promote, threats to report an employee to ICE, refusal to provide professional development and training, denial of time-off, or denial of access to resources necessary to the performance of one’s job (like access to databases or records).

The grounds for Wrongful Termination go beyond whistle-blowing, and can include Wrongful Termination in Violation of Public Policy — such as refusing to perform an illegal act, performing an obligation required by law (such as jury service), exercising a legal right or privilege (like insisting on a lunch break), or reporting a violation of law (other than whistle-blowing).

I suspect that Bourqui is going to have quite a good case, because while Marcie Frost and Matt Jacobs are a couple of bullies, they appear to lack knowledge and experience of the subtleties of employment law. Her lawyer has quite a successful practice, and it’s doubtful that she would make a move like showing up at the off-site if she didn’t think that she has a very strong hand.

Another factor that would give Bourqui leverage is that if she were to file a State Personnel Board appeal, that document is a public record, and her hearing would also be public.

As I read the hearing procedures, if the two parties do not reach an agreement in a settlement conference, they are then scheduled for an evidentiary hearing. Bourqui would be able to do discovery and subpoena witnesses and documents. If Bourqui believes her stance on the private equity scheme was the reason she was pushed out, she would wind up reviewing her objections and why she felt she had a professional and potentially a fiduciary duty to make those views heard. Bourqui could also seek to depose board members and have the judge consider any relevant closed session information under seal. It’s hard to imagine that Frost would want this controversy to go public. If she has any sense, CalPERS will settle pronto. But selfishly, I’d love to see this go a few rounds. It’s time Frost took some body blows for her incompetence and vengefulness.


1 One employee e-mailed us to report that “She was ‘walked’ out of the building early this morning.” If that is true, that would be gratuitously nasty as well as consistent with the idea that Bourqui was fired.

2 To be more precise, the probationary period for Bourqui’s position was one year. However, but some lower level civil service positions have a 6 month probationary periods.

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  1. vlade

    Put it this way.

    You do not bring an employment lawyer (especially expensive one. Stewart has her name on the door, so she’s partner. thousands $/hour easily) somewhere if you resigned fully voluntarily and have no problems with your former employer.

    Given that taking an employment lawyer _publicly_ to your former company does not enhance your CV, it also tends to be an indicator that something is really wrong.

    1. PlutoniumKun

      The good news is that it means Frost picked on the wrong employee to push around. Its certainly an indication Bourqui will go full scorched earth in revenge for whatever was said or done behind closed doors. Given Bourqui’s background, obvious skills and, it seems, resources to hire the best lawyers, she will be a very formidable opponent.

      1. skippy

        Wonder if Frosts qualifications might be challenged from the prospective of competency and how that might have set the stage.

    2. flora

      If Bourqui is as competent as reported, and as capable of functioning in high level and deeply bureaucratic environments as reported, she was no doubt keeping careful records or a daily work diary of her work and interactions with Frost and staff. A daily diary or some timeline record of behavior on the part of Frost and staff (the employer) is considered legal evidence in most states. This is going to be interesting. Pass the popcorn.

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

  2. The Rev Kev

    Escorted out the building? That’s petty and vindictive that. Was she carrying all her stuff in a cardboard box to complete the picture? What did they think that Bourqui was going to try to do? Swipe a red Swingline stapler on the way out the door like something out of Office Space? Like vlade, I thought that Bourqui bringing along a heavy-duty employment lawyer to a CalPERS meeting was not something that will look good on her resume. It seems the actions of a person that had not much choice but the question is why.

    Going way beyond my skis here (not recommended – I have tried it) I am beginning to wonder if perhaps Frost was not satisfied with Bourqui’s abrupt departure but took it further. Could it be that she was making phone calls to bad-mouth Bourqui’s reputation with future employers to try to redeem her own reputation? That might explain Bourqui’s actions. But then I thought no. That would be the actions of a petty person. One that was vindictive by nature. One that was ill-suited for her corporate role. One that demanded outwards signs of fealty among her staff with ostentatious showings. I guess that I will have to think of another possible reason. I’ll get back to you.

    1. Mark Gisleson

      Maybe not at this level, but lower down in the employment chain it is very common to be escorted from the building. Writing resumes I heard this story many times and in truth, when I refused to sign a non-compete agreement with the national outfit I was writing resumes for, I was escorted from the building by a guard (and then started my own resume service). Absolutely zero misconduct was alleged (I was a top producer), the (clearly illegal) non-compete was the sole grounds for dismissal.

      And it’s the last thing people talk about with others. It’s humiliating (even for me running a one-person office in a building where no one knew me).

      Excuse the schadenfreude, but I truly do love hearing about senior executives being treated like underlings. I don’t wish this on anyone, but it’s gratifying to think of the chill this sends down backs in C-suites where accountability often comes with a golden parachute.

      1. Yves Smith Post author

        This sort of roughing up is sadly common in Corporate America, but not in public service in California. Lower level employees have union protection, so being walked out happens only if they have been accused of serious misconduct or were fired (which virtually never happens, even for the few that are close to at will employees, they are usually offered the opportunity to resign). With that as the standard, if Bourqui had been walked out (and again, we have to stress this is only one report, so it could be inaccurate), it would be wildly out of line with state agency norms.

        1. Mark Gisleson

          And as a former union steward, thank you for acknowledging how unions safeguard employees from being humiliated in that manner.

          I only saw a union guy fired once, but when they walked him out he had his union divisional chairman walking next to him and his coworkers were free to wave and offer encouragement without fear of company retaliation.

      2. ChrisPacific

        Every private sector employer I’ve ever worked for in America that had layoffs did things this way (admittedly that’s not a long list, but it’s larger than one). Meeting late in the day for the announcement, then pack up your desk and out the door. The one that ended up doing this a lot (lots of rounds of layoffs) was actually a good employer, and I don’t see that there was any real need for it, except that we had been acquired by a national firm and I expect corporate felt this was the way it was done. It just seems to be the culture in private sector corporate America. (We did get to talk to them on the way out, which I later gathered wasn’t normal practice).

        On the one occasion where I was at a public sector employer during a layoff period, they were handled very differently.

        1. Yves Smith Post author

          Even then, you are proving the point. Layoff = firing. CalPERS is maintaining Bourqui resigned. CalPERS allowed Ted Elipooulos and Real Desrochers stay around the office for months and continue to conduct business even though they had announced they were resigning.

          1. ChrisPacific

            Right, so it duck-types* as more of a dismissal than a resignation. I’m trying to think of cases I’ve seen where people have been escorted from the building after they resigned. The only one I can think of is if they left in order to join a direct competitor and the company feels that continuing their current work would amount to a conflict of interest or security risk. Even then, an escort out of the building would be extreme (and I don’t think Bourqui’s case fits that scenario anyway).

            * Duck typing = classifying things based on their observed characteristics. “If it walks like a duck and quacks like a duck, it’s probably a duck.”

      3. fajensen

        Heh. I was there when the former Vestas Wind Systems head of research was marched out inside a neat box of four G4S goons out the front door to a waiting taxi. One of the goons carrying a black bin-liner, supposedly with all his stuff in it.

        This “Just Happened ™” to be at the same time as Ditlev Engels (CEO) was doing his very best Steve Jobs performance with two “I am Larger Than God ™” video screens next to the stage he was performing on in front of a crowd of maybe 3-400 people, the path of the goons being right along one side of the crowd.

    2. RUKidding

      As Yves indicates, this is a very odd, to say the least, practice for a high level (and even lower level) government employee.

      One has to wonder what was going on that led to this action, which I suspect may (hopefully) backfire in Marcie Frost’s incompetent, smug face.

      I am a current CalPers contributor and (hopefully) a future CalPers annuitant. As I’ve said here numerous times, I have known various people who’ve worked at CalPers over the years. I’ve heard lots of stories about general dysfunction at CalPers; about what a toxic workplace it is; about necessary jobs remaining open far longer than they should; about shoddy work practices; and so forth. Of course, they’re all hearsay, but this outstanding series on CalPers lends credibility to the stories my friends have told me.

      1. ChrisPacific

        I am unclear on what standing she had to attend the offsite at all if she had already resigned with immediate effect, or why CalPERS would go along with it. It sounds like they did indeed allow it, so perhaps that was in response to an assertion of legal rights of some kind on her part (which would explain the lawyer). What the argument might have been though, I have no idea.

        Any senior exec at CalPERS with half a brain would settle on this one to avoid discovery, but then that was true of the Asubonten scandal as well and they didn’t do it. Here’s hoping we get to see how it plays out.

        1. RUKidding

          I’m not entirely certain, but I suspect that CalPers Board meetings have to be open to the public per California’s Brown Act:

          I made the assumption, possibly incorrect, that this is how Bourquoi was “allowed” to attend the meeting. The fact that the meeting was held off-site shouldn’t make any difference in terms of the Brown Act and how meetings have to be open to anyone to attend.

          If anyone knows differently, please advise. But my assumption is that CalPers Board meetings – except for pre-planned Closed Sessions (which can only be closed for some very specific reasons) – are open to the public to attend.

          One may question Bourquoi’s decision to attend, but I think she had a right to do so.

          1. Yves Smith Post author

            Chris, you have not been paying attention. Aside from the closed session portions, CalPERS board meetings are public. They are taped and transcribed by court reporters. Bourqui could even have made a 3 minute public comment.

            1. ChrisPacific

              Oh, that explains it, thanks. I read “offsite” as meaning a staff meeting at an external location or something similar (training day, retreat, strategy session, or whatever). If it’s a board meeting then it makes perfect sense (and yes, I didn’t read the heading carefully enough – I’m inclined to jump straight to the article on the CalPERS stuff).

  3. John Beech

    No interest in what’s going on in CA other than the author writes exquisitely well about it. Fascinating!

  4. diptherio

    Think I caught a little typo:

    Yet CalPERS routinely tries to blame these unwelcome disclosures on staff, when Diamond makes crystal clear his sources were employees, not board members.

    “Staff” should be something like “disgruntled board members,” right? Or maybe just “Jelencic and Brown”…

    Great reportage, as always. Can’t wait to see how this plays out. I, for one, hope it’s messy.

  5. Tom Stone

    This hot mess is now in the air, on its way to Gavin Newsome’s lap settlement or no.
    How long did it take for Marcie to find out which Board members took Ms Bourqui’s card?
    A wonderful way to rent space in Matt and Marcie’s heads, their reactions both public and “Private” are likely to be amusing in an unhealthy way.
    And the leaks to Diamond add to the drama nicely.
    Here’s hoping Mike Hiltzik picks up on this soon.

    And once again
    “Attorney General Becerra is gonna be all over this!”

  6. notabanker

    Yves, you hit the jackpot choosing to put the microscope on Calpers, and I don’t believe for a second that there was any luck involved with that choice.

    A doofus like Frost in charge of one of the world’s largest pension funds…. sure makes you wonder what is really going on here.

    I’d bet Bourqui walks away with a massive check and an iron clad NDA.

    1. Yves Smith Post author

      There won’t be an NDA. Any settlement payment and settlement agreement are public records, subject to disclosure in a Public Records Act request. Recall that I got and published the texts of the settlement agreements that CalPERS entered into with Dow Jones, the New York Times, and the Los Angeles Times over its copyright infringement.

  7. RUKidding

    As always, thanks Yves for the updates about the shenanigans at CalPers. What a red hot mess. Will be interested to learn the outcome, if possible, of any further developments with Elisabeth Bourqui.

  8. David in Santa Cruz

    As a CalPERS beneficiary, you have my eternal gratitude for exposing the culture of wrongdoing that has taken-over this once-hallowed institution. This latest news is not a good look for Marci Frost and Matt Jacobs.

    Follow the money…

  9. KLG

    Has Ms. Frost gotten that degree from Evergreen State yet? I ask only because at each of my three positions since PhD-dom, I have had to prove with notarized documentation and official transcripts that I am who I say I am. Seems reasonable for the head of CalPERS. No?

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