CalPERS chief’s resignation followed ethics complaint, allegations over $1 billion deal
The resignation last week of CalPERS’ chief investment officer followed an anonymous complaint to the state’s ethics watchdog agency amid allegations that he had approved a $1 billion deal with a firm in which he’s a shareholder.
Yu Ben Meng, who was in charge of overseeing the giant public employee pension fund’s $411 billion portfolio, had OK’d in March a $1 billion investment with a private equity fund controlled by Blackstone Group Inc., a New York financial firm. Meng’s conflict-of-interest disclosure statements showed he held as much as $100,000 in Blackstone stock.
An anonymous tipster sent the Fair Political Practices Commission, the ethics watchdog, a complaint about Meng last Tuesday, said FPPC spokesman Jay Wierenga. The complaint made vague allegations about disclosures of economic holdings and included a two-page list of Meng’s personal investments, including his ownership of Blackstone stock.
A day later, on Wednesday, CalPERS announced his resignation in a press release that quoted Meng as saying he needed “to focus on my health and on my family and move on to the next chapter in my life.”
The pension fund followed that up Thursday with a statement from board president Henry Jones saying CalPERS was aware of “questions regarding Ben’s Fair Political Practices disclosure filings. These are private personnel matters and already have been addressed according to our internal compliance protocols.”
The Blackstone investment, first reported by Bloomberg news, represents “a breach of his responsibilities,” said James Hawley, a business professor emeritus at St. Mary’s College in Moraga and an expert on ethical investing. “A billion dollars is a lot of money.”
The fund declined comment Monday on Meng’s resignation.
Over the weekend CalPERS Chief Executive Marcie Frost issued a statement saying, “When it comes to personnel matters, we follow California state law and always protect privacy and due process and the rights of the individual. And we’ll always stay true to our mission. Every day, we focus on the 2 million people who are counting on us to provide them with financial security in their retirement.”
Meng, who took over CalPERS’ investment office in January 2019, had faced controversy already during his short tenure at the California Public Employees’ Retirement System.
In April, Bloomberg reported that Meng discontinued a hedging strategy that would have offset $1 billion worth of losses CalPERS suffered when financial markets melted down as the coronavirus pandemic struck.
The disclosure infuriated CalPERS board member Margaret Brown, who told The Sacramento Bee on Monday that Meng had misled her and other board members a month earlier by claiming the hedging strategy was still being used.
Meng was “less than truthful,” said Brown, who has jousted with CalPERS management over various issues and recently sued Jones after he disciplined her over allegations that she improperly used the pension fund’s logo for campaign purposes.
Meng defended the decision in an op-ed published in the Wall Street Journal outlining his broader investment strategy, which he said helped reduce the market downturn’s impacts on the fund by $11 billion. Meng told the CalPERS board he would have made the same decision had he known what was coming.
Meng also came under fire in February when a Republican congressman from Indiana claimed that Meng was steering American investments to China and demanded he be fired. Meng is a U.S. citizen who was born in China and worked for the Chinese government between two stints at CalPERS.
The congressman pounced on Meng’s resignation last week, declaring: “With Yu Ben Meng’s departure, CalPERS now has the opportunity to correct its course and divest from companies within China’s military-industrial complex.”
CalPERS’ top executive, Frost, repeatedly leapt to Meng’s defense over Banks’ charges. Board member Brown, despite her criticism of Meng, said “the China stuff was completely unfair.”
Meng’s resignation marks the latest embarrassment for CalPERS, which has struggled to earn the 7% profit target set by the board. CalPERS earned 4.7% in the latest fiscal year, although that was higher than the 3.2% earned by the average pension fund as the coronavirus outbreak triggered a national recession.
In 2018 the pension fund’s newly-hired chief financial officer Charles Asubonten resigned after a blogger reported that he had exaggerated his resume. And CalPERS is still smarting over a scandal that landed former CEO Fred Buenrostro in prison in 2016 for accepting hundreds of thousands of dollars in bribes from an investment representative, Alfred Villalobos, a former CalPERS board member. Villalobos shot himself to death in Reno before he could face trial.
Meng worked at CalPERS from 2008 to 2015, leaving to work for China’s State Administration of Foreign Exchange. Upon returning to CalPERS in 2019, he was California state government’s top-paid employee with a base salary of about $646,000 plus about $850,000 in incentives.
This story was originally published August 10, 2020 at 1:11 PM.