JJ Jelincic Appeals His Largely-Successful Ruling Against CalPERS to Obtain Still-Hidden Parts of Transcript and Undermine Matt Jacobs Protection Racket

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As CalPERS-followers may recall, former board member JJ Jelincic sued the giant public pension fund to obtain records he believed had been improperly withheld in response to his Public Records Act requests. Even though Jelincic succeeded in getting most of the transcript of an illegal closed session released and having the board deemed to have violated the Bagley-Keene Open Meeting Act, Jelincic and his attorney Michael Risher believe the judge made significant legal errors in withholding parts of the transcript at issue. We have embedded their appeal at the bottom, whose text is identical to the version filed yesterday.

Jelincic did lose on one part of his case, to obtain records regarding a nearly $600 million writedown of real estate assets. He is not appealing that aspect of the decision.

The other part of his suit was to obtain the transcript of a special board meeting held shortly after Chief Investment Officer Ben Meng suddenly resigned. Recall that Naked Capitalism broke the story that Meng had held shares in Blackstone when he had approved a $1 billion investment in a Blackstone fund. That’s a violation of California’s conflict of interest laws. Even worse, CEO Marcie Frost and key compliance staff had known about Meng’s misconduct for months yet had not informed the board.1

The board held the meeting as a closed session, even though the personnel exemption it used to justify the secrecy does not apply to former employees. Jelincic sued to get the transcript, using a detailed listing of topics provided by a meeting participant to demonstrate that the discussion consisted entirely of matters that should have been held in public.

Jelincic scored important wins in his suit. Judge Michael Markman ruled that the CalPERS closed session was improper and had violated the Bagley-Keene Open Meeting Act, which is a strong rebuke. He also ordered that most of the transcript be released. However, Markman was extremely deferential to CalPERS. The agency had arrogantly refused to give the judge a full copy of the transcript to review in camera, but mistakenly made its partly-redacted version public when it submitted it to the court’s website. We posted it in EXPOSED: Transcript of CalPERS Closed Session on Ben Meng Departure Shows Clear and Extensive Violations of Transparency Laws, Builds Case for Contempt Ruling by Judge Markman (Presiding).

Judge Markman never made CalPERS produce the full transcript for him to review to see if the sections CalPERS had redacted were warranted. CalPERS had withheld nearly the entirety of General Council Matt Jacobs remarks in the illegal closed session. Markman accepted CalPERS’ assertion that the material was attorney-client privileged even though most of those grounds do not apply with respect to California government deliberations, and most assuredly did not here. On top of that, Markman agreed to let CalPERS withhold some additional portions of the transcript that are now public on this site.

To confirm that any meaningful redaction of the transcript was unwarranted, we’ve also embedded the list of topics discussed (prepared by a meeting participant) at the end of this post, you’ll see that none of them fall within the very narrow grounds for secrecy treatment.

It’s crucial to see what Matt Jacobs actually said, since it is highly unlikely that any of his remarks warranted being withheld from the public is that he likely engaged in a bar violation in this closed session by effectively acting as if CalPERS CEO Marcie Frost and her staff were his client rather than the board. We’ve documented Jacobs’ propensity to flat out lie about what applicable law says or what proper board supervision amounts to. Jacobs also feeds the grotesque distortion that the board has a duty to protect CalPERS staff. In fact, if you read the CalPERS governing law, not only is all power and responsibility vested solely in the board, it contains no notion whatsoever of a legal entity or staff existing independent of the board. In other words, the CalPERS organization exists solely as an instrumentality of the board.

The reason to suspect a bar violation is that one of the issues discussed at the board meeting was whether they should be allowed to read an investigation report prepared by an outside attorney on Meng’s conduct. The very fact that access was even subject to a board vote shows how deeply diseased CalPERS’ governance is. Any board member should be able to read any document the organization possesses; recall board members are jointly and severally liable. Moreover, the fact that this issue was debated at all in the closed session indicates that Jacobs argued against having board members read it; otherwise the vote would have be perfunctory and unanimous. The idea that Jacobs would oppose the board reading a critically important document on the biggest scandal CalPERS faced that year, one that got national attention, shows that he is in the business of protecting Marcie Frost and not the board and the beneficiaries. Jacobs needs to go.

I hope you will read Risher’s filing in full, or at least the Memorandum in Support of Petition, which starts on page 36 and summarizes the germane portions of the key statutes. Risher drafts beautifully and his presentation is clear and pleasant to read. Even so, it is eyepopping to see how the Judge Markman mangled several key points of law, and appears to have been trying way too hard not to mess with CalPERS any more than he had to, given the fact that the accidental release of the partly-redacted transcript tied his hands.

Although Risher calls out quite a few important errors in Markman’s legal reasoning, two stand out. One as indicated before was Markman’s failure to require CalPERS to cough up a full unredacted transcript for his review. Not only was there no basis for Markman to tolerate this insubordination (he could have both found CalPERS in contempt and ordered the release of the full transcript in his ruling based on their failure to meet their burden of proof by virtue of having withheld it) but his ruling is legally defective by not having reviewed the text at issue. From the filing:

The CPRA [California Public Records Act] prohibits a court from using records submitted for in-camera review as substantive evidence of the contents of other records. 

Although the superior court wrote that “the discussion itself is the sort that would be privileged and would be properly discussed in a closed session,” there is no evidence to support this conclusion. See 2 PA 967 (Ex. 39). To the extent the court relied upon its in-camera review of the purported litigation memo, it erred. The CPRA authorizes the court to order the government to “disclose the public record” after “examining the record in camera.” § 6259(a) (emphasis added). That the Legislature’s twice used the definite article in the phrase “the record” means that both instances of this phrase refer to the same record. See Lincoln Unified Sch. Dist. v. Superior Ct., 45 Cal. App. 5th 1079, 1094 (2020). Thus, the purpose of in camera review under the CPRA is to allow the court to review the contents of a record and determine whether that same record is exempt from disclosure. See Schaerr v. United States Dep’t of Just., 435 F. Supp. 3d 99, 116 n.14 (D.D.C. 2020) (“[T]he purpose of in camera review [under FOIA] is to consider the applicability of an exemption to a specific record.”). It does not authorize the court to rely on statements set forth in one record to determine the contents or status of a different record created months before. 

A second big error, which is close to shocking, is that the judge made up the basis for his ruling out of whole cloth. He invoked a provision of the law commonly referred to as the balancing test, which is to argue that the balance of factors, considering the benefits versus costs of disclosure, favor secrecy. Note that this is considered to be an extremely weak argument in Public Records Act cases; it’s usually a throw-away add on argument and judges seldom rule favorably on it, let alone hinge their entire decision on it.

But the derelict element here is that CalPERS never argued for the so-called catchall, § 6255, as a justification for withholding any or all of the transcript. So this was entirely a creative exercise by the judge! And that meant that a decision on this basis had no factual foundation and could never meet the state’s burden of proof. Again from the filing; not the first statement is simply shocking in light of Judge Markman’s action:

CalPERS never claimed that these materials were exempt under § 6255 or submitted any evidence to support this exemption. Nor did it ask the court to review the materials in camera; to the contrary, it improperly redacted them from the transcript it provided for this review. CalPERS’s failure to present evidence to support withholding under § 6255 requires reversal…..

The CPRA’s catchall exemption allows an agency to withhold records if it can show that “on the facts of the particular case the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure of the record.” § 6255(a). This test puts the “burden of proof on the proponent of nondisclosure to demonstrate a clear overbalance on the side of confidentiality.” ACLUNC, 202 Cal. App. 4th at 68. The requestor has no burden to show anything; even “idle curiosity” is enough to require disclosure absent a countervailing public interest in secrecy. Id. at 67. As always, the government must meet its burden with detailed admissible evidence justifying each withholding or redaction, not assertions or generalizations. See id. at 74-75, 83-85. If it fails to do so, this Court must reverse. See id. at 75, 77-78.

The public has a strong interest in monitoring the operations of government retirement agencies such as CalPERS…. The public also has a strong interest in learning about non-frivolous allegations of misconduct by high-ranking government officials such as the CalPERS CIO…And, of course, the primary goal Bagley-Keene is to require “deliberations to be conducted openly” so that allow the “public may remain informed” about all such deliberations that are not expressly excluded from the open-meeting requirements. §§ 11120, 11132. There is thus a strong interest in disclosure of the parts of the transcript that should have been conducted in public.

There is no public interest in non-disclosure that could “clearly outweigh” this interest….

Moreover, when the government relies on “potential” adverse consequences to justify disclosure under § 6255 it must show more than just a theoretical possibility that these harms will occur….the mere possibility of future harms is not enough to support withholding under § 6255. Moreover, even if there were evidence that litigation was likely, there is still no evidence that disclosure of the redacted material would adversely affect the public interest. CalPERS thus failed to meet its burden to show that it can withhold the redacted material under § 6255.

Note that there is a small possibility the appeals court will refuse to hear this case. But we should know soon if it will let this case proceed. If so, expect another round of strained arguments and high-handed conduct from CalPERS.

1 Board President Henry Jones claimed Frost had told him but it’s not clear how quickly that happened, and regardless, the entire board should have been informed.

00 2022.05.03 Jelincic Pet. in Court of Appeal -- FINAL service copy
00 Board topics 8.17.2020
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  1. DorothyT

    Re: “Jelincic did lose on one part of his case, to obtain records regarding a nearly $600 million writedown of real estate assets. He is not appealing that aspect of the decision.”

    I wish this seemingly innocuous piece of information were under appeal. When following the former Dept. of Insurance’s lengthy litigation after conserving Executive Life Insurance Co. in 1991, a similar ‘writedown’ was observed with hundreds of millions in the company’s real estate assets. The Insurance Commissioner’s people met with Judge Kurt Lewin in camera to ask for all the real estate records to be destroyed. He complied. They were taking up “too much space.” Dept. of Insurance staff were responsible at the time for the billions of ELIC assets that weren’t being sold to a “bidder.” The real estate assets and their values were never disclosed to the ELIC policyholders or the public. Staff members were publicly found to be involved in a start-up real estate REIT that went public right off the bat.

    Is history repeating itself? A Sacramento judge recently approved the destruction of all the ELIC historical records of this multi-billion-dollar historical litigation that resulted in huge losses to policyholders.

    1. Yves Smith Post author

      I agree and I don’t know why Jelincic isn’t appealing that too. However, he is somewhat hostage to the inclinations of his excellent attorney Michael Risher, who is working largely on spec. I did not follow the real estate related arguments closely, but my impression is there were two big issues, one surmountable, the second not so much. The first was that CalPERS made it sound as if Jelincic had demanded an impossibly large number of documents, when in fact the Public Records Act contemplates that the party requesting records does not know precisely what the government body has and the onus is on them to be pro-active and helpful in identifying relevant records.

      However (if memory serves correctly, due to the hour, I desperately need to turn in, so I am not checking the decision right now), the judge ruled that the real estate investments were “alternative investments” because they were in partnership entities and hence exempt from disclosure. There is a precedent, ironically for CalPERS (Page Mill Properties) that found the reverse, that real estate, even if held in a partnership entity, is a traditional, not an “alternative” investment. I don’t know why Risher didn’t want to pursue this matter; you’d think at least some of the real estate investments written down would have been in vehicles structured similarly enough to Page Mill for that precedent to be germane.

      1. DorothyT

        Here’s an interesting multi-million dollar tidbit regarding an Apollo Real Estate Advisors LP deal with CalPERS and MacFarlane. At the time the Time Warner Center construction loan by Apollo was the largest ever in NYC. Would be interesting to see who was on CalPERS board at this time?


        Developers Apollo Real Estate Advisors LP and the Related Cos. will sell MacFarlane will a 49.5% stake in the building’s 347,000-sf Shops at Columbus Circle retail space; 211,000 sf of class A, non AOL Time Warner office space known as 60 Columbus Circle; and the facility’s tri-level, 504-vehicle parking structure. While the price won’t be set until January 2005, when the deal closes, the value is expected to amount to somewhere between $425 million and $500 million.

        Further transactions with CalPERS regarding TimeWarner Center were also in the news at the time.

  2. JJ Jelincic

    Betty Yee, California State Controller and ex-official Board Member, is also concerned with Matt Jacobs’ protentional conflict in serving two masters..

    “I’m looking at the risk to the Board, what we knew, what we didn’t know, what we should have
    known, when. And I’m feeling very exposed right now to the point of where I feel like we need to get
    our own counsel, because, you know, to see — to hear all this, I mean, I get it. You’re all responding
    to the situation at hand. And I get the distinction between the fact that he disclosed and what’s in
    question is the conflict.” (Transcript at Page 52 at lines 1-8)


    “But I just do feel really exposed, because on the one hand I feel like is Legal’s client the executive staff and not the Board, which I’ve-been feeling a little bit lately?” (Transcript at Page 53 lines 20-21)

    1. Margaret Brown

      Well Mr. Jelincic you have hit the nail square on the head. Ms. Yee typically is very nice, too nice if you ask me when serious issues arise. But here, Ms. Yee speaks up about what is all too common at CalPERS. Matt Jacobs is representing himself and the staff, and the board is kept in the dark.

      I believe the full unredacted transcript will help to prove that Jacobs is representing himself and the staff and not the board. I truly appreciate all you are doing to have this information become public. Taxpayers and beneficiaries alike should know how CalPERS staff is running the Board.

    2. lawrence grossman

      This sounds similar to CalPERS long-term care fiasco where Mr. Jacobs has declined to respond to requests that he explain CalPERS behavior which is contrary to enabling legislation concerning the requirement that CalPERS provide a private company option?

  3. Jeff

    It’s easy to forget that CalPERS is the biggest public pension fund in the country and that fraud being hidden is risking the retirement of 2 million people.

    It’s a shame that Johnny Depp and Amber Heard weren’t CalPERS members. Maybe if they were, we’d hear about CalPERS leadership fraud on CNN.

  4. The Rev Kev

    I have to admire people like JJ Jelincic and Margaret Brown for taking the fight up here and not quitting when it could be so easy. Just thinking off the cuff – when times are good, things like the corruption with entities like CalPERS tend to be tolerated more as after all, the money is flowing. Thus you would be more likely to hear about a sex scandal or an embezzling scandal than a financial scandal in good times. But when times turn tough, that is when a lot of water gets shaken out. And now we are heading for one helluva series of bad times including a full-bore recession. Here in Oz we haven’t had anything like that for a generation so most young people have no idea what they will be like. So these bad times will inevitable put all sorts of stresses and strains on CalPERS books, ones which cannot be covered up. The question is whether Sacramento will still try to protect them still or whether they will throw the Board to the wolves to save their own skins. I suppose it depends on how much moral integrity there is at the top of Californian politics.

      1. JBird4049

        Integrity? In California’s state government?

        Honestly, the corruption in parts of the state government has been ongoing for generations. It is part of the DNA.

        Then there are the cities like San Francisco, Oakland, and Los Angeles. I suspect San Jose and San Diego are the same, but I do not know enough to say that they are.

        So, thank you for doing this. It will help people like my Mom. I just wish that we had a few dozen more similar efforts for the entire state.

  5. flora

    Kudos to Mr. Jelincic for pursuing honest accounting and disclosures wrt public records at CalPERS.

    As for Jacobs, is he CalPERS version of Lanny Breuer? (dark satire)

    Thanks for your continued reporting on CalPERS, PE, and pensions. (Many states’ pensions benchmark off CalPERS.)

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