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

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.

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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