Saturday, January 8, 2011

New York Times: S.E.C. Investigating California Public Employees' Retirement System (CalPERS)

I sincerely hope it is a disclosure issue and not just the pay-for-play sleeze that the fund is known for.
Kudos to the writers, they point out some facts I thought were known only to aficionados.
From the New York Times:

U.S. Inquiry Said to Focus on California Pension Fund
Federal regulators are investigating whether California violated securities laws and failed to provide adequate disclosure about its giant public pension fund, according to a person with knowledge of the investigation

The Securities and Exchange Commission normally polices companies, but last year it brought its first enforcement action ever against a state, accusing New Jersey of securities fraud for misleading bond investors about the condition of its pension fund. The commission signaled, in its settlement with New Jersey, that it was going to look more broadly at the pension disclosures of states and cities.

The fund, the California Public Employees’ Retirement System, known as Calpers, lost about a quarter of its total investment portfolio during the financial crisis, leaving the state responsible for replacing billions of dollars each year and contributing to its huge deficit. The question is whether California adequately disclosed in the preceding years how risky the pension investments were and how much money it might need to cover any shortfall.

But it is unclear whether investigators are focusing on those risks or on possible conflicts of interest in steering investments to related parties, the subject of a separate investigation by the attorney general of California.
S.E.C. officials declined to confirm an investigation, citing agency rules. But the person with knowledge of the investigation said it was among the agency’s top priorities. A spokeswoman for Calpers, which is America’s largest pension fund with assets of about $220 billion, said it had not been contacted by the S.E.C. about its accounting or about financial disclosures....MORE
Here's one of the tidbits:
...Calpers has lately been under fire for a big benefit increase in 1999. At that time the fund ran various assumptions on how its investments might do. It discussed them in a public meeting but the state did not put them into its bond prospectus, which was the responsibility of the state treasurer, then Phil Angelides, who also sat on the board of Calpers....
In June's "CalPERS Asking California for More Money" I went over some of the history:
Remember this choice piece of bullshit that the public employee pension plan put out when we and a half dozen other wonks were warning that CalPERS market assumptions were #^$*(@! nuts?...

...One of these days I'll get around to posting on the 1999 deal the politicians cut with the unions that doomed the taxpayers of the formerly Golden State.
In the meantime here's the database of the CalPERS $100,000 per year pension club. Over 9100 members!
And don't let the name fool you, some of the members are taking home multiples of that $100K....
In May's "Public pensions: "Calpers Dreaming of Dow 28,000,000?" But for now asks Bankrupt California for an additional $600 Million" I went over some of the behemoth's return assumptions.

So you don't think we're some sort of gadfly-come-lately, here are the results for a Google search of the site: calpers climateer
The goog says there are 3550 hits.