By any measure, CalPERS has big problems. It’s tens of billions of dollars short on what it owes to public employees and retirees, and it’s facing an occasional uprising from local governments worried about the rising costs of participating in the $360 billion fund.
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.
That writer, Susan Webber of Naked Capitalism, has uncovered discrepancies in a chief financial officer’s job application that led to his removal. In August, she revealed that CalPERS promotional materials mischaracterized the educational background of Chief Executive Marcie Frost. Now the state treasurer is calling for an investigation in an effort to resolve questions he worries could discredit the fund.
Webber, a New York-based corporate management consultant, says she’s out to hold the nation’s largest pension fund accountable for governance lapses that could threaten defined benefit retirement plans around the country.
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“CalPERS seeks national and international media coverage. Then, when the press takes interest in their problems, CalPERS shoots the messenger. I am strong supporter of defined benefits plans who recognizes that CalPERS’ governance and operational failings give grist to critics of public pension plans,” she wrote in a message to The Sacramento Bee.
Yet her style of advocacy leads some CalPERS leaders to close ranks against her reporting. They view her as too closely aligned with camps that want to oust Frost and unseat elected representatives on the CalPERS board.
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.
Webber tends to write with a sharply critical style that can get in the heads of the officials she covers. For instance, her first piece on Frost’s application began, “Marcie Frost, who joined the pension system as CEO in October 2016, even on paper was not qualified for the job. She was only a high school graduate. And even putting that aside, her experience was also wanting.”
The report prompted Feckner and Board President Priya Mathur, who were aware of Frost’s education when they hired her, to dismiss the story as a “spiteful attack.”
Webber, who writes under the pen name Yves Smith, founded the popular financial blog Naked Capitalism in 2006. It became a must-read during the recession, when Webber made a case for financial reforms on her blog, in a book and on television appearances.
She turned her attention in earnest to the California Public Employees’ Retirement System about five years ago and struck up a relationship with then-board member J.J. Jelincic, when both were drawing attention to what they considered to be excessive fees CalPERS was paying to private equity firms.
Now, when CalPERS leaders like Feckner suggest that Webber is actively involved in political campaigns, they’re alleging that she’s working with Jelincic to oust Jelincic’s adversaries.
Jelincic says he does not have a formal political consulting relationship with Webber. He says the complaints about her akin to “attacking the messengers and not attacking problems.”
‘Working with a couple of the candidates’
As the controversy mounted, The Bee obtained Webber’s recent communications with CalPERS staff through the California Public Records Act.
The documents showed that:
▪ In September 2017, Webber identified herself not as a blogger but as a “management consultant ... working with a couple of the candidates” when she called a customer support line for a company tallying ballots in the CalPERS election. Webber’s coverage of the election was favorable to candidates Margaret Brown and Michael Flaherman.
Webber disputed that she characterized herself as someone working with candidates for the board. She wrote to The Bee that she was trying to relate to the customer service representative based on her own experience participating in marketing campaigns for financial services clients. “Not political campaigns,” Webber wrote.
Her call led contractor Integrity Voting Systems to send a written message to CalPERS with a recording of Webber’s six-minute conversation with an employee. The Bee obtained a copy of the recording.
▪ During last year’s CalPERS board election, Jelincic – while still on the board – used his state government email address to share news stories with Brown, Flaherman and Webber. Some of the messages include remarks about the election or tone of coverage. In one, Jelincic coached then-candidate Brown on how to write campaign material after she sent a message to CalPERS board members. He copied Webber and Flaherman on the exchange.
“Simple declarative sentences are better campaign material. If people have to re-read a sentence, they will not,” Jelincic wrote to the group on May 13, 2017.
State law prohibits elected officials from using government resources — including communication devices — to support or oppose political campaigns. Jelincic did not recall the message and declined to comment on it.
▪ Webber this summer arranged for board member Brown to retrieve documents she sought through public records requests at CalPERS and at the state’s department of human resources. That suggested to other board members that Brown and Webber have an ongoing working relationship that is deeper than journalists typically have with officials they cover.
▪ Webber in May 2017 wrote a direct appeal to CalPERS board members asking them to reconsider discipline of board member Jelincic for allegedly leaking closed-session material and to disclose documents related to his case. CalPERS classified the documents as confidential. Webber criticized the decision to conceal the disciplinary records as well as the premise of Jelincic’s censure.
“Clearly the paramount aim is to obscure the reality that the charges against Mr. Jelincic were unsupported by meaningful evidence,” she wrote.
A failed overture
Last month, documents Brown requested from CalPERS board staff showed up on Webber’s blog in a piece that called attention to a practice that allowed board members to have employees stamp their signatures on expense forms.
Board member Theresa Taylor, a former vice president of state government’s largest union, said she felt Brown was disingenuous when Taylor asked why Brown wanted copies of their oaths of office. Brown didn’t answer the question, Taylor said.
The oaths included board member signatures, which Naked Capitalism used to compare with stamped signatures on expense forms.
Brown “could have said she wanted to compare signatures. She didn’t,” Taylor said. Brown said she did not have to explain to anyone why she wanted the documents.
Webber has attended board meetings to offer her perspective based on her experience in the financial services industry. Frost, the CalPERS chief executive, say they greeted each other at a July meeting, but did not talk much.
Frost attempted to meet Webber last year during a trip to New York. Emails show that the attempt failed primarily because Frost did not want to do an on-the-record interview at the time and Webber wrote that she wanted to record their conversation.
Webber’s message included criticism of CalPERS General Counsel Matt Jacobs, a longtime Sacramento attorney who has worked for the U.S. Attorney’s Office and held his position at CalPERS since 2014. On her blog, Webber has argued that Jacobs participated in a “campaign against Jelincic” and failed to correct governance lapses.
Webber wrote in an email to Frost that CalPERS “needs to replace” its general counsel because Webber believed Jacobs was doing “great harm.”
“A meeting intended to ‘improve our working relationship’ is unlikely to succeed as long as Jacobs is at CalPERS. If that changes and you are still interested in meeting, we can revisit then,” Webber wrote to Frost in September 2017.
Frost interpreted Webber’s email as a request for her to dismiss Jacobs. She did not fire him. She did not meet with Webber, and their relationship did not improve.
“I remain willing to meet with her,” Frost said. “The conditions from before are not acceptable.”