CalPERS Independent Retiree-Funded Forensic Investigation Released
CalPERS's controversial CEO Marcie Frost, a high school graduate, blasted the 289-page report by renowned pension experts as "baseless" and "breathless."
As reported in NBC News, a year-long preliminary forensic investigation into performative transparency, profound conflicts of interest, hidden excessive costs, and chronic underperformance at the nation’s largest public pension has now been released to the public.
In the coming weeks, we will provide readers with a series of articles delving into the expert findings from CalPERS: America’s Misled and Misleading Pension Leader (download below). There’s a ton of information here about CalPERS specifically, but the report also identifies disturbing issues regarding our nation’s public pension systems generally which, until now, have not been openly addressed. The need for Inspectors General—at all state pensions—is a central theme of the report. We also detail concrete steps IGs can take to improve accountability and performance at state pensions.
The need for Inspectors General—at all state pensions—is a central theme of the report.
Whether you agree with the disturbing findings in the report, presumably we can all agree that the introduction of effective, independent oversight—an IG knowledgeable about pensions with subpoena authority to confirm or deny any concerns—would be beneficial to all stakeholders.
The extraordinary CalPERS review was funded by the Retired Public Employees’ Association of California (RPEA) and made possible through the support of thousands of members and contributors committed to transparency and accountability in public pensions.
It was a sweeping independent investigation conducted by renowned pension experts selected by participants—free of political influences weighing upon CalPERS’s board members and senior staff who, as the report details, generally lack pension investment fiduciary expertise.
Before we discuss the investigative findings in our upcoming series of articles, it is important to recall that during the fundraising period, CalPERS’s embattled CEO Marcie Frost, speaking on behalf of the massive state pension, preemptively assured Wall Street listeners on CNBC Squawk on the Street that the fund would not cooperate with the review funded by its concerned participants:
“CalPERS is not sharing the limited partnership agreements. CalPERS is not sharing any side letters… We are extremely transparent… But frankly, private markets are private for a reason…”
At that time, no one had asked CalPERS to “share” anything—the review had not even begun. Yet, somehow, Frost felt compelled to publicly announce to Wall Street she would not be giving her participants anything they might.. someday… ask for, such as key documents detailing ever-growing investment of their hard-earned retirement savings in high-cost, high-risk speculative private alternatives.
Frost, immediately upon release of the 289-page expert report late last week, blasted it as “an opinion piece full of baseless assertions and breathless language designed to make our members needlessly fear for the stability of their pensions.”
Perhaps it’s no surprise that a high school graduate with no investment expertise or credentials—no command of the pension basics—would defensively call the most comprehensive critical analysis of CalPERS ever released to the public “baseless.”
Ironically, it was CalPERS members’ justifiable fears for the stability of their pensions—as a result of decades of widely-publicized, horrific mismanagement—that led them to take the extraordinary step of contributing their hard-earned savings for an independent expert review.
In the words of Billy Joel:
We didn't start the fire
No, we didn't light it, but we tried to fight it
How did Marcie Frost, a high school graduate, ever become the CEO of one of the largest pension systems in the country?
That would be called a board of trustees. The trustees are vested with responsibilities to manage the investment staff. I would note the 7 members appointed as "political" representatives and 6 members appointed as "Calpers member" reps. Private equity a big investor in elections nationwide; political appointees have two masters here. https://www.calpers.ca.gov/about/board/board-members