The California public employees unions that have bizarrely made clear that they are firmly on the side of having CalPERS continue to be poorly run have gotten their way. Pro accountability, pro-transparency board member Margaret Brown, and Tiffany Emon-Moran, who was challenging incumbent and staunch staff David Miller, were both defeated in this year’s board election. The unions backing Miller and Brown’s opponent used the same playbook they deployed to defeat JJ Jelincic last year when he tried to return to the board: raw spending power and dirty tricks. Both times, the anti good governance forces deployed repeated hit piece mailings chock full of distortions and outright fabrications. It didn’t hurt that the unions also had better mailing lists than the outsider board candidates. Knowledgeable parties are confident that CalPERS employees threw some lists over the fence to the unions, which would be violation of California election laws.
To paraphrase Clinton strategist Jim Carville: Drag $500,000 across California, you never know what you will find.
Chief Investment Officer ran an even-handed piece on the result, with the title, Vocal Critic Margaret Brown Is Knocked Off CalPERS Board, and more important, the subhead,
Things should be more peaceful once the ‘watchdog’ leaves, this coming January, but whether CalPERS will be better or worse remains to be seen.
The article also makes clear that union backing drove the results:
Both Pacheco and Miller received the support of a powerful coalition of unions representing state and local employees including the statewide Service Employees International Union (SEIU) in California. Brown did receive some smaller union support, but too little to fight the SEIU group.
It also gives a fair-minded recap of her tenure at CalPERS, in particular her criticism of CalPERS intending to increase its commitments to private equity funds when they haven’t delivered the needed risk adjusted and even gross returns, and her crossing swords with Frost, particularly the board rubber-stamping never-ending pay raises for Frost’s non-performance.
Brown was sorely hampered by her inability to force discussion of important governance and investment issues due to her rarely being able to get a second when she made a motion. She would often field calls from the press about pressing issues at CalPERS and gave good soundbites, which drove the staff and captured board members nuts.
CalPERS has continued to lurch from scandal to scandal under Frost,. The staff and board have reacted in a paranoid manner, blaming presumed internal and external saboteurs, as opposed to their own visible incompetence and chicanery. A prime example was the shape-shifting “private equity new business model”. It was initially a plan to hand the program over to BlackRock and pay an additional layer of fees, then morphed into setting up new vehicles entirely outside CalPERS, with no reporting to the board, which was almost certainly illegal. CalPERS abandoned the scheme because even modest press prodding exposed that CalPERS was unable to give a coherent explanation of how it would work and why it would be an improvement. No joke, only rationale seemed to be “Because innovative” when it wasn’t that either.
Blaming Brown for the poor press was part of the knee-jerk refusal to take responsibility for CalPERS’ mistakes and (gasp!) try to learn from them. Admittedly, Brown did unabashedly plant a few stories, such as on how board members were pre-signing blank expense forms. She gave that to use after her efforts to get the practice stopped went nowhere.
But the most embarrassing stories about CalPERS, such as Chief Financial Officer Charles Asubonten and Marcie Frost’s resume fabrications, the long-term-care insurance fiasco, its consistent peer-lagging returns, former Chief Investment Officer Ben Meng’s sacrificing $1 billion by canceling tail hedges right before their big payday, and then caught out for violating California conflict of interest rules, which led to his abrupt resignation, all came out through public information.
CalPERS seems unable to believe that outsiders can actually do research; they seem to believe that the press lives solely on planted stories. You can see that long-form in the partially-redacted transcript of the special board meeting held shortly after Meng’s exodus in EXPOSED: CalPERS’ Brainwashed Board in Denial that CIO Meng Caused His Own Downfall with Information He Himself Provided. Board members keep referring to leaks as if they drove our reporting. Earth to CalPERS’ board: you need to free yourselves from the staff reality-distortion machine. Everything we did came from your own documents. No Deep Throat, no insider wink and nod.
And that means, as much as the staff and board might be high-fiving each other that they’ve expelled a barbarian from their ranks, their life is not going to get any better. Brown had at most a marginal impact on CalPERS’ press. The bad stories were generated by CalPERS’ bad acts. It’s going to be interested to see how CalPERS behaves now that it has finally freed itself of dissident board members that served as convenient scapegoats. Expect increasingly convoluted efforts to avoid admitting that it has only itself to blame for being held in disrepute.
And those of you who followed CalPERS, please thank Brown for her valiant efforts. She took a lot of punching yet was not deterred.