CalPERS must strengthen rules to prevent conflicts of interest and sudden resignations
CalPERS Chief Investment Officer Ben Meng was California’s highest-paid employee until Aug. 5.
That’s when CalPERS announced his resignation in a late-night email after the Fair Political Practices Commission zeroed in on Meng’s investment of up to $100,000 in Blackstone Group, Inc. a New York financial firm.
Meng had approved a $1 billion investment with Blackstone for the state’s pension fund in March. This led a whistleblower to alert the FPPC to Meng’s personal financial holdings. The FPPC also collected two pages of other potentially damaging conflicts of interest.
Meng, who drew up to $1.5 million a year in compensation at CalPERS, said he was retiring after only 18 months “to focus on my health and on my family and move on to the next chapter in my life.”
Nothing to see here, folks. It’s a just standard exit template in a brewing scandal. More time with my family. Health. Next chapter.
Yeah, right.
CalPERS manages a $415 billion portfolio for California’s 2 million retired state workers and their families. The state’s retirees and taxpayers deserve utter transparency and unassailable ethical behavior in its administration.
But CalPERS still hasn’t gotten it — yet. That’s why it’s important for the CalPERS board to learn a lesson here and ensure nothing like this ever happens again.
The board will meet on Sept. 16 to discuss adding more stringent guidelines governing the next Chief Investment Officer’s portfolio, with an eye toward “significantly diminish(ing) any perceived or real conflicts of interests originating from such assets,” according to CalPERS Human Resources Division Chief Michelle Tucker.
This seems like an important goal as the board and CalPERS Chief Executive Officer Marcie Frost launch yet another search for someone to administer the fund. Dan Bienvenue, the deputy CIO, will serve in an acting capacity until Meng’s successor can be named.
A quick perusal of Meng’s State of California Form 700 — the financial disclosure statement required of many of the state’s employees — shows a rather curious portfolio that extends beyond the Blackstone Group. The Carlyle Group, the Bank of China, and PJGC Gazprom are all well-represented in Meng’s portfolio.
The FPPC sent a letter to Meng’s lawyer in August noting it intends to investigate, with the caveat that they hadn’t “made any determination about the validity of the allegation(s).”
CalPERS board president Henry Jones told The New York Times that Meng had “produced good results in a tough market,” as The Times phrased it. Meng hit a 4.7% return.
However, even a fund manager who beats the market must adhere to the rules. His sudden departure, and the evening press release, seems more telling than any Form 700. California state taxpayers and retirees deserve the utmost integrity, particularly with the state staring down the maw of a $54 billion potential shortfall.
The CalPERS board must strengthen the rules and make sure this never happens again.
This story was originally published September 11, 2020 at 5:00 AM.
CORRECTION: This editorial has been revised to reflect that CalPERS has 2 million members rather than 1.6 million; to clarify that CalPERS announced Ben Meng’s resignation on a Wednesday night rather than a Friday night; to clarify that Meng had investments of “up to” $100,000 in The Blackstone Group, Inc.; to clarify that Meng’s total compensation, rather than salary, was up to $1.5 million; and to clarify that the FPPC sent a letter to Meng’s attorney in August rather than September.