Ex-CalPERS board member sues pension fund, demands records following investment chief’s exit

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CalPERS board members violated California’s open meeting law when they held a wide-ranging private discussion following the abrupt resignation last year of Chief Investment Officer Ben Meng, a former board member says in a new lawsuit.

J.J. Jelincic, a former CalPERS real estate investment officer who served two terms on the board and lost a bid for a third in 2019, is asking a judge to release parts of a transcript and other records he says should be public. Jelincic filed the lawsuit against the CalPERS Board of Administration on Monday in Alameda County Superior Court.

Meng resigned Aug. 5 after a tipster filed an anonymous complaint with a state ethics watchdog over his personal investments. The complaint said Meng oversaw CalPERS investments in funds in which he held personal investments, potentially violating conflict-of-interest rules.

The 13-member CalPERS board held a closed-to-the-public meeting on Aug. 17 during which Jelincic says its members had a broad discussion on the Meng situation.

His lawsuit says the meeting violated a California law that says state boards and commissions must make meetings public except when discussing specific subjects that qualify for exemptions, including employee performance and lawsuit strategy.

A notice published by the board said the meeting was closed so board members could discuss a “chief executive officer’s briefing on performance, employment, and personnel items.”

Jelincic’s lawsuit alleges, based on notes a current board member shared with him, that the conversation touched on many topics not covered under the agenda, including hiring and training and new policies the board could use to govern investigations.

“If it’s a policy decision, it ought to be in public,” Jelincic said by phone Wednesday. “It’s the public’s interest, it’s the beneficiaries’ money.”

CalPERS spokesman Wayne Davis declined to discuss the lawsuit in detail.

“CalPERS fully complied with California law on these matters,” Davis said in an emailed statement. “We expect the court to reach the same conclusion and promptly dismiss the lawsuit.”

In a letter to Jelincic’s attorney, CalPERS senior attorney Robert Carlin said CalPERS had the right to close the meeting since it was related to personnel matters. Carlin’s letter is included as an exhibit in Jelincic’s lawsuit.

Notes from a CalPERS board member

Jelincic’s lawsuit cites an Aug. 10 letter that State Controller Betty Yee, a member of the board overseeing the $440 billion pension fund, sent Board President Henry Jones after Meng’s exit.

Yee wrote that she was “deeply disappointed” in Meng. She said she didn’t want to wait until Aug. 17 to discuss the former CIO’s “blatant disregard of conflict-of-interest laws and policies.”

She asked Jones to hold the meeting earlier and make sure the board would hear from attorneys regarding “potential violation of laws, adequacy of existing policies, safeguards that could prevent a recurrence of the situation, and the chief executive officer’s oversight and implementation of policies and safeguards.”

Jones declined to reschedule the meeting.

Just before the closed session started on Aug. 17, Yee asked Jones again about the requests she had made in the letter.

Since the closed session would have to be limited to the briefing from Chief Executive Officer Marcie Frost under state law — since that’s how it was noticed — Yee wanted to know when her requests would be addressed.

Board member Margaret Brown also raised an objection, saying she thought the board should accept public comments during the brief open portion at the start of the meeting. CalPERS attorney Matt Jacobs told her the board didn’t have to do that, since the meeting was scheduled as a closed session.

Jelincic alleges in his lawsuit that the board did discuss the topics Yee raised despite the law’s restrictions. His lawsuit says the board discussed 55 different topics. He said the list of topics, which is included as a redacted exhibit in the lawsuit, was given to him by a board member, but he declined to say which board member.

His lawsuit requests that the topic list, along with any portions of transcripts or audio recordings from the meeting that were improperly withheld, be made public.

He also asks the court to order CalPERS to audio-record its private sessions and preserve the recordings for five years.

Financial records

Separately, Jelincic’s lawsuit requests financial documents related to a June 2020 audit report. In that report, audit firm BDO said a CalPERS audit of its 2018-2019 finances overestimated the value of some real assets — including real estate and other holdings — by about $583 million.

Jelincic requested underlying documents related to the overestimation through California’s Public Records Act, and CalPERS denied his request. His lawsuit asks the court to order CalPERS to hand over the documents.

“If you’re throwing around half a billion dollar errors, how much confidence can I have in your financial statements,” Jelincic said.

In a February meeting this year, Billy Kim, a partner from BDO, told the board that changes to valuations are common for the last quarters of fiscal years, since accountants use estimates from the final quarter when they prepare year-end financial reports, and sometimes the estimates are off.

Cohen said the overestimation — amounting to less than 1% of the $400 billion fund’s value at the time — had been determined not to be large enough to trigger more significant revisions to a year-end financial report.

The audit report said auditors had not identified “any material inconsistencies or concluded there are any material misstatements of facts” that hadn’t been corrected.

This story was originally published March 11, 2021 at 11:43 AM.