Showdown at CalPERS – Hoisted on Their Own Petard?

EASTSIDER--Here are the real stakes for some 2 million beneficiaries and taxpayers.

At the upcoming September Board meeting, it seems that President Henry Jones, CEO Marcie Frost, and  General Counsel Matthew Jacobs are going to try and cover everything up just as they have for the last few years, absolutely defying the purpose and intent of the Bagley-Keene Open Meetings Act. 

The Board meeting Agenda is out for September 14-16, and it is clear that the three Executive members wrote the agenda as though there were no problems and all is well at CalPERS.. Thanks to Matt Jacobs, It even has the same misleading and questionable language in it denying the right to public comment before and after a closed meeting to kick the proceedings off! 

In fact if you read the agendas for all the meetings, you would think that it’s business as usual at the $400 Billion dollar pension plan, even as the cries for reform escalate at an amazing rate, based on some pretty terrible information.  The issue as raised by Betty Yee, the Controller, has been relegated to a committee on the second day – one she is not a member of. 

So let’s look at how this could be.  Try the three CalPERS folks who have virtually all the delegated authority to run the agency as they see fit. 

1) Henry Jones, the President of CalPERS Board, was elected as the designated “Retiree” member of the Board.  As I pointed out at the time, his election was based on a very dirty campaign. You can read about that campaign here. 

“Ultimately, JJ was taken out by the most brazen, slimy 1-2-3 hit campaign that I have ever witnessed. And that means something. In all the Union campaigns I have participated in over the years, some of which were really hard core, the Department of Labor would have stepped in and sent people to jail over the conduct of both the incumbents’ fake-money-laundered backers, and the illegal conduct of CalPERS staff (who have evidently been given “attaboys” instead of disciplinary investigations).” “

Further, the very large Retired Public Employees’ Association of California (full disclosure I am a proud member) sent Mr. Jones a letter at the end of August asking him to resign.  For cause.  You can find a copy of that letter here, and it is damning. 

Finally, the only reason that an apparent dotard like Henry Jones was eased into the position of President, is that he has almost unlimited delegated power under the current Governance Policy, serving as the front for Frost and Jacobs.  If you look at the actual language in the Governance Policy I refer to later, it goes on and on with his power, including “secret discipline” of other Board Members.  Just ask Margaret Brown. 

2) Marcie Frost - There have been questions as to Marcie Frost ever since she fudged her qualifications to be CEO at all Now there are l  The blog NakedCapitalism recently posted evidence of major unethical conduct by her picking up big speaker fee bucks from a company making $500,000/yr advising her during her day job at CalPERS.  The header says it all -  CalPERS Misappropriates Funds, a Violation of the Criminal Code, By Laundering $40,000

and also 

As Hoyt Axton once wrote, “It  Ain’t Pretty But You Better Believe Its Real” 

There’s much more, but this conduct is the simplest to understand. 

3) Then there’s General Counsel Matthew Jacobs

After my last analysis of Mr. Jacobs unusual or just plain wrongheaded interpretation of the Bagley-Keene Open meetings act (here), you’d think he would comply.

Well, for the September meeting, he is doubling down on his cover-up miss-itnerpatation of the Act, by once again denying the Board any ability to have public comments either before or after the closed session. Here’s the language:

Meeting Agenda for September 14, 2020

Open Session

8:30 a.m.

  1. Item
    1. Call to Order and Roll Call

Closed Session

Upon adjournment or recess of Open Session (Government Code sections 11126(a)(1), (e), and (g)(1))

  1. Item
    1. Chief Executive Officer's Briefing on Performance, Employment, and Personnel Items “ 

Look familiar?  Same as the last meeting, including the description of the Closed Session Item.  Nothing like having a really good General Counsel.  

CalPERS Poison Pill - The Governance Policy

So let’s see how CalPERS Board was  lulled into giving away their fiduciary duties and meaningful oversight of the giant fund.  While the beginnings go back to the days of Anne Stausball, the latest version is in the September 2019 Governance Policy, which you can find online here. 



  1. A. The Board will have one direct report: the Chief Executive Officer.

The Chief Executive Officer is responsible for the overall administration of all units, departments and functions within CalPERS. The Board and the Chief Executive Officer share responsibility for hiring, evaluating and, if necessary, terminating the Chief Investment Officer.” 

So there you have it.  In effect, a total abdication of oversight to three ethically challenged individuals; only one of whom is even elected to the Board  While Marcie, Matt, and Henry try to characterize this giveaway of oversight as allowing them to help the Board handle all the complex tasks they are charged with, their actions give lie to their rhetoric.   In reality the system is  based on the Board’s incredible delegation of authority to these three to do as they see fit. 

The Takeaway

The only practical way to end this madness before the pension fund implodes from mismanagement and/or at worst criminal misconduct, the Board needs to find eight votes to do two simple things.   

First, call a Special Meeting just as Controller Yee tried to do last month, and have a frank discussion of how the full Board needs to retake control of CalPERS and what to do with President Henry Jones, CEO Marcie Frost, and replacing General Counsel Matthew Jacobs with a good public sector General Counsel with relevant experience. 

Section 11125.4 provides in part that: 

”(a) A special meeting may be called at any time by the presiding officer of the state body or by a majority of the members of the state body.  A special meeting may only be called for one of the following purposes when compliance with the 10-day notice provisions of Section 11125 would impose a substantial hardship on the state body or where immediate action is required to protect the public interest” 

Further, as Board member Margaret Brown stated in a September 3rd  letter to Henry Jones, the agenda should include

*“Governance and Oversight of CalPERS

*Delegation to the CEO

*Reporting structure of the CIO to the Board

*Expanded meeting calendar

*Composition of the Investment Committee”

I think the other Board members, if they have any common sense should vote to have such a meeting asap.  Remember, the Board members themselves are the ones with a fiduciary duty to the funds beneficiaries.

In fact, it would be a very prudent move to have the outside fiduciary counsel to the Board present at the meeting, to have her provide advice to the Board members on fiduciary matters separately and without any interference from General Counsel Jacobs.

As has been pointed out many times before, a misstep could result in one heck of a class action lawsuit against the Board members. 

PS – For a lot more factual information and some great links, check out NakedCapitalism.  Just look at the Topics list on the right hand side of the blog, and click on “CalPERS”.  They obviously have some really good sources.

(Tony Butka is an Eastside community activist, who has served on a neighborhood council, has a background in government and is a contributor to CityWatch.)