Eight years ago, the California Legislature and then-Gov. Arnold Schwarzenegger made what may have been a gigantic mistake by allowing public employee pension funds to drop a curtain of secrecy over their dealings with hedge funds, private equity funds and other "alternative investments."
Backed by Wall Street interests, the California Public Employees' Retirement System and other pension funds declared that if they were required to treat investment deal documents as public records, they would lose opportunities to make more money and thus force taxpayers to cough up more money.
Fast forward to last month. A federal grand jury indicted a former chief executive of CalPERS, Fred Buenrostro, and a former CalPERS board member, Alfred Villalobos, on charges of conspiring to steer pension fund money into "alternative investments" being promoted by Villalobos clients.
Did the public records exemption abet the scheme? We may never know for certain, although their trials could cast some light on the question.
Certainly, however, the lack of public and media access to records made it more difficult to know who was profiting from what, or whether the deals were, in fact, good ones for the pension fund and the taxpaying public.
The indictments were returned less than a month after Assemblyman Kevin Mullin, D-South San Francisco, introduced Assembly Bill 382, which would place pension fund real estate investments behind the same shroud of secrecy that the 2005 bill dropped on "alternative investments."
Why? Pension fund sponsors, parroting what was said in 2005, claim that requiring real estate investments to be public records would make high-earnings deals more difficult. The bill responds, in part, to a 3-year-old court decision requiring CalPERS to release documents on its $100 million investment in an East Palo Alto housing project that was a big loser.
CalPERS is not at least not yet a sponsor of the bill, which is being backed by a coalition of county pension funds. But the huge state fund may have the most at stake, if one looks at its recent history of real estate investments.
It not only dropped $100 million on that East Palo Alto project, but it lost nearly a billion dollars on a Southern California land deal and another half-billion on a commercial real estate deal in New York City.
Voters and taxpayers would know a lot less about such wrongheaded deals were their underlying documents to be locked up in a vault, as the Mullin bill would do.
Its enactment could easily entice the kind of insider dealing that infected CalPERS on "alternative investments." One can just imagine local developers talking or bribing overseers of local pension funds into plugging money into their pet schemes with the deals being encased in secrecy.