Wellie, if CalPERS had actually done what it asserts it has done, as in prepare a legal memorandum on March 25, 2021 that had to be presented to the board no later than than August 24, 2020, and then send it to the past to make it kosher, CalPERS should immediately stop managing money and go into the business of selling time machines. It would do far better for beneficiaries than it has with its public-pension-fund-industry-lagging investment performance.
Of course, this isn’t the case. CalPERS is just lying in a particularly shameless manner, but now to a judge, not to its captured and clueless board. And for grins, CalPERS has tossed a smear at whistleblowing former board member Margaret Brown into the mix.
The reason this row over a legal memo matters is that CalPERS is trying to justify its defiance of a clearly-worded order from Judge Michael Markman in a Public Records Act lawsuit filed by former board member JJ Jelincic.
Judge Markman ruled that CalPERS held an illegal “closed” as in secret, board meeting on August 17, 2020 to discuss the abrupt resignation of former Chief Investment Officer Ben Meng. Recall Meng quit after we exposed that Meng had violated California conflict of interest laws by approving a $1 billion investment in a Blackstone fund when Meng owned Blackstone shares.
Jelincic petitioned the court to require CalPERS to release the transcript for that secret meeting and also find that CalPERS had violated the Bagley-Keene Open Meeting Act. Markman ruled that CalPERS had indeed violated Bagley-Keene and also directed CalPERS to either produce the full transcript (ex some teeny bits the judge has agreed to be excluded as related to hiring of the new CIO; CalPERS has only provided one with more sections redacted) or produce the legal memorandum, called a litigation memorandum, that could justify keeping the disputed parts hidden.
By way of background, one valid basis for relegating a board discussion to closed session is to talk about pending litigation. But the basis for that exclusion is very narrow. It has to be an active suit or one that is imminent, not “hey, maybe someone might take us to court over that.”
It is hard to see one could make that claim with respect to a meeting about Ben Meng having quit since:
– Meng resigned, completely undercutting any basis for Meng pursuing CalPERS
– CalPERS in the substantial portions of the closed session transcript that have been exposed, repeatedly referred to the hiring of an outside law firm to look into Meng’s misconduct as an “investigation”. It was never depicted as intended to prepare for litigation
– Most important, the draft “investigation” memo was presented to Meng and his outside law firm, which no one with an operating brain cell would do if there was any possibility of a lawsuit
For a litigation memo for the August 17, 2020 board meeting to be legitimate, it would have to have been prepared and given to board members no later than August 24, 2020, a week after the board meeting. From Judge Markman’s order on December 20, 2021:
CalPERS has said in court filings that it had prepared the litigation memo. From its Opposition to Motion and Writ of Mandate, page 13, line 18:
Those discussions were thus properly closed. (§ 11126(e).
The meeting cannot have been “properly closed” unless CalPERS, as the filing asserts, satisfied the requirements of (§ 11126(e),1 which includes preparing the litigation memo and delivering it to the state body (here the board) on a timely basis.
So by making such a sweeping statement, CalPERS was asserting that it had not only prepared the litigation memorandum as required but had also provided it to the board as stipulated by law no later than one week after the board meeting on August 17, 2020.
I was not able to get a copy of the interrogatories and the CalPERS’ responses to confirm, but Jelincic’s recollection is “They said they didn’t possess the litigation memo during the time requested in the discovery.” Which if accurate is awfully cute in light of the representation above.
Judge Markman did take note that CalPERS had handwaved about having a memo and ordered CalPERS to produce that:
As we wrote in a post earlier this month, CalPERS in a January 2022 filing took the astonishing position that it could provide a memorandum prepared well after the legally mandated one-week-max deadline.
Recall further that the law requires that the litigation memo be presented to the “state body” which in this case is the full CalPERS board. From a January 27 filing by Jelincic’s counsel, Michael Risher:
CalPERS’s so-called litigation memo fails to comply with these statutory requirements because it was apparently drafted months after the closed session and was never submitted to the Board….
Apparently recognizing these legal deficiencies, CalPERS suggests that it can “cure any delay” under § 11130.3(a) by drafting a memo months after the meeting. CalPERS’s Sept. 17, 2021 Supp. Opp. at 6 fn. 2. This is wrong, because that provision applies only in cases brought to nullify legislative actions on the grounds that the state body violated § 11123 or § 11125. See § 11130.3(a). This case does not seek to nullify any action that the Board took; it simply seeks a declaration that the Board violated the law and access to the discussions that should have been public in the first place. Moreover, nothing in § 11130.3 even suggests that it supersedes other requirements such as the one-week deadline set forth in § 11126(e), the requirement that the Board determine whether a closed session is appropriate before it have the discussion, or the requirement that the memorandum be sent to the Board…
And Risher also filed an affidavit, embedded at the end of this post, from former board member Margaret Brown, that staff never sent the board any litigation memo for the verboten August 17, 2020 closed session.
Risher has further argued the memo should be unsealed, which has the potential to be highly entertaining:
CalPERS has moved to seal the memorandum it has submitted based on privilege. But its failure to comply with § 11126(e) means that this memorandum is not privileged under that section or the one it references, § 6254.25.
Apparently stung by the Risher filing, CalPERS deigned to reply….and only dug its hole deeper. We’ve embedded the CalPERS February 3 response below.
In this short document, CalPERS effectively admits:
The memorandum was not provided to the board as mandated by law, as of by a week after the August 17, 2020 meeting.
CalPERS created the memorandum on March 25, 2021 and then sent a clandestine e-mail to the board on April 1, 2021. That is a full seven months late and more than three weeks after Jelincic sued CalPERS. Yet CalPERS cheekily describes the memo as the “August 17, 2020” document, not its actual March 2021 date.
In fact, CalPERS never delivered the litigation memo to the board. It’s almost certain no member of board has seen it even as of now.
The first affidavit, from Margaret Brown, is accurate. CalPERS is engaging in yet another gratuitous smear to cover for its own misrepresentations.
CalPERS had as of the time of the August 17, 2020 illegal board meeting had a long-established practice of sending litigation memos that were clearly labeled in their subject lines as such to the full board. Board Services staff member Christina Ortega would send those e-mails.
Crucially, Ortega would provide the litigation memo itself as an attachment to these e-mails. CalPERS did not do that with the March 25, 2021 memo about the illegal August board meeting and there is no reason to think it has done so since then.
CalPERS also had a well-established practice for alerting the board to important documents (aside from litigation memos and other material that were e-mailed directly to board members). Those would instead be uploaded to CalPERS board document system, Diligent. When that happened, a different Board Services staff member, Pam Hopper, would send an e-mail to the board, clearly identifying in the subject line what the new document in Diligent was about, like “Consultant’s valuation on 301 Capitol Mall.” Generally speaking, mandated communications to the board came from Ortega; information that the staff deemed to be nice know but not essential was uploaded to Diligent, with an e-mail alert from Hopper stating what the document was about.
However, while this approach might sound like reasonable disclosure to the board, it wasn’t. Even with a document name that was descriptive, it was difficult to find the files in Diligent. Margaret Brown, who is no techo-phobe, complained publicly about the difficulty of finding records in Diligent and requested that they be sent via e-mail. Note that if they was a way to send board members a link to a particular report in Diligent, staff didn’t generate and send them for board member benefit.
With those practices in mind, when you read the third embedded document, you can see CalPERS engaged in fake disclosure.
Instead of the person who usually tells the board about important documents, Christina Ortega, sending the e-mail, it was Pam Hopper, who is typically handles more technical matters for the board, like resetting their iPads.
Second, the subject line said absolutely nothing about the matter: “Diligent – Updates and Reports – Confidential.” So it read as if the technician Hopper was telling the board about new Diligent procedures.
And even if a board member were to read the body of the message, it still left them in the dark. As one CalPERS insider put it:
Why on earth would anyone think that a document titled “Attorney- Client Privileged (ACP) Memorandum – March 25, 2021” relates in any way, shape, or form to the August 17, 2020 Board meeting?
These people are smoking crack.
Third, as indicated above, even if for some peculiar reason the designed-to-deter-interest labels nevertheless piqued the curiosity of a board member, he would have to go on an more-difficult-than-it-ought-to-be hunt to find it.
So not only has the staff actively impeded the board finding this memo by deliberately misleading signposting, it appears that the staff intends to hide all legally important material, including future litigation memos, this way.
As a lawyer and prominent CalPERS beneficiary assessed this CalPERS filing:
It shows an utter contempt for the law, the Court, and the members and beneficiaries. Given their earlier “the dog ate my homework” excuse, I’d like to see a forensic audit of Diligent to see whether the April 2021 date is even truthful.
First they claim they filed the memo timely, then they claimed it was lost, then they claim it’s the plaintiff’s fault for not requesting a wildly untimely memo, and finally they want the court to pretend it depends on how you define “shall” and “week.”
It’s unethical, bad faith lawyering — which is why Jacobs is hiding behind the skirts of outside counsel, who can be pushed in front of the train should the judge stir himself to address the issue.
Rule 3.1 Meritorious Claims and Contentions
(Rule Approved by the Supreme Court, Effective November 1, 2018)
(a) A lawyer shall not:
(1) bring or continue an action, conduct a defense, assert a position in litigation, or take an appeal, without probable cause and for the purpose of harassing or maliciously injuring any person;* or
(2) present a claim or defense in litigation that is not warranted under existing law, unless it can be supported by a good faith argument for an extension, modification, or reversal of the existing law.
(b) A lawyer for the defendant in a criminal proceeding, or the respondent in a proceeding that could result in incarceration, or involuntary commitment or confinement, may nevertheless defend the proceeding by requiring that every element of the case be established.
Remember, this sorry example is the result of the CalPERS’ board’s abject failure to hold CEO Marcie Frost accountable for lying on her résumé and keeping up the falsehoods in her official bio after she joined. There are far too many smoking guns here, like the dodgy but thankfully thwarted scheme to move CalPERS private equity portfolio out of what little transparency it has now….at higher cost and with no reason to expect any performance improvement. In addition of Meng’s Blackstone financial conflict, how about his eagerness to put money in China, which has generated serious losses? What about the failure to explain the overvaluation of real estate assets to the tune of nearly $600 million?
What else is CalPERs staff hiding from the board?
1 CalPERS in its sneaky way made its misrepresentation early on, in its August 18, 2021 Opposition to Motion and Writ. But first see the relevant section of California Government Code, § 11126. Note in particular (e)(2)(C)(ii):
00 2022.01.27 signed Brown Dec
(e)(1) Nothing in this article shall be construed to prevent a state body, based on the advice of its legal counsel, from holding a closed session to confer with, or receive advice from, its legal counsel regarding pending litigation when discussion in open session concerning those matters would prejudice the position of the state body in the litigation.
(2) For purposes of this article, all expressions of the lawyer-client privilege other than those provided in this subdivision are hereby abrogated….litigation shall be considered pending when any of the following circumstances exist:
(A) An adjudicatory proceeding before a court, an administrative body exercising its adjudicatory authority, a hearing officer, or an arbitrator, to which the state body is a party, has been initiated formally.
(B)(i) A point has been reached where, in the opinion of the state body on the advice of its legal counsel, based on existing facts and circumstances, there is a significant exposure to litigation against the state body.
(ii) Based on existing facts and circumstances, the state body is meeting only to decide whether a closed session is authorized pursuant to clause (i).
(C)(i) Based on existing facts and circumstances, the state body has decided to initiate or is deciding whether to initiate litigation.
(ii) The legal counsel of the state body shall prepare and submit to it a memorandum stating the specific reasons and legal authority for the closed session. If the closed session is pursuant to paragraph (1), the memorandum shall include the title of the litigation. If the closed session is pursuant to subparagraph (A) or (B), the memorandum shall include the existing facts and circumstances on which it is based. The legal counsel shall submit the memorandum to the state body prior to the closed session, if feasible, and in any case no later than one week after the closed session. The memorandum shall be exempt from disclosure pursuant to Section 6254.25 .
00 2022.02.03 FINAL Resp to Pl Jan 27 Filing
00 2022.02.03 FINAL Asai Decl ISO Resp to Pl Jan 27 Filing