Slimy Deal Allows CalPERS President and Staff to Hold Secret Star Chamber Discipline of Dissident Board Member Margaret Brown

What the hell? Then the light went on. Just like J.J. Jelincic before her, Margaret Brown is the only current member of the CalPERS Board who asks substantive questions, challenges staff, and actually fulfills her duty as a fiduciary. So of course, they’re out to squish her, just like the slime and innuendo the staff and President dished out to J.J. before her. 

Only the names have changed, not the suppression of free speech and honesty. This time though, like J.J., the Board is led by their collective nose, to follow the idiocy of staff to do in Brown, even as the staff are doubling down, canceling good investment contracts which ultimately cost you and I over a billion (with a B) dollars. They’re going back to their tried and true scheme to blow up the fund with Private Equity plays. I kid you not.  

So the first thing they have to do is to muzzle the lone voice on the Board who would out them and their schemes to the beneficiaries and the public. We discover in Michael Hiltzik’s column that President Jones has secretly “disciplined” Brown for the felonious conduct of. . .having a personal twitter account. No shit. 

Her Dirty Deeds 

I’m going to quote from Appendix A of Brown’s lawsuit, so you can see just how petty and absurd her alleged crimes are: 

“In my capacity as the President of the CalPERS Board of Administration, I have received a copy of the enclosed several letters written to you by CalPERS executives from 2017 through the present. In those letters, CalPERS repeatedly asked you to cease and desist in your improper use of CalPERS’s name, first as a website address and then as the handle associated with your Twitter account.” 

And Henry winds it up with, “Therefore, in light of the nature and number of your violations of CalPERS’s rules regarding use of its name, I have decided to implement private discipline against you as provided in Section VIII(B)(2)(a) of the Governance Policy.” 

Well, I’m certainly not a copyright or trademark attorney, but it seems pretty clear that neither is Henry Jones or his secret owner, General Counsel Matthew Jacobs. So let’s parse this pile. 

First, Margaret Brown, according to the CalPERS website, did not become a member of the Board until January 2018. Can CalPERS go back before Brown was a Board member to impose retroactive liability against her as a beneficiary of CalPERS? Like over a million other beneficiaries? 

1. As to the other crimes like having a twitter account using their name? How about Richard Costigans’ @CostiganCalPERS, or Jason Perez, or any other Board member? If we did an in-depth search of every social media account or email address or of every single Board member of CalPERS, what do you think we’d find? Yup. 

And do you think CalPERS in fact engaged in anything like real research before flaying Margaret Brown? I think not. This is the gang that can’t shoot straight, and this smells like just what it is. 

What’s scary is that we would never know about this had Brown not grown tired of being slimed by ethically challenged incompetents and decided to sue the Board. All of whom knew about this and zipped their lips even as they planned their big time paid-by-us junkets offered up as bribes by Marcie and Matthew. 

How the Cabal Operates 

Under their 2019 Board Governance Policy, CalPERS is effectively run by three people, two of whom are unelected. Those three are Marcie Frost, CEO; Matthew Jacobs, General Counsel; and Board President Henry Jones. 

Great. Marcie Frost lied about her credentials as she applied for the CEO job, and Matthew Jacobs has a secrecy fetish that makes Dick Nixon look like a piker. As for Henry Jones, he’s proved over the years that he can and will do anything to become President, and evidently has now done so. 

That’s the triad who decided to muzzle the one Board member who actually asks questions, demands answers, and can tell you what the phrase “fiduciary duty” really means. 

Here’s what the 25-page turgid governance tome identifies as the Role of the BoardPresident: 

“The Board President's principal role is to lead the Board in the conduct of Board business by managing the affairs of the Board and ensuring the integrity of the Board’s process. The President’s specific duties, delegated by the Board, are to: 

1. 1. Provide leadership to the Board in terms of collegiality, civility and ethical conduct. 

2. 2. Ensure that Board operations are consistent with its own policies. 

1. a. At his or her discretion, after considering the nature and number of the violations, the Board President may implement private discipline against a Board member whose conduct fails to meet the standards outlined in or violates this Governance Policy or whose conduct is otherwise inconsistent with Board policies. Such discipline may include, but will not be limited to, admonishment, censure, temporary termination of a Board member’s travel privileges, or the requirement of additional training.  The Board President will inform the other Board members of the discipline, without divulging the name of the disciplined Board member” 

‘Joe McCarthy’ Jones posits the felonious conduct 

And exactly what was this felonious conduct that required the combined horsepower of Marcie Frost, Matthew Jacobs, and Henry Jones? And in private, so that she was muzzled from telling anyone about her horrific actions? Here it is, and, no, I’m not making this up: A twitter account. 

Here he makes his damning case: 

“Your conduct on this topic is not, in my judgment, consistent with a CalPERS Board member’s responsibilities as required by the Board’s Governance Policy. In particular, it is not consistent with the Board’s “Statement of Activities that are Inconsistent, Incompatible, or in Conflict with the Duties of a Board Member of the Public Employees’ Retirement System” (“Inconsistent Activities Statement”), because you continued to improperly use CalPERS’s name “knowing that the act may later be subject, directly or indirectly to the control, inspection, review, audit, or enforcement by the PERS Board.” (Inconsistent Activities Statement, I(6).) Therefore, in light of the nature and number of your violations of CalPERS’s rules regarding use of its name, I have decided to implement private discipline against you as provided in Section VIII(B)(2)(a) of the Governance Policy.” 

This, even though other Board members have done the same or, gasp, worse, without comment. And ignoring the fact that Brown wasn’t even a Board member during some of the time she engaged in this heresy. 

And the punishment is: 

“1)  I hereby admonish you not to engage in any improper use of CalPERS’s name as described in the enclosed letters or in any other manner. If you resume your improper use of CalPERS’s name, I will consider bringing the topic to the full

Board for discussion and potential action in open session under Governance Policy section V(B). 

2)  I also hereby censure you for engaging in conduct that fails to meet the standards of ethical conduct anticipated by the Governance Policy. 

3)Your travel privileges on behalf of, and to be reimbursed by, CalPERS, are hereby suspended until June 30, 2020, with the exception of travel that the CalPERS Board already has approved and also with the exception of travel to CalPERS’ scheduled Board of Administration and Committee meetings. 

4)You are to participate in additional training provided by CalPERS, which will be the comprehensive Board member orientation that will be provided also to any new members who join the CalPERS Board as of January 2020. CalPERS will provide you with the timing of the training separately. 

Plus, Henry will take her misdeeds into consideration when he decides Committee assignments this year. 

Maybe, just maybe, CalPERS should look a little closer to home before putting a straitjacket on  Margaret Brown for a nothing burger. I seem to remember a case against CalPERS that they had to settle for a few million dollars, as reported by NakedCapitalism: CalPERS Pays $3.4 Million to Dow Jones to Settle Massive Copyright Infringement That We Exposed.   

Pattern and Practice 

If you think that I’m being harsh on poor old CalPERS, consider the $350 billion or so of assets that they are mismanaging, which pays for our monthly retirement checks. What happens when the fund starts to seriously tank, putting our retirement at risk? 

I think there’s plenty of pattern and practice to demonstrate that the staff has functionally taken over the Board of Directors. Back in 2018, I even wrote about it as follows: 

“So, let’s see some issues and outcomes since my last post. 

1) The issue of the President usurping an elected Board member’s right to see all email and documents is only kinda sorta resolved. At their meeting, most of the Board -- except Margaret Brown and John Chiang -- didn’t seem to care that the Board President does whatever she wants, and they can’t be bothered to read mail anyhow. 

In discussing the matter, there were a couple of handouts that look like Rube Goldberg schematics, and ultimately the Board is mostly OK with the Policy. Of course, the policy is illegal, but we will see how stupid President Mathur wants to get. For now, I assume the secret reprimand will go away and at least two Board members will get their mail. Especially since outsiders are watching.  

2) Equally disturbing was Obergrupenfuhrer Priya Mathur’s locking Brown out of the office and refusing to provide transcripts of prior meetings. Is CalPERS becoming a banana republic? Anyhow, directly faced with the issue, even this Board couldn’t take the heat, and voted to keep the practice of making transcripts of Board meetings. Overruling the staff recommendation, by the way. Personally, I wonder if Priya Mathur has the cognitive skills to read the documents in question, much less comprehend them.  

3) Next, we discover that staff, out to “help” the Board members, has them sign blank and undated expense forms! Even I was agog with this one, but you can read the article Criminality CalPERS Style here proving it’s true beyond a doubt.  

4) In light of all the absolutely egregious and probably illegal actions taken directly and indirectly by her very own self, CEO Marcie Frost had the brass to use another bought and paid for consultant to miraculously recommend a big-time compensation increase. Yup, this in addition to the fact that she’d been using the Ted Eliopoulos gimmick of getting huge bonuses (18% last year).  

The fact that she got the job at all was a gift (of public funds), and her performance to date has been more as a front for General Counsel Matthew Jacobs than indicating that she has actually done anything positive to justify her existence.  

I could go on, but it gets depressing. And this was all within the last few weeks!” 

That was in May 2018. Now in 2020, Margaret Brown’s discipline for failing to go along to get along, mostly before she was even a Board member, proves that Marcie Frost & Matthew Jacobs wear Henry Jones like a hand puppet. 

Hey Beneficiaries, Wake Up! 

If you are one of the almost two million beneficiaries of CalPERS who work, or used to work, for a CalPERS public agency. is this any kind of BS discipline that you, your Union, or your Agency would impose or tolerate? 

I think not. If anyone I know was subjected to this total repudiation of due process of law suffered by Board member Margaret Brown, the only question would be how much money it would cost the idiot who did it after they were sued. 

What’s worse, is that she is being tortured by a bunch of incompetent state employees themselves who work for CalPERS, do whatever Marcie says lest they too get hammered, and they are all hiding behind legal advice from an odious and incompetent General Counsel who pretends to give a damn about the fiduciary duties of the Board. Even as he actually runs the Board behind attorney client privilege, 

And there’s not much objective dispute that the investment performance of the giant Fund is underwhelming. Recently, NakedCapitalism outed them in a post called CalPERS Plans to Blow Its Brains Out: Seeks to Increase Risk by Boosting Private Equity, Private Debt, and Leveraging the Entire Fund.  

That post was on June 15. Then on  June 25, CalPERS itself announced that CalPERS Names Three Managing Investment Directors. 

These are not encouraging signs of competency.  

The Takeaway 

If the Board under the leadership of Henry Jones keeps giving away their oversight authority to staff, they will not be doing their fiduciary oversight, and as the assets of the Fund continue to under-perform, us beneficiaries just might want to consider crowd funding a class action lawsuit against the Board. Then the Board just might discover that they have no immunity. 

In the meantime, we need to make sure that Margaret continues on the Board, and that she is not hamstrung by bullshit “private discipline” by the unholy cabal of Jones, Frost, and Jacobs. 

So, you just might want to wander over to Margaret Brown’s Legal Defense Fund website.  

She will  probably need our help, since the M.O. of Matthew Jacobs is to spend your and my retirement money to try and bankrupt those who challenge him in court.  

Stay tuned.

(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.