CalPERS Chief Investment Officer Ben Meng Resigns Following Our Exposing His False, Felonious Financial Disclosure Filings and Private Equity Conflicts of Interest

CalPERS Chief Investment Officer Ben Meng resigned effective Wednesday August 5. This was less than three days after we exposed Meng having made multiple felonious1 false statements on financial disclosure forms as well as holding investments in private equity firms when CalPERS was making multi-hundred-billion dollar commitments to them.2 Since Meng was seen in the office in routine internal meetings Wednesday morning, it appears his departure was not voluntary.

We were also first to break the story of his resignation, via Twitter; you can read the press release here:

This outcome was a self-inflicted wound. Remember that the Forms 700 that exposed Meng’s misconduct went first to CalPERS, which then sends them to the Fair Political Practices Commission. Apparently no one reviewed the documents, much the less suggested Meng correct them, even though CalPERS’ written policy is that the Form 700 is to be submitted in time so that the employee’s supervisor, which in Meng’s case was CEO Marcie Frost, can review it.

Apparently, no one checked the Form 700 against Meng’s trading records, which CalPERS should also have on file. Apparently, no one even told Meng to amend his form when CalPERS was about to post it on CalPERS’ site. And we will see when we get the results of our Public Records Act request, but it appears likely that CalPERS did not require Meng to recuse himself on private equity investment pitches from the firms whose stocks he held: Ares, Blackstone, and Carlyle.

The people immediately responsible are CEO Marcie Frost, who per CalPERS’ own policy was tasked to review Meng’s Form 700, and the head of compliance, Marlene Timberlake D’Adamo. Timberlake oversees the Personal Trading Policy and has, or should have had, records that showed Meng’s 2019 Form 700 was incomplete. Timberlake reports directly to CEO Marcie Frost.

CalPERS board is ultimately responsible for not holding Frost, Timberlake, and other key staff members responsible for past compliance failures, such as:

The massive spike in personal trading violations earlier this year

The wholesale copyright violation of tens of thousands of news articles, which cost the pension fund millions of dollars to settle

The failure to vet the claimed qualifications of Charles Asubonten, the fund’s former CFO, who was fired after grossly embelishing his work experience

The similar failure to vet the claimed educational endeavors of Marcie Frost, who lied by saying she was enrolled in a non-existent joint bachelor’s/master’s degree program, when in fact she had never matriculated anywhere

The admission that CalPERS wrote down asset valuations last year, which is tantamount to saying that its past financial statements and its reported investment returns were false

This dramatic development is part of CalPERS’ slow disintegration. With every passing day, CalPERS is paying a bigger and bigger price for its failure to learn the right lessons from the criminal conviction of its former CEO, Fred Buenrostro, who took bribes that ultimately came from private equity firms including Apollo and perversely, one of the private equity firms Meng invested in, Ares.

Instead of cleaning house, the giant pension fund conducted an investigation designed to be a cover-up. Instead of embracing transparency as the way to restore its damaged credibility and keep the institution on the straight and narrow, CalPERS instead beefed up its PR department and acted as if all it had to do was manage the spin when it got caught misbehaving. Instead of promoting accountability, board members almost to a person impersonate potted plants and defend whatever staff says even when it is patently false or embarrassingly dumb.

CalPERS accelerated its decay when it chose a white-collar defense attorney, Matt Jacobs, as General Counsel in 2014. Despite having sworn an oath to defend the laws of California and having constitutional duties that make protecting beneficiaries paramount, Jacobs clearly sees his job as shielding the executive team. And that has included thwarting board members in making what at any well-functioning institution would be non-controversial inquiries, like getting senior management resignation letters, copies of procedure manuals, minutes of closed session board meetings, and internal audit reports.

Jacobs has repeatedly sullied CalPERS by regularly telling falsehoods in public, which is toxic model for an institution’s top compliance officer. The examples are too numerous to catalogue in full, but they include misrepresenting the background of tainted fiduciary counsel Robert Klausner, who’d been involved in multiple pay-to-play scandals; brazenly lying about CalPERS’ policies on public comments, and throwing his weight behind fabricated leaking charges against former board member JJ Jelincic.

Matt Jacobs promoted a culture of casual lying that became institutionalized under CEO Marcie Frost, who joined in October 2016. Frost not only defended flagrant resume fabulist, her CFO Charles Asubonten, in the face of incontrovertible documentary evidence of his falsehoods, but as mentioned above, she herself was caught out having told multiple lies not just during her hiring but also on her official CalPERS bio. When then State Treasurer John Chang wrote a letter to the board demanding an investigation, staff confiscated all copies. When the letter was requested under the California Public Records Act, staff took the position the letter was closed session material and a confidential personnel action.

Confirming it was all-in with dishonesty, the CalPERS board refused even to take the basic step of investigating this controversy. So the message from on high was clear: CalPERS would rather risk having a liar in charge than face embarrassment.

Needless to say, this conduct is deeply corrosive. It telegraphs to employees that something is deeply wrong. People whose job it to tell the truth think there is no payoff for doing the right thing, only punishment. This message has been powerfully reinforced by Frost and Meng forcing out some of the few remaining competent executives: Elisabeth Bourqui, apparently for questioning a “private equity new business model” that eventually died under the weight of its own contradictions, and then two highly regarded investment professionals, Ron Legnado and Paul Mouchakka.

Yet the CalPERS board, unwilling to look at its own culpability in this run of escalating scandals, chooses to blame commies under the bed, um, supposed pension haters. In fact, as we have catalogued, these transgressions were all unforced errors that merely adequate oversight would have prevented. There would be almost no bad stories about CalPERS if CalPERS didn’t keep generating them. Although CalPEERS has some competition from the disastrously underfunded and deeply corrupt Kentucky Retirement System, CalPERS under Marcie Frost has done more to damage the image of public pension funds in the US than any other force.

And our experience is when an institution becomes this rotten, not only do the remaining upstanding and capable people leave, but the ones who remain become increasingly obsessed with watching internal plots and cover-ups and devote their energies to making sure they are on the right side of them, as opposed to doing their jobs.

One of the reasons that this cancer has metastasized is that the press for the most part (with some standout exceptions like Mike Hiltzik of the Los Angeles Times) simply parrots CalPERS’ talking points. Apparently news rooms are stretched so thin that soi-disant journalists and their editors can be bought off with the promise of exclusive interviews with the executives of a visibly failing institution. Will reporters finally wake up and start doing their jobs?

This debacle should also be a wake-up call for organized labor, which bizarrely has been supporting public pensions funds like CalPERS as they stumble all over each other to buy more private equity rope which is being used to hang them via breaking unions and private sector pension funds. And it should be a wake-up call specifically for CalPERS.

Labor has been backing Marcie Frost even as she has led CalPERS from scandal to scandal, virtually all of which were due to her lack of administrative ability. Frost is demonstrating that she reached her level of incompetence in Washington, when she was head of a 250-person back office/call center operation staffed almost entirely by clerk typists. She’s been floundering ever since she took the helm at CalPERS, with nearly 2900 employees and a large investment operation. An intervention is long overdue.

The one bit of good news here is that Meng’s exodus presumably also means the end of his bone-headed, desperate “reach for all the risk you can find” investment strategy of not just increasing private equity stakes and leveraging the entire portfolio, but going whole-hog into a new area, private debt. That would have required, among other things, a fine-honed sense of timing, in-depth fundamental valuation skills, and sharp elbows, none of which CalPERS has heretofore shown.

Nevertheless, turnover among investment staff is strongly correlated with poor results; Ben Meng’s apparent effort to make himself indispensable by driving out well-regarded senior level professionals has put CalPERS in unnecessary jeopardy. That aspect of this fiasco is also Frost’s doing, since she acceded to his power grab.

It is time for Gavin Newsom to wake up and smell the coffee. It would behoove him to stiffen the spines of his appointees, as well as speak to the two statewide elected officials, Controller Betty Yee and Treasurer Fiona Ma, about the need to leash and collar Marcie Frost before she does even more damage. Ma in particular is in need of what my Jewish attorney called a “Come to Jesus” meeting. Ma has been shamelessly willing to put her presumed good name on CalPERS’ bone-headed ideas, like Meng’s “eat as much risk as we can” investment strategy. As you can see in the embedded document at the end of this post, the city of Pasadena took the unusual step, in the context of objecting to CalPERS’ proposed private debt secrecy bill, AB 2473, that Meng (and by implication Ma, who amplified it) were telling huge howlers with their “more assets, better assets” palaver.

However, this board is so deeply captured by staff, even an intervention by Newsom may not work. The tendency of connivers like Frost is to placate, pretend the storm has blown over, and go back to their old ways. And with no board elections this year, hoping for or even getting new faces on the board will take too long. So the best move for Newsom to rectify CalPERS’ deeply deficient governance is to set up a truly independent inspector general to mind the store.


1 California Penal Code section 118 provides that:

(a) Every person who, …declares, deposes, or certifies under penalty of perjury in any of the cases in which the testimony, declarations, depositions, or certification is permitted by law of the State of California under penalty of perjury and willfully states as true any material matter which he or she knows to be false, is guilty of perjury.

This subdivision is applicable whether the statement, or the testimony, declaration, deposition, or certification is made or subscribed within or without the State of California.

Meng does not have a criminal conflict of interest with respect to his private equity holdings, since amendments to Government Code section 1090, the generally applicable criminal Conflict of Interest statute:

(a) Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. Nor shall state, county, district, judicial district, and city officers or employees be purchasers at any sale or vendors at any purchase made by them in their official capacity.

However, amendments established carve-outs for public stock ownership that result in a high earner like Meng being subject only to civil penalties, which would have to be administered by the toothless Fair Political Practices Commission.

But Meng may still be subject to criminal liability under GC 1090 for a different reason. A reader pointed out that Meng also showed compensation in the calendar year 2019, after he started working for CalPERS, in the $10,001-$100,000 range from Schwartzman Institute in China. Recall Steve Schwarzman is the CEO of Blackstone. Government Code section 1090 is the generally applicable criminal Conflict of Interest statute

2 While Meng could in theory have recused himself with respect to the investments in Carlyle and Blackstone funds, Meng also had created a general conflict with respect to private equity, that any initiative by CalPERS to bring private equity in house or to reduce its private equity investments would be as powerful a signal as CalPERS’ decision to exit hedge funds in 2016, which legitimated withdrawals by other major institutional investors. By contrast, Meng looked to be talking his own book when he stated, “We need private equity, we need more of it, and we need it now,”.

00 CalPERS Concerns Letter
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  1. vlade

    You know Yves, you’d modify the site to include a Tombstones section. With Calpers having a special place there.

    Good job!

    1. PlutoniumKun

      Result! I was envisaging more a decal, like fighter pilots under their cockpit for each kill. Yves is well on her way to being an ace by now.

    2. Yves Smith Post author

      Vlade made an important observation by e-mail:

      Most people on the trading desks trade (on their account). But most of them stop when they get to MD level or higher, it’s just too problematic in too many way.

      If Meng could not stop trading as a CIO, he’s not good enough for the role.

      1. Who win who lose

        Yep, congrats, NC. You made a guy leave who just led the fund through a recession and still earned 4.7% while median funds, including CalSTRS, earned 3.2% in the past year.

        1. Yves Smith Post author

          “Led the fund?” Only in the formal sense as far as the fiscal year returns are concerned.

          He was barely there long enough to have any impact except driving out some top managers who left this year. The results for fiscal 2019-2020 are almost entirely inertia, particularly since CalPERS didn’t change its asset allocation last November, which is the one way Meng could have pulled an investment lever in a big way.

          The three things he did all cost the fund. One was dumping the tail hedges, which as widely reported, and the second was his choice of factors in his factor weighting the equity portfolio, as Taleb explained at length.

          Finally, he saddled CalPERS with a $1 billion investment in Blackstone’s “Warren Buffet” fund, which as we have explained at length, are terrible investments because they are marketed as producing lower returns than conventional PE and have greater illiquidity, which means no one should consider them, since they offer lower returns at higher risk. Accordingly, the purveyors of these funds have had a hard time raising funds. And that damage wouldn’t show up this year (the commitment was made last in this fiscal year and I doubt any drawdowns were made before year end) but you applaud Meng who cost the fund $1 billion this year and also put them in a $1 billion dog.

          On top of that, I don’t see any evidence that Wilshire has released its public pension fund summary, which is due out about now, and you provide no link supporting your assertion

          More important, I have not yet written Brad Pacheco, but CalPERS reported overall return is markedly at odds with their reported earnings by asset class when you weight by their reported asset allocation by quarter, and the gap is large, in favor of the claimed overall result. In other word, the numbers they have presented literally do not add up.

        2. calpers low returns

          calpers consistently underperforms most other pensions (see CEM benchmarking reports)

          If calpers finally did outperform its total fund benchmark, it’s because staff proposed and the board approved easy-to-beat benchmarks, so that everyone can congratulate themselves for what is in reality continued poor returns

        3. jason davis

          As a calpers retiree, I would prefer we find other ways to generate funds than illegal ones. That’s like justifying a robbery with the amount of money you were able to steal. It’s really not that impressive to win when you’re cheating.

  2. PlutoniumKun

    Congratulations Yves, I wonder what led to this. From what I’ve read, he doesn’t sound like the ‘fall on a sword’ type of guy. More the sort who has to be dragged to the empty room with the glass of whiskey and a revolver. My guess is that what you dug up is just the tip of the iceberg, and Calpers are desparate to keep the lid on things.

    1. vlade

      And somoene else saying “if we’re not carrying you out in 15 minutes, this group of guys with machettes comes in. And you really don’t want that”.

  3. The Rev Kev

    Like Vlade & PK, I too was thinking of something similar for this site but along the lines of a road kill logo. So, before I launch my comment, a little music to set the tone-

    It is difficult to believe that his undoing came through lodging dodgy paperwork without it being checked by Marcie Frost since this is kinda her job. But to get to the point that you make such gross errors that you manage to get yourself in such a position in the middle of a world-wide pandemic when most people’s attention is distracted is something else again. That reeks of sheer carelessness on both their parts. Not a good look.

    In the Harry Potter series it comes out that the post of the Defence Against the Dark Arts teacher was cursed by Voldemort which is why anybody who took up that job suffered disaster. I am beginning to think the same of the CalPERS CIO post. It has been seriously cursed. Seriously, who is going to put their neck on that particular chopping block knowing that if you were honest, that you would be left swinging in the wind by the feckless CalPERS Board? Having the term CalPERS CIO on your resume is not considered a plus these days, especially when competent staff have been given the heave-ho by the incompetents.

    Perhaps Marcie Frost should give herself this post in addition to her own. It would only be fitting. But I would say that for CalPERS the timing is lousy. Consider, if Meng had been kept on for several more months, any disastrous results could have been pinned on him as he became their sacrificial lamb. But now he is out the door and as he was not that long with CalPERS in the first place, not too much blame can be laid at his door. Especially as his door now stands empty and his office cleaned out. Yes, very bad timing that. To swipe a line from “Life of Brian”, I can only say to his replacement-

    ‘Up the stairs, first on the left – one cross only!’

  4. Clive

    A smoking gun for a massive governance, employee monitoring and supervision, training, recruitment and — this above all else — cultural failings at CalPERS.

    You don’t just come across disclosure and CoI problems out of nowhere, they don’t visit you and cause you grief as random happenstances. You get them because the wrong people are hired who do the wrong things and are not managed properly by managers who can’t manage that are undetected through inadequate internal controls that come into being through a culture of tolerated incompetence and hear-no-evil see-no-evil speak-no-evil in the senior leadership team.

    How many more excuses for failure (don’t forget this comes hot on the heels of Asubonten as Yves rightly drew attention to) can Marcie Frost get away with before the buck has to stop somewhere?

  5. Clive

    The FT has picked up the story now:

    Mr Meng had been brought in to turnround a shortfall in assets, which recently totalled 71 per cent of the amount necessary to fulfil projected payouts to the 1.9m public workers served by Calpers.

    Calpers has been marked by executive turnover in recent years. The fund did not have a head of private equity for two years until Greg Ruiz joined in May 2019. Elisabeth Bourqui left as chief operating investment officer in January last year after eight months at the fund.

    Mr Meng did not respond to a request for further comment.

    Board Member Margaret Brown gets a mench, too:

    Mr Meng had recently drawn criticism for a plan to increase the fund’s leverage to 20 per cent of its value using borrowings and financial instruments such as equity futures. One board member, Margaret Brown, voted against the plan, saying it reminded her of the fund’s mis-steps during the 2008 financial crisis.

    (think that’s as much as I can legitimately quote without annoying the FT for copyright issues, please consider a subscription to the FT, it is worth it if you can afford it)

    “marked by executive turnover […]” — indeed!

    1. vlade

      “citing health and family reasons”.

      Like “If you don’t leave, the prison healthcare ain’t great and you will see your family only once a month”?

      1. Clive

        This is so t’riffic that I’ll just have to quote (dear lovely FT team, if I’ve added too much from your article please let me know and I’ll remove, but Yves deserves to gloat a little; actually, she deserves to gloat a lot, after all the run-arounds she’s had from CalPERS over the years — not for nothing is Naked Capitalism referred to within CalPERS-insider wits as “the blog that dare not be named”)

        A person close to Calpers said Mr Meng had been “brought down” after the Naked Capitalism website published allegations that the executive had failed to fully comply with the California Fair Political Practices Commission in relation to financial disclosure documents.

        Elected officials and public employees in California who make influential decisions are required to submit a statement of economic interest, also known as a Form 700.

        “The fact that Ben could not be bothered to fill it [Form 700] out correctly or amend it when the errors were first identified is a serious breach,” the person said.

        Naked Capitalism alleged that Mr Meng had personal investments in private equity groups where Calpers was also an investor, raising the prospect of conflicts of interest.

        Naked Capitalism 1 CalPERS 0 !

        1. ChrisPacific

          Looks like this has been picked up by Bloomberg and Reuters as well now. The Bloomberg one is pretty good and credits NC, with a link to the post. Reuters completely missed it and seems to have assumed it’s related to the “Meng is a spy for China” theory that was suddenly popular a few months back.

      2. Bystander

        Today’s LA Times and the Sacramento Bee mention Naked Capitalism and Susan Webber, respectively.

        Bottom line, Yves has been doggedly following the trail of shenanigans through series of public records request and working through the stonewalling of the staff. The thought of copying an attorney to claim privilege on correspondence is not entirely uncommon in California government. California taxpayers should pay attention to the methods of investigating and the timeline for results, about three years.

        CALPERS management, a kakistocracy, is not a one off situation. The most unfortunate thing is the honest middle level managers and rank and file are powerless to act in these organizations. I caution any state employee against taking whistleblower action without researching the statistics beforehand. Whistleblower protection in California government organizations are touted, but practically nonexistent. An employee will be forced out and the remaining coworkers will be reminded to keep their head down. Last time I checked there were 3-4 retaliation cases, a couple hundred were submitted, that made it to hearing in a two year period with two noted settlements. This is a 3% chance of getting to hearing. Most cases, 97%, are rejected by the State Personnel Board upon submittal.

        Well done NC. Few people journey this far into a problem due to the protectionist systems in place.

  6. rusti

    The whole sorry CalPERS saga sounds like a perfect case study for Nassim Nicholas Taleb’s “Skin in the Game”. The staff have had essentially no personal exposure for outcomes that are negative for the people they ostensibly serve.

    the city of Pasadena took the unusual step, in the context of objecting to CalPERS’ proposed private debt secrecy bill

    Is pressure at the city/municipality level likely to be effective in amplifying Yves’ attempts to introduce something like accountability?

    1. vlade

      Skin-in-the game isn’t the silver bullet Taleb believe it is.

      A simple counterexample – a judge with “skin in the game” will always rule conservatively (i.e. closest to status quo possible), because:
      – counterfactual cannot be established
      – the cost of getting it wrong is catastrophic, and the probability of getting it wrong is (relatively speaking) high (i.e fat tail).

      Given that he’s THE proponent of precautionary principle, a precautionary principle in “skin-in-the-game” means “don’t do anything that can lead to a bad outcome”. Which is a prescription for status quo, unless the status quo is massively and provably wrong in first case.

  7. none

    Is AG Xavier Beccera simply useless at pursuing this stuff? His critics in some unrelated controversies call him “Basura”, which is Spanish for “garbage”.

    Also, is the fundamental lie driving all the scandals that Calpers is supposed to get 7% return on its investments to not be woefully underfunded? Of course that level is impossible by legitimate means over the past several years economies, so they’d have to resort to smoke and mirrors to maintain the pretense. That would explain the obsession with opaque private equity deals.

    1. jeff

      Becerra is more politician than AG, so how could he be expected to perform the AG job duties when he’s so focused on the optics of how he is perceived. Beccera’s title is more a distraction to him.

      Of course, CA just admitted that COVID numbers being reported have been inaccurate from the start due to problematic electronic reporting and the state officials don’t know when the system will be used again.

      CA is a dumpster fire of problems, many of which are ignored or exacerbated by our elected or appointed leaders.

  8. The Rev Kev

    I wonder if it would be too obvious if they got a revolving door for the office of CalPERS’s Chief Investment Officer.

  9. Brooklin Bridge

    Besides the other well deserved accolades above, this is an exceptionally well written piece.

  10. Bob

    Bravo, Yves.

    And the shift from a focus on obviously flawed individuals at CALPERs to the focus that the organization is and of itself a flawed construct is timely.

    “And our experience is when an institution becomes this rotten, not only do the remaining upstanding and capable people leave, but the ones who remain become increasingly obsessed with watching internal plots and cover-ups and devote their energies to making sure they are on the right side of them, as opposed to doing their jobs.”

    This is a perfect description of a flawed organization.

    1. hunkerdown

      Nah, it’s an organization that’s meeting its PMC-assigned mission of its own reproduction and growth via predation, in the image of the class that created it. An occultist might well call it a demon.

  11. Brian (another one they call)

    Thanks Yves; I hope it benefits all of the CalPers beneficiaries and reduces the control freaks in Excramento to actually do their jobs and get out the lasso.

  12. ALM

    As a CalPERS retiree, I am most grateful to you and your reporting on CalPERS’s rot. Another lacerating letter to Henry Jones, the retiree Board member, and complaints to the usual elected officials, who so far have sat on their hands, are is in order.

  13. jcmcdonal

    This is great! Waiting for you to finally get Marcie Frost out too, I’m honestly surprised your reporting hasn’t sufficiently embarrassed them enough yet. This was close to incompetent-Trump-appointee type speed though, which shows how bad the rot is.

  14. Sacramento Sal

    Thank you for your continued exposure of Calpers malfeasance in an attempt to protect my pension. CIO Meng wanted to borrow $80 billion and invest in private equity and private debt with the support of CEO Marcie Frost. The private debt would have been kept a secret if the legislature passes AB2473.

    I hope now the AG, Governor or Legislature takes action. If not, Calpers could see another FBI investigation and imprisonment of who knows how many. Jacobs, Frost, Feckner, Jones, TAKE YOUR PICK.

  15. jt

    *And our experience is when an institution becomes this rotten, not only do the remaining upstanding and capable people leave, but the ones who remain become increasingly obsessed with watching internal plots and cover-ups and devote their energies to making sure they are on the right side of them, as opposed to doing their jobs.*

    It can be debated whether the “upstanding and capable” part applies, but the latter reason are why I left. It was all palace intrigue all of the time. Soul-crushing. I became willing to gnaw through my wrists to leave the “flagship destination employer.”

  16. Tom Stone

    Add me to the “This is suspiciously fast” camp.
    We may find out why reasonably soon since CalPers leaks like a sieve.

  17. Kurt Sperry

    Great work! Don’t let up until you can (metaphorically of course) parade around with Marcie’s head in one hand and your avenging sword in the other.

  18. flora

    Bravo, Yves! Great reporting.

    Your bill of particulars against the Board (with a few exceptions) for its lack of interest in performing the required fiduciary oversight is pretty damning.

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

  19. Corrupt Meng is gone, finally

    Ben (Yu) Meng — with his many verifiable false statements, forcing out of experienced investors and centralizing decision making so he could dominate without checks or balances or diverse perspectives being considered, personally owning stakes in three private equity partners that Meng made the decisions to invest billions of calpers capital, princely travel expenses including a trip to Tokyo that cost CA taxpayers over $17,300 just for the airplane ride, frequent flights to China, ordering that equity market hedges be removed and then dishonestly responding to Board questions, always thinking that ethical norms did not apply to him, filing false disclosures — collectively made Meng the perfect CIO for CalPERS given its corrupt culture, but also makes Yves a hero to the people of California for her truth telling that finally led to his removal.

    I feel a renewed appreciation for democracy and the freedom of expression.

    1. Yves Smith Post author

      Not by a very long shot. First, 71% funded is just an itty bit below average public pension fund funding. Second, CalPERS is backstopped by the state of California.

      Kentucky is the one that is on track to hit the wall first, at 13% funded.

      1. Wukchumni

        I’ve found that when you glimpse a wee bit of chicanery in matters like this, oftentimes it’s much more widespread than you could ever imagine, the rot.

        1. Lambert Strether

          > a wee bit of chicanery

          “I have indeed, not read it all. But when I take up the end of a web, and find it packthread, I do not expect, by looking further, to find embroidery.” — Dr. Samuel Johnson

          When a book is good, it’s good all the way through. Testing one or two pages is enough for rejection (though not necessarily for acceptance). Similarly with institutions?

  20. Thank you Yves

    A wonderful day for the people of California who value integrity.

    A sad day for Blackstone, Carlyle, and Ares who all lost a self-interested and conflicted CalPERS CIO in Ben (Yu) Meng who was making biased decisions to steer more lucrative billions to their firms

  21. Susan the other

    This is great. IF this is a synopsis, it’s a killer page-turner. Somebody please call Dick Wolf. This really needs to be a blockbuster video or the prize winner at Sundance. Or both. Every paragraph above is a movie in and of itself. The details are amazing. So are the characters and then the circumstances are almost comedy… If it were a series I’d be glued to it. Cameos for Yves, Hiltzig, even a walk-by for Taleb. I’m serious.

  22. Bazarov

    Before I started reading Naked Capitalism, I had no idea CalPERS even existed. For a long time, I would ignore the CalPERS posts because they seemed unimportant compared with the broader takes on the economy. One day when I had a lot of time to kill, I decided to look over one of Yves’ CalPERS stories.

    Ever since, I’ve been hooked.

    The CalPERS saga truly is a case study on executive incompetence and institutional rot, late capitalism style. I know you have hardly any time to spare due to caring for your mother, Yves, but one day you should write a book on CalPERs as just such a case study.

    The book could be made into a great movie, a real farcical comedy.

    1. adios to the Corrupt Meng

      The CalPERS saga truly is a case study on executive incompetence and institutional rot, late capitalism style.
      by giving lucrative contracts to the connected, calpers promotes crony capitalism, not actual capitalism. For example, was Steve Schwarzman, the Blackstone CEO wrong to fund an organization in China that paid Ben (Yu) Meng between $10,000 and $100,000 while Meng was calpers CIO (see Meng’s 2019 form 700)? I don’t know. But private equity company CEOs know they can make tens or hundreds of millions in profits if they gain large contracts from government pensions such as CalPERS, so of course they stretch ethical boundaries to reel in these contracts. This is why calpers needs honest Board members and execs, but given the calpers and Sacramento patronage that has flourished since the departure of its former CIO Mark Anson that has benefited all the insiders, the forces for continued corruption are stronger — but at least for one day the forces for honesty and integrity can celebrate a victory.

    2. Conrad

      Well said, I followed a very similar path. I initially thought the CalPERS saga would be of little interest to me, living in another country with a totally different superannuation environment. But tales of institutional incompetence and graft are truly universal.

      Ask not for whom the bell tolls because it tolls for thee. And everything is like CalPERs

  23. juno mas

    Great work, Yves.

    I’m not certain Governor Newsom will find the time to learn about the incompetence at CalPERS, though. He’s taking lots of heat from the LA Times for data glitches in Covid reporting and his “nice guy” approach to citizens not following social distance proclamations.

    As, for Ms. Frost: How do you manage an organization of financial specialists without understanding finance? (As I once wrote the loud part quietly to the Governor of Nevada, “The ultimate responsibility is yours. . . It’s time for change.”)

      1. calpers next CIO

        by calpers standards, the next CIO, like the previous one, will need to meet the following standards: dishonest, incompetent, corrupt, controlling, self-aggrandizing, and free from all ethical constraints

      2. Samuel Conner

        Perhaps she could hire an assistant to read the Form 700s and interpret them for her.

        1. Samuel Conner

          One wonders what interesting details may lurk in these filings for other principals.

          Perhaps CALPERS could have its own “700 Club”

          1. Jennifer

            Wonder no more there was a report submitted last board meeting showing there were several incidents dating back to Nov. nothing done by the board or CEO. In fact the Pres and VP, chair of investment committee, were also in trouble for issues with there 700’s Nothing happened to them so it’s all good.
            Yes, perhaps posting that report?

  24. Elizabeth

    Great work, Yves. Your reporting on CalPERS has been fantastic – and gets results! I really don’t understand how Marcie Frost keeps her job – if this was a corporation, she would have been long gone, especially for lying on her resume. At some point, I would think Newsome would get engaged in what’s going on at CalPERS – I do believe there is deep rot waiting to be exorcised. Maybe someone should follow the money?

  25. Oceaniris

    Yves, thank you and NC once again for the detailed CalPERS analysis and reporting. Meng’s departure should be followed by Frost. There is more to come……for sure.

  26. Robert

    WTF is with the news reports on his retirement not mentioning the reporting by Yves Smith? The NYTimes has a write up talking about Trump’s war on China or something. So weird.

    1. Samuel Conner

      I suspect that MSM outlets don’t like it when subject matter experts functioning as citizen-journalists scoop them.

      Again — Bravo, Yves!

  27. Jones dissembles after Meng Fiasco

    “Meng rejected the claims and was supported by prominent Wall Street investors including Oaktree Capital Group founder Howard Marks and Blackstone Group Inc.’s Stephen Schwarzman.”

    Was Marks’s and Schwarzman’s support of Meng related to Meng’s recent decisions to allocate $1B lucrative contracts each to Oaktree and Blackstone? Nah, no relation at all, to suggest otherwise is wild conspiracy theory.

    another paragraph in the article
    “In a statement, Chairman Henry Jones said Calpers was aware of questions surrounding Meng’s filings. “These are private personnel matters and already have been addressed according to our internal compliance protocols,” he said.”

    As Mr. Jones makes clear, the calpers CIO Meng filing false government disclosures and personally owning large stakes in the same private equity companies that he is deciding to award billions of calpers capital are “private personnel matters” that are no one else’s business, and “have been addressed” by the obviously effective calpers “internal compliance protocols”. As Mr. Jones makes clear, CA citizens can place their full trust in Mr. Jones & Ms. Frost without any oversight.

  28. Fiona Ma and Ben Meng

    “He started out by conducting a comprehensive review of the portfolio and built measures to protect it in a market crisis, which did happen,” California Treasurer Fiona Ma said of Mr. Meng in an email. “His preparations helped CalPERS greatly in navigating through the COVID-19 crisis, and despite all the challenges, the portfolio delivered a respectful return of 4.7% and beat its benchmark of 4.3%.”

    “Ben also set the portfolio on a better path toward a 7% solution with better and more assets,” Ms. Ma added.

    CA Treasurer Fiona Ma remains a vocal supporter of Meng, even after his false filings and conflicts of interest are revealed. Meng contributed five times to Fiona Ma’s political campaigns. Source is the CA Secretary of State website Click on contributor, then type in “Yu Meng” or “Ben Meng”

    Political Donations from Ben (Yu) Meng to Fiona Ma
    Fiona Ma CA Assembly 7/16/2010 $300 CalPERS
    Fiona Ma CA Assembly 12/9/2009 $300 CalPERS
    Fiona Ma CA Assembly 10/4/2008 $100 Barclays Global Investors
    Fiona Ma CA Assembly 11/1/2007 $250 Barclays Global Investors
    Fiona Ma CA Assembly 3/3/2007 $300 Barclays Global Investors

  29. David in Santa Cruz

    Beautiful post, but all should bear in mind that Frost and Meng are mere meat-puppets for the people who continue to loot the savings of average Americans and the profits of our few remaining independent businesses. There remain but a few American defenders of the Rule of Law, but those few must have found a way to intervene here.

    Follow the money…

  30. Andee Dew

    I understand that the first meeting he had with staff, he told all of them they should be fired because of the funds under performance. 95% of them are just hard working State Workers doing the job the managers tell them to do. There were people standing up there with him that are the real cause of the under performance.

    Please keep digging – the truth needs to come out.

  31. vlade

    And FTA also features this in the links section, I believe it’s the second time this week (Hubert’s Uber post was there too).

  32. Christian in London

    I learned about this site via the FT article mentioned earlier in the thread. What a great job – congrats !

  33. Sancho Panza

    Red State story on this today highlighted Meng’s ties to CCP and possible espionage role at CalPers. The obvious question is how he ever got hired…where does that cookie crumb trail lead to? Based on Yves’ reporting, Meng looks not only crooked but stupid/incompetent, and now possibly a spy, too? I wonder if Yves was aware of this angle and chose to not include it. It might be a key factor in his firing.

    1. Yves Smith Post author

      No, it was not. Frost spent a lot of time in DC after the Rep. Banks attack and didn’t have much trouble persuading officials that it was racist. This was a dead issue.

      Plus if you understood how CalPERS invests (asset allocations determined by experts by Wilshire, most of its investments within asset classes done on an index basis; the sort of exception, private equity, done by CalPERS choosing fund managers where CalPERS has zero influence over what companies they buy) you would understand Meng could do bupkis at CalPERS to help China.

      1. Sancho Panza

        I don’t like the xenophobic flavor of Banks’ and Fox News’ attacks either but the episode is still curious. According to this Pension & Investments Online report, Meng actually ran SAFE…a $3T entity…after having a line job at Calpers; then returned to Calpers in almost amakudari fashion as CIO. That’s quite a makeover. Frost noted the “strong relationships” he had formed in China upon his re-hiring. CCP influence doesn’t have to manifest as goosed returns on traditional securities…there are other ways. SAFE manages an asset; Calpers a liability. Source of cash; use of cash. You could see off balance sheet ways to convert Chinese US currency/debt holdings into something more concrete through 3P’s (real estate, toll highways etc) while helping California fill its obligations black hole. Jerome Corsi wrote about this in 2013.

        1. Yves Smith Post author

          No no no, Meng was not even close to running SAFE. He was responsible for a portfolio and my understanding is that he didn’t even trade or invest that, but merely supervised outside managers.

          The “strong relaionships” were at most with non-Chinese money managers. Meng was at SAFE all of three years, had become a US citizen….no way would he be trusted all this much.

          Remember these claims come from Frost, who lied flagrantly when being hired by CalPERS and (astonishingly) kept backing a fabulist (her newly hired CFO Charles Asubonten) in the face of irrefutable documentary evidence that he had hugely inflated his credentials. Her word means zero.

  34. Disinterested observer

    The contrast between US public pension funds and Canadian funds is notable. The latter have highly competent Boards and well remunerated executives and as a result can employ high quality professionals that deliver excellent results….US boards are political and incompetent and as many commentators observe, why would you want an executive position at Calpers if you were good at your job – better rewards, earned honestly, lie elsewhere?

  35. Stan Sexton

    Why should Meng care? His buddy Curtis Ishii recently retired with a CALPERS Pension of over $418,600 a year. Meng’s pension should be similar. Not bad for incompetence and law-breaking.

    1. Yves Smith Post author

      Meng wasn’t at CalPERS remotely long enough. You need to have tenure of 20 years to max out on your pension. Meng was either not eligible to receive a pension or would be at the lowest benefit level (5 years due to his previous time at CalPERS).

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