CommentsEASTSIDER-Recent headlines have been detailing the total meltdown at CalPERS. After some secret discipline of the only voice on the Board who lives up to their fiduciary duty (Margaret Brown), we quickly discovered that Chief Investment Officer Ben Meng was out of control, piling up significant investment losses, which were covered up by the Board and key staff.
The Oh So Illuminating Chronology
Only a few weeks ago, it turned out that Mr. Meng, the CIO, had been making investment decisions on stocks which he personally owned as well. When the blog NakedCapitalism outed him, he resigned a nanosecond ahead of the avalanche.
Right after that, State Controller Betty Yee (I suspect figuring out that CEO Marcie Frost and General Counsel Matt Jacobs had been playing her for a sucker), called for an emergency Board meeting.
“In a letter to Calpers’ Board President Henry Jones on Monday, Yee called for a meeting to be held within 48 hours of receipt of her request. Last week, she called for an emergency meeting before the board announced it will have a session on Aug 17.
“I believe the board has an obligation to Calpers members to determine whether Mr. Meng’s carelessness violated any laws or caused financial and reputational damage to the pension system,” Yee wrote in her request for “immediate board action.”
President Henry Jones promptly rebuked her, saying (1) she couldn’t do that under the Bagley-Keene Act, and (2) that he, El Jefe, had called for a Board Meeting on August 17. What was not stated, however, was under which section of the Open Meetings Act he was actually calling the meeting!
Finally, this week, on August 17, CalPERS held their Board meeting. Of course, the meeting was in secret, using the old “Personnel” exemption to hide what they were doing. Here’s Jones’ explanation:
“CalPERS is moving forward and recruiting a new chief investment officer. A board meeting has been scheduled for August 17 to discuss personnel matters. In the meantime, our organization remains focused on providing retirement security to members and supporting our employer partners.”
At the meetings start, Board Member Margaret Brown wanted to have a discussion under public comment before going in to closed session. And so did Controller Betty Yee, who thought the item as agendized had a much too narrow scope. President Henry Jones, being worn like a glove by General Counsel Matt Jacobs, handed the rebuttal off to Jacobs, who boldly asserted that under the provisions of the Bagley-Keene act, there is no public comment allowed.
Let’s take a look at Jacobs forceful statements against the actual language of the Bagley-Keene Act. It defines a closed meeting as follows:
(a) (1) Nothing in this article shall be construed to prevent a state body from holding closed sessions during a regular or special meeting to consider the appointment, employment, evaluation of performance, or dismissal of a public employee or to hear complaints or charges brought against that employee by another person or employee unless the employee requests a public hearing.”
Prior to a closed session, the statute states:
(a) Prior to holding any closed session, the state body shall disclose, in an open meeting, the general nature of the item or items to be discussed in the closed session.”
and after the closed session:
“(C) After meeting in closed session pursuant to subparagraph (A), the state body shall reconvene in open session prior to adjournment and report that a closed session was held pursuant to subparagraph (A), the general nature of the matters considered, and whether any action was taken in closed session.”
Let’s parse this. First of all, we don’t know the subject of the closed meeting. The actual (undated) agenda stated:
“Open Session
9:00 a.m.
- 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))
- Chief Executive Officer’s Briefing on Performance, Employment, and Personnel Items”
There are clearly at least two deficiencies in the Agenda itself. For openers, the Agenda failed to allow for an open meeting which disclosed the general nature of the item of items to be discussed.
According to Jacobs, there was no requirement for an open meeting allowing for public comment prior to the closed session. And his caption of a mere “Briefing” is highly questionable as being in compliance with either the description required by the Open Meetings Act, and/or whether or not the Board could participate in any meaningful way if the only purpose was to brief them on what Marcie, Henry, and Matt had already done.
Second, there is a clear violation of the requirement to “reconvene in open session and report out” what the Board actually did in the closed session.
I note this in light of Jacobs refusal to allow for any public discussion prior to going in to a closed session (Brown), or Yee’s legitimate query that she wanted to cover much more than the totally captive “briefing” that simply continues to hide what CalPERS really has done.
Finally, the Agenda and runup thereto totally avoids acknowledging a scathing public letter by Steve Mermell, the City Manager of Pasadena dated August 3, with copies to Assembly member Chris Holden, Senator Anthony Portantino, and the California League of Cities, among others.
Directly challenging CalPERS competence and nonpareil secrecy, the letter states:
“This was never more evident than when on June 15, 2020, the Investment Committee emerged from a more than a five-and-a-half hour closed session to hear a brief report from Chief Investment Officer Meng outlining the More and Better Assets concept with not one question asked by a committee member. It was obvious the committee was briefed on this item and conducted all discussion in Closed Session. This is even more alarming with the fact that CalPERS has had its own legal problem in the past with a bribery scandal. The combination of disguising risk as Better and More Assets, conducting all discussions about it in Closed Session, and reducing public meetings is concerning for the City as a member that must be responsive to its community.”
Funny how none of this rates so much as a nod, even though we know for a fact that State Controller Betty Yee was essentially in the dark about CalPERS actions, as was virtually everyone else. Except, of course, Henry Jones, Marcie Frost, and General Counsel Matt Jacobs.
While all this was proceeding, there was no mention of AB 2473, still floating around the Senate as a DO PASS measure allowing CalPERS to hide their private equity investments from everyone. That’s right, no public records at all! So, yours truly filed the following with the Senate on August 6.
To the Committee:
My name is Tony Butka, and I am both a CalPERS beneficiary as well as a weekly columnist for the online LA Newspaper Citywatchla.com. I am asking the Committee to kill this bill on the grounds that CalPERS made a lot of deliberate misrepresentations to the Legislature; namely that their ask was just to get some privacy which would allow them to play private equity games with the big boys.
I have attached a couple of articles to demonstrate how nuts things are at CalPERS, as they engage in internal witch hunts, and make bad investment decisions which they seek to hide under the language of this bill.
First is my recent article on just how slimy and secretive the current Board and the staff who own them have become. Second, there is a NakedCapitalism post regarding their flat-out incompetence in investing.
Finally, you should note that their big time Investment Officer, Ben Meng has resigned. I attach an article from August 6th which provides the details.
While the request was phrased in nice logical terms, underneath CalPERS is asking you to sign off on a secrecy provision which will certainly blow up in their faces. They can't even provide reasonable returns on their own and now want to play with the Wall Street heavies. God save us.
Finally, in the event that this atrocity passes the legislature, the names of the legislators who voted for it will be remembered. There are almost 2 million beneficiaries of CalPERS, and they certainly include registered voters in every legislative area of the State, be it Assembly or Senate. Bad enough investment results would likely result in a full court press to reduce the pensions of existing and prospective pensioners. Think about it.
I implore you to kill the bill.
Sincerely,
Tony Butka, CalPERS beneficiary, Glassell Park
While I don’t think CalPERS said squat to the Committee, a review of the legislative record indicates that on August 5 the Committee postponed action on the Bill, and on August 10 they canceled the Hearing “at the request of the author.” I suspect that Steve Mermell’s letter copying the State legislators and perhaps my direct challenge to the Committee, helped the author withdraw the CalPERS bill entirely.
The Takeaway
I think it is clear at this point that CalPERS Board needs to hold a duly noticed public meeting which includes a closed session item. That personnel item should be directed to the potential discipline/discharge of Marcie Frost and Matt Jacobs, as well as calling for the removal of Henry Jones as President of the Board.
Just to help out the Board, they can actually override Jones & Co. and call a Special Meeting of their own choosing. 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”
Think about it.
(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.) Edited for CityWatch by Linda Abrams.
