Exposed: Sacramento Bee Goes After Naked Capitalism Blog…Why?

Recently, my favorite Sacramento politics screed, The Sacramento Bee, put out a hit piece on my favorite blog, Naked Capitalism, accusing them of being a bunch of east coast insiders mucking around with CalPERS by using disgruntled Board members to unfairly attack the pension giant. You can find the column here. 

Adam Ashton and The State Worker 

Author Adam Ashton is the Sacramento Bee’s reporter for its very popular The State Worker column. It was launched back in 2008, before McClatchy had revamped the entire operation and trimmed a lot of the staff. It would appear that Mr. Ashton is a part of that process, as he came to the Bee a couple of years ago, and the column seems pretty much a shill for the CalPERS CEO and Board. 

You can get a taste of his recent hit job on Naked Capitalism from the second paragraph of his article fronting for CalPERS: 

“But its leaders time and again find themselves distracted by an entirely different kind of problem – an opinionated financial blogger on the other side of the country who has her hooks in the fund and a couple of key sources on the inside.” 

This is simply the old “outsider with a few inside sources who have a grudge” story. Of course, Adam’s own viewpoint could be characterized as the ultimate insider front for the CalPERS establishment. It appears he relies heavily on inside information from Board members and CalPERS Executives for his posts. 

Adam himself is a survivor of the McClatchy news empire after they bought the Bee and started shedding staff. He came to the State Worker a couple of years ago after serving for almost five years as the Military Reporter for McClatchy’s News Tribune. 

Anyhow, quoting again from Ashton’s article: 

“As local government employees vote in one CalPERS election this month, Webber’s critics see her as a partisan who’s putting public pension plans at risk by overblowing small controversies until mainstream news organizations pick up on her pieces.

“You’re not from California. Why would you be involved in a California election for that board? Why is it so important to you to get someone elected in that board?” said CalPERS Board of Administration Vice President Rob Feckner, a union leader and frequent Webber target.” 

You can tell form the tone that he is evading personal responsibility for his hit piece by using the words of others. 

Just to be clear, I’m a third generation Californian, live in Los Angeles, am an actual retiree with a CalPERS pension, so I am not an outsider. I would note for the record that Feckner himself was never transparent or open about anything during his tenure as President of the CalPERS Board, and I happen to think that the questions raised by NakedCapitalism have been spot on in a vacuum aided and abetted by The State Worker. 

The Real Story of How CalPERS Is Run 

Here are a few provable facts that demonstrate that the CalPERS Board President and CEO hide almost everything from us, the beneficiaries. Let’s start with the Board’s very own Board of Directors Governance Policy, revised May 2018, and available here.  

1) “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., and 

2) “To avoid the appearance of undue influence, Board members will refrain from communications with staff, outside a Board or committee meeting, wherein the Board member advocates for, or directs staff to, a specified action, decision or course of conduct with respect to any existing or prospective investment transaction or existing or prospective contract,” and 

3) the President will “with the Chief Executive Officer, manage the effective and efficient flow of information to the Board, which is comprehensive and timely without being over detailed” 

Add all these rules together, and you have a system functionally controlled by two people -- the Board President, and the CEO. Throw in General Counsel Matt Jacobs, who thinks everything they do is subject to attorney-client privilege, and there you have it. A perfect closed system. 

The reality is that the Board President and the CEO run the whole thing with minimal, if any, real oversight. First, there’s a rule to cut the Board members off from the rest of the organization. Then, once the Board members are functionally neutered, we have the President’s duties defined as replacing them on all day to day matters. 

I call this the Mushroom Theory of Management -- keep them in the dark and feed them manure. And let us note that the Board could change this governance policy anytime they want by a simple majority vote. 

The History 

Long before Adam Ashton, CalPERS had a history of secrecy, most of which ended badly. Back in 2013, former CEO Fred Buenrostro and former Board member Alfred Villalobos were indicted for fraud, conspiracy, and obstruction of justice in a ‘Pay to Play’ scandal. Rob Feckner was Board President at the time. 

Further, shenanigans in 2014 by the Board in hiding information about their Private Equity portfolio from =- you guessed it -- Naked Capitalism, prompted me to write an open letter to Board President Rob Feckner and the Board demanding that the information be made public.  

This was the same Rob Feckner Adam Ashton quoted in his hit piece on the NC blog. You will be unsurprised that ultimately CalPERS had to cough up the information, and it turns out that Private Equity investments were a mess. 

And these were far from the only scandals. How about the hiring of sleazeball outside fiduciary counsel to the Board Robert Klausner using an incredibly amateurish process. Flawed enough that he had to be let go.  

Then, in a Board retreat in Monterey, which had no videotaping of the event, the appointed Board members and their General Counsel tried to take out JJ Jelincic for unspecified crimes they characterized as “breaches of confidentiality.” This one stunk bad enough that I wrote the Governor  about their bizarre suspension of any due process. 

That didn’t work. Moving right along, the Board meeting in June 2017, went for a trifecta of coverups. 

While they had a good time excoriating Mr. Jelincic, they: 

• failed to even mention a class-action lawsuit over fee increases for long-term care; 

• used attorney-client privilege to hide Private Equity problems, again, and 

     (3) failed to deal with a multi-million-dollar case of copyright infringement by CalPERS itself. 

The Takeaway 

 I could go on and on to more recent examples of misdeeds, but by now my point should be clear. Thank god for NakedCapitalism for exposing the secret actions of CalPERS, particularly their hidden ways in hiring staff, be it their CIO, outside fiduciary counsel, or Marcie Frost herself! 

 CalPERS is the largest public pension fund in the United States of America, with something like $360 billion in assets. It should be administered by the best and the brightest, as well as having rock solid protocols for handling the outreach and hiring of executive positions. It doesn’t, and there is simply no excuse. 

 And in answer to my first question, by not covering or by downplaying all the inappropriate goings on at CalPERS, The State Worker is indeed acting as a shill for the CalPERS establishment. 

 (By the way, if anyone would like to anonymously provide me with information about the workings or lack thereof of CalPERS, you can write [email protected].)

 (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.