CalPERS refused to adjust. Its scheduled Monday investment committee meeting blatantly violated California’s public meeting laws, especially the “Bagley-Kean Public Meeting Act.” This blatant and deliberate misconduct occurred because the giant fund will have a judge ruling that it violated the Bagley-Keene Public Meeting Act in Jelincic v. CalPERS. Readers may remember that former board member JJ Jelincic sued the giant fund for twice refusing to provide records that should not be kept confidential. One is the record of a special board meeting held after the sudden resignation of Chief Investment Officer Ben Meng. Jelnicic argued that closed meetings were inappropriate for a variety of reasons, including that the legal basis provided for secret chats did not apply to anything that CEO Marcie Frost later admitted to discuss in the meeting.
We are very confident that the judge will rule that CalPERS violated the open meeting law, because this is one of the requirements of the Jelincic case, and the judge has said that he did not see anything in the transcript to prove that he was in the so-called “closed meeting”, that is Not open to the public.
So, what is CalPERS doing? Judge dazzling? Trying to conceal the truth as much as possible before the ruling. When the media may finally wake up and begin to challenge CalPERS for insisting on breaking the law again and again, it is obvious that actions that need to be shared with the public will not endure the light of censorship?
Of the three planned violations of the Public Meetings Act, all of which will occur this Monday, one of them is particularly worrying because in the worst case, they may involve concealing criminal acts. The former CEO of CalPERS, Fred Buenrostro, has served four and a half years in federal prison for accepting bribes related to placement agency fees. In another lawsuit, Alan Hevesi, the chief financial officer of New York, was also convicted of receiving kickbacks from the placing agent. As a result, California and other states have greatly strengthened their disclosure requirements for placing agents.
However, what do we see on the CalPERS Monday investment committee agenda? Note the last item:
Needless to say, any excuses for secretly conducting such discussions do not apply to placing agents. As you can see, Article 11126(a)(1) of the Government Code is a personnel matter.Intermediary is professional
prostitute Service providers, not employees. Section 11126 (c)(16) of the Government Code is an expected investment decision. Agency fees are not an investment decision. Section 11126 (e) of the Government Code deals with pending litigation. Things must mature, just like an impending or actual lawsuit, not a theoretical legal risk. Discussions on placement agency fees are not even within the scope of this divestiture.
To make matters worse, as a result of Buenrostro’s lawsuit, CalPERS enacted a regulation requiring extensive new disclosures of CalPERS’s placement agency activities. One can only assume that this move is to prevent legislation.
So, what legal requirements does CalPERS try to avoid? Is this part of CalPERS regulations? Article 559, Disclosure of Placement Agency Fees, Gifts, and Campaign Donations:
(D) A description of any and all compensation provided or agreed to be provided to the placing agent in relation to the assets, securities or services provided to CalPERS, including its nature, time and value.
Does CalPERS try to hide compensation in favor of certain placement agents? If the string is cancelled, it may expose additional compensation instead of the quality of the service, which is the reason for their choice?
Or how about this rule:
(F) Suggest or otherwise assist in the retention of the names of any current or former CalPERS board members, employees or consultants of the placement agent.
This is what CalPERS is trying to hide. Did CalPERS internal staff or consultants play a role in hiring selected placement agents?
And pay attention to this part:
(g) All parties responsible for implementing, supervising and complying with these regulations should consider the spirit and literal expression of their regulations. In the case of uncertainty as to whether it should be disclosed, this provision should be interpreted as a requirement for disclosure.
There is an exception to this rule, subsection (h), but CalPERS cannot pretend to rely on this rule because it does not use it as a reason for a private meeting.
The second flagrant violation of the Public Meetings Act occurred on the same agenda as excerpted above, “Projects completed under authorization.” This topic does not even meet the conditions of closed conversation processing. These are not pending investment decisions, and these decisions are allowed to be kept confidential, so as not to disclose information of other investors and put CalPERS at a disadvantage. And they are obviously neither personnel issues nor litigation related. Actually, The beneficiaries of CalPERS should be shocked that employees and the board of directors are working together to conceal employees’ behavior on the board’s blank checks and the results of these behaviors.
The third planned “private meeting” violation occurred later in the meeting, and board member Margaret Brown had already protested:
When did asset allocation or planned asset allocation become a state secret? For decades, CalPERS has had its consultants scrutinize asset allocation in detail and make forward-looking recommendations, which are then approved (or rarely approved) by the board of directors. These strategic decisions are far from the actual triggering of buying and selling, and they cannot be eligible for protection from pending investment actions.
Board member Brown weighed in with Board Chairman Henry Jones. The relevant part of the investment committee agenda is embedded in her message:
From: “Brown, Margaret”
Date: November 12, 2021 at 10:20:48 PM MST
To: “Jones, Henry”
Cc: Betty Yi
, Irina Ortega , “Olivarez, Stacey” , “Middleton, Lisa” , “Mom, Fiona”
Topic: The agenda of the closed-door meeting of the Investment Committee
After reviewing the annex to item 4a of the private meeting agenda. And the attachment to item 7b of the public meeting agenda. Documents in 4a. It seems to be the same as the public meeting material.
Agenda item 4a. An exception to the non-public meeting specified by Bagley Keene, because the discussion of risks and other issues related to the adoption of ALM is a public meeting.
Please delete item 4a from the private meeting agenda.
Board member Brown added that the staff showed 43 pages of exhibits for discussion in a public meeting and 2 pages of the document in a private meeting. Similarly, in addition to the fact that asset allocation briefings and decisions are never suitable topics for secret review, the fact that basic materials are presented to the public ultimately shows that the handling of private meetings is illegal.
Through this behavior, CalPERS also publicly opposed the popular trend of laws and regulations. We pointed out last week that Gary Gensler, chairman of the US Securities and Exchange Commission, is not affected by the temptation of revolving doors. Announced a strong push to improve the transparency of private equity investment Revolve around expenses, performance reports, conflicts of interest, and cover letters. All these tactics help private equity investors pretend that they don’t understand that private equity is far from even a good deal pretended by general partners and the captured media.
CalPERS also has a misunderstanding that removing Margaret Brown from the board of directors means it can engage in more fraudulent activities unhindered. In fact, the most embarrassing incidents CalPERS has faced in recent years have all happened through public information. Checklist: Former CFO Charles Asubonten’s resume fraud. CEO Marcie Frost lied about enrolling in a non-existent dual bachelor/master degree program. CalPERS’s practice of handing over private equity management rights to external entities is inconsistent and clearly corrupt. Former Chief Investment Officer Ben Meng resigned abruptly after we exposed that he violated the California Conflict of Interest Law. Now JJ Jelincic’s lawsuit, even if the judge bends back to indulge CalPERS, judging from his remarks so far, it looks promising to give the fund a big black eye and encourage other public record bill lawsuits.
Jerincic didn’t walk away quietly. Brown does not intend to do this either. But CalPERS was trapped in a bubble of denial, unable to realize that as a former board member, she could become a more effective supervisor. Pass popcorn.