Secret Calpers Meeting on CIO Meng’s Exit Sparks Legal Fight

A confidential Calpers board meeting on chief investment officer Ben Meng’s abrupt departure is the subject of an intensifying legal fight between the nation’s largest public pension fund and a former director.

Joseph John “J.J.” Jelincic sued the California Public Employees’ Retirement System earlier this month for transcripts and minutes of what he said was an improperly closed meeting held soon after Meng’s Aug. 5 resignation in the face of an alleged conflict of interest involving a Blackstone Group Inc. investment. Jelincic, a former investment officer who retired in 2019, served on the Calpers board from 2010 to 2018.

Secret Calpers Meeting on CIO Meng’s Exit Sparks Legal Fight

Though Calpers has not yet responded to the suit in court, a lawyer for the pension fund sent Jelincic a March 17 letter urging him to immediately withdraw his complaint “to mitigate the potential harm” done by him and an unnamed director who provided him with information about the Aug. 17 board meeting.

“Calpers will investigate and take appropriate action with respect to Mr. Jelincic and his source’s improper actions,” the lawyer, Ragesh Tangri, said in the letter, which was reviewed by Bloomberg.

Meng’s resignation came four months after a Calpers compliance team found he approved the Blackstone investment while personally owning shares in the private equity giant. His exit shook the pension fund, which manages nearly $450 billion and has frequently advocated for corporate governance reforms. Both Calpers Chief Executive Officer Marcie Frost and California state controller and Calpers board member Betty Yee have promised to implement oversight reforms, including possibly requiring the next CIO to divest personal holdings.

Board Secrecy

But Jelincic says the board’s secrecy about the August meeting shows it’s not committed to transparency about what happened. “The issue in this case, quite frankly, is that Calpers continues to hide information from the public and beneficiaries that should be made public,” he said in an interview.

Jelincic filed his lawsuit alleging Calpers violated the state’s open-meetings law after the pension fund’s legal staff rejected his information request. Though California law permits public agencies to discuss personnel matters in closed session, Jelincic claims Calpers is trying to use that exemption to avoid public scrutiny of a far broader discussion about Meng’s departure.

In his March 8 suit, Jelincic cited “a board member’s record” of the meeting in saying 55 topics were discussed, most of which “had nothing to do with personnel matters.” Instead, directors spent a “substantial portion” of the closed session discussing issues including the need for policies governing internal investigations, when the board should be informed of “serious issues,” and compliance matters. The board also discussed media coverage of Calpers, characterizing some of it as “gotcha articles,” the suit says.

According to Calpers though, the main issue is that Jelincic learned details of the meeting from an attendee. In his letter, Tangri said Jelincic should at least have redacted information about the meeting topics from his complaint.

“The plaintiff’s lawsuit states that a Calpers board member provided Jelincic with confidential information from a closed session meeting of the Calpers board,” said pension fund spokesman Wayne Davis. “That’s a clear violation of the law, and we are obligated as fiduciaries to investigate the matter.”

In a written response to Tangri reviewed by Bloomberg, Michael Risher, an attorney for Jelincic, said the confidentiality law doesn’t protect “matters that go beyond what is properly discussed” out of public view.

“It seems that Calpers is attempting to turn the tables on those who pointed out it violated the law,” Risher said in an interview. “The fact that these topics were discussed in closed session might be embarrassing but it’s hard to imagine how this revelation could adversely affect legitimate interests.”

Although the Calpers CIO is among the state’s highest-paid employees, the pension fund has churned through nine different individuals over the past two decades, with Meng serving less than two years. Calpers has delayed hiring Meng’s replacement due to the need to further clarify the pay and incentive structure and the reluctance of candidates to move during the Covid-19 pandemic, Frost said in a statement last week.

Meng’s personal investment in Blackstone was valued at less than $70,000, and Frost said in August that she believed the violation was unintentional. Meng had had a turbulent tenure even before then, with Calpers reporting an underwhelming 4.7% return during his first year as CIO.

A Chinese-born naturalized U.S. citizen, Meng had also faced suspicions about his allegiance from Republican politicians and conservative commentators because of a previous stint as deputy CIO at China’s State Administration of Foreign Exchange. Stephen Schwarzman was among the Wall Street figures who came to Meng’s defense. “This type of attack on an accomplished American citizen is unwarranted,” the Blackstone CEO said last year.

©2021 Bloomberg L.P.

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