CalPERS Election Corruption: Huge and Illegally Opaque Dark Spending Against Pro-Accountability Candidate JJ Jelincic

It’s astonishing to see the ferocity of the effort to turn the tide against JJ Jelincic, the favorite to win the election for the CalPERS retiree board seat. It isn’t just that CalPERS is too obviously trying to fix the election, or that board members and employees are violating anti-corruption laws by using state resources to attack Jelincic and promote his opponent, the incumbent Henry Jones. It is also that this is the first CalPERS board election to feature dark money, and on top of that, it’s coming in at levels that dwarf the spending by the candidates.

It isn’t just insiders who’ve noticed the tidal wave of dark money. Even the retirees whose votes are being sought don’t like what they see. From reader ALM in comments:

I am a CalPERS retiree. Last week, I received my mail ballot on the same day that I received campaign mail bankrolled by “Concerned Retirees for Pension and Healthcare Security” who are even more concerned about secrecy because there is no trace of them on the internet. The envelope used was deliberately designed to give the appearance of official state mail sent to all CalPERS retirees at the direction of Fiona Ma in her capacity as State Treasurer….

I sent an email directly to Mr. Jones to complain about the deceitfulness of the campaign mail supporting him. I also informed Mr. Jones that the campaign mail was reason enough to vote against him. He denied any knowledge of the campaign mail or the dark money group backing him.

This is the first dark money backed campaign mail that I have received in any CalPERS election.

The Sacramento Bee earlier today exposed the role of the union SEIU as the not-so-hidden hand behind the Fiona Ma mailer described above and dissected longer form in our companion post on the CalPERS elections today.

However, the article missed or chose to sidestep several key issue, such as the unprecedented magnitude of the spending, and the dubiousness of a union throwing its financial weight around to influence the election for the retiree seat, when the union represents no retirees and hence has no proper role. Recall that six of the 13 board seats are elected by various classes of beneficiaries. It’s appalling to see the SEIU try to buy the retiree seat, one where unions don’t represent the votes, as opposed to the five others, where it has a more legitimate nexus.

As one connected retiree wrote:

Follow the money. Henry Jones has not represented retieree interests in the last 4 years. Local 1000 has zero retiree members – ZERO. He is owned by the unions. He’s a tool. Plus, CPF [California Professional Firefighters] and SEIU have an axe to grind because they spent big in the election that unseated Priya Mather. They were so arrogant they thought she couldn’t lose. Now they want revenge.

What concerns me more however is that “Health Care Providers” are listed as campaign contributors. These are insurance companies who contract with CalPERS!!!!! Henry has voted in favor of every single health insurance premium and co- pay increase since being on the board. No questions asked, even retirees contacted him with concerns. So, whose interests are really being served?

As we work through what we’ve been able to put together about the spending on this CalPERS board election, readers may be struck by how small the numbers are. Don’t be deceived. Influence comes cheap in Sacramento, particularly at CalPERS. The old line was that the price of a $100 million commitment was a steak dinner. Focus on the relative changes, and on the sudden emergence of covert spending.

Consider why are forces that want to remain hidden, but in many cases are tied to labor unions, so keen to defeat Jelincic, who you’d think they’d eagerly support as a candidate who has worked vigorously to protect worker pensions, particularly from Big Finance chicanery? We don’t have definitive answers. One possibility is that Jelincic’s probing of private equity fees and costs has led to other institutional investors taking that issue more seriously. That means he’s established himself as a threat to their bottom lines.

But why would unions work against their own members’ interests by standing up for private equity’s profits at the expense of pension returns? Due to space constraints, we’ll have to defer a full treatment to a later post. But the short version is that after the crisis, despite the fact that private equity firms are a direct threat to state and local tax revenues, due to their efforts to cut headcounts and wage increases, plus their indifference to bankrupting companies, and hence to government worker pay and employment levels, unions have perversely sided with public pension funds who are desperately betting on private equity as their salvation in a low-return environment.

As the retiree quoted above suggests, another group that may be out to stop Jelincic from returning to the board is health care industry members who see Jones as willing to rubber stamp premium increases (CalPERS is one of the largest health insrers in the US) as opposed to try ot contain costs.

The Magnitude of Dark Money Is a Big Multiple of Past Election Spending

Historically, all the official spending in a CalPERS board election comes from the candidates’ campaign funds. Unions have made contributions to these campaigns and also provided important informal backing, such as sponsoring “get out the vote” initiatives on behalf of their candidate. This year, there are two dark money groups supporting the campaign of incumbent Henry Jones:

Firefighters, School Employees, and Health Care Providers for Retirement Security supporting Henry Jones for CalPERS Board 2019 supported by labor organizations (Firefighters)

Concerned Retirees for Pension and Healthcare Security supporting Henry Jones for CalPERS Board 2019 supported by labor organizations (Concerned)

Both have made official political filings that are false. Each claims to have been formed in recent weeks: Firefighters on August 22 and Concerned on August 26. Yet both have made large mailings. Firefights already made two of an expected four mailings, with the first “drop” arriving the same day that most retirees received their election packages, September 3 and 4. Given the lead times to execute a bulk mailing (design, printing, reserving capacity at the fulfillment house) and the financial commitments required, it is impossible for these mailings to have been financed by the newly-formed groups that are claiming responsibility for them. It’s the political version of Athena springing fully grown from Zeus’ forehead. That sort of thing only happens in mythology.

No house that would have handled a mailing of this size would have done so without having a large deposit. That in turn means the spending on the mailer was improperly and illegally funded and the Firefighters filing is false and therefore a violation of campaign finance laws.1

Concerned sent the Fiona Ma mailer that we discuss in our related post today. That started arriving to retirees on September 6 when Concerned submitted its initial filing on August 26.

Here are the current totals for both dark money groups:

The “Spent to Date” exceeding “Received to Date” for Firefighters is accurate and obviously highly irregular, as we’ll discuss shortly.

Bear in mind the election has over two more weeks to go, so expect these figures to rise. But contrast these amounts with the totals for recent board campaigns:

2018: No independent committees

$65,402.88 Priya Mathur 2018
$49,100.00 Jason Perez 2018
Total: $114,502.88

2017: No independent committees. Note this election has a runoff which would lead to higher expenditures
$118,413.13 Michael Bilbrey 2017
$17,792.28 Margaret Brown 2017
Total: $136,105.41

So far, Henry Jones has raised $64,150.00 and spent $31,959.73. JJ Jelnicic has raised $31,911.96 and spent $15,158.57.

We’ll use the expenditure levels as the indicator of activity.

Henry Jones and his allies have spent $374,368.64 plus the $31,959.73 directly from Jones’ campaign, totaling $406,328.37. That is an astonishing 26.8 times what Jelncic has spent.

However, before you think this money arms race gap is fatal to Jelincic, bear in mind that what makes conventional campaigning so expensive is television ads, which are costly but widely viewed as effective. Notice that the political unknown Margaret Brown beat incumbent Michael Bilbrey who spent nearly 7 times as much as she did. In the context of CalPERS elections, Jelincic has previously said that spending beyond a fairly low threshold isn’t very productive. The dark money groups are testing that point of view and so far, they may be confirming it. For instance, a great deal of their spending on mailers has been wasted by being sent to union mailing lists which consist of current members who by definition aren’t voting in this election. In addition, many retirees are offended by the mailings and receiving them has only increased their support for Jelincic and has led some to promote his candidacy to other voters. Nevertheless, the raw display of muscle has to be disconcerting to Jelincic and his inner circle.

Moreover, only partway through this campaign, the total spending of both candidates and their backers is 3.1 times the amount spent by the two final candidates in a two-round contest in 2017, and 3.7 times the 2018 election expenditures in what was considered to be a hard-fought election.

SEIU’s Role

The Sacramento Bee story did identify SEIU’s fingerprints on the mailer it sent with Treasurer Fiona Ma’s name displayed prominently on the outside and an July 15 letter from her objecting to Jelincic running for office inside. From its story:

The letter was sent by a newly registered political action committee named Concerned Retirees for Pension and Healthcare Security. The committee’s registered address matches that of SEIU, and a campaign finance filing lists “SEIU CA State Council” as a sponsor of the organization…

Unions formed a separate political action committee to support Jones called Firefighters, School Employees and Health Care Providers for Retirement Security Supporting Henry Jones. That committee is funded in part through a $100,000 contribution from SEIU Local 1000, according to campaign finance records.

Jelincic is a former president of the California State Employees Association, a union that later became SEIU Local 1000.

As a different influential retiree noted: “Still not sure whether SEIU leadership is being paid or played.”

Other Campaign Abuses

There’s more not to like. The committees are violating campaign finance requirements by not reporting donations or spending accurately, as evidenced by spending for Firefighters greatly exceeding the amount received, and both committees somehow miraculously executing major mailing campaigns before they existed.

Another abuse is in officially describing themselves as supporting Henry Jones when the a significant amount of their activity has been to attack Jelincic. For instance, from Concerned:

Perhaps the groups will clean things up and amend their filings to describe their purpose properly, as required, which is to oppose Jelincic as well as to promote Jones. But given their failure to report their activity on a timely basis, I wouldn’t hold my breath.

The bottom line is that this dirty campaign against Jelincic should be a wake up call as to how desperate his opponents are to thwart a candidate who has a clear track record of being an effective promoter of transparency and accountability. The fact that union leadership sees that at a threat should raise concerns among the rank and file.

_____

1 Presumably, someone funded the mailer expenses covertly and then was reimbursed by Firefighters. But that’s not kosher.

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7 comments

  1. David in Santa Cruz

    A $360 billion pool of money is just there for the taking. Spending a couple of hundred thousand to maintain the skim is mere pocket-lint to the politically-connected grifters counting on a complacent board.

    Why do the unions play with their abusers? It’s classic Stockholm Syndrome. Not surprised to see the health care extortion racket working them like sock-puppets.

    Follow the money…

    Reply
    1. vlade

      I beg to differ. I suspect that the reason why unions play with the abusers is because they hope to become abusers too. I.e. that in due time, the favours will be returned.

      This is actually terrible, as it makes a lot of anti-union noise from the right based on (some) fact. On the other hand, I’m not surprised – the unions have no greater capacity to stay uncorrupted than political parties (both being lobby organisations interested in getting and maintaining power). It is up to the union members to police it – or lose the benefits (as they did).

      Reply
  2. Lambert Strether

    > Given the lead times to execute a bulk mailing (design, printing, reserving capacity at the fulfillment house) and the financial commitments required, it is impossible for these mailings to have been financed by the newly-formed groups that are claiming responsibility for them…. No house that would have handled a mailing of this size would have done so without having a large deposit. That in turn means the spending on the mailer was improperly and illegally funded and the Firefighters filing is false and therefore a violation of campaign finance laws

    Sounds like somebody was really worried about operational security, more worried about that than complying with the law. I wonder why? Paranoia about leaks? But from where?

    Reply
  3. Camp Lo

    All of the above is brought to you by the Employee Retirement Income Security Act of 1974 [ERISA] from which public pension funds are exempt. The exemption standard is “established or maintained” by a government entity. In general, the amount a state gov’t must cough up every year is based projected rate of returns [not actual rates]. An asset manager, let’s call it “Blaq Rawkus”, promises the moon, doesn’t deliver on account of the fees, the plan is underfunded, [hell’s belles!] pension shortfall, results in cuts to public sector job rolls, results in lower future liabilities, which means more appetite for fees. Campaign donations bones are thrown. Noblesse oblige. The cycle is recession-proofed. So I wouldn’t hold my breath for Congress to act.

    But there is a tipping point [in theory] when the operation no longer resembles what was established by state statute and maintenance has been deferred to entities estranged from government. The courts would say ERISA kicks in, the Fed’s PBGC is on the hook, bingo-bango-bongo, so the board best come correct with their fiduciary duties. Or they gonna get Blagojevich-ed.

    Reply
    1. Yves Smith Post author

      Your last para is false.

      The Kentucky Retirement System is 13% funded. No one is talking about ERISA or any federal assistance. Public pension funds are state and local government problems.

      And you also straw-manned our post. We have never, here or anywhere, suggested Congress will or should intervene. We have called on California taxpayers to write or call state legislators, since the legislature is one of the few things CalPERS is afraid of.

      Reply

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