CalPERS board at odds with maverick member

As one of 13 CalPERS board members, J.J. Jelincic presumably has some authority. But last June and July, he filed Public Records Act requests to force CalPERS to give him weekly reports from its federal lobbyists, much like any member of the public.

CalPERS tripled its federal lobbying force last year from one all-purpose firm, the Lussier Group, to three separate lobbying representatives for retirement policy, investment and market regulation, and health care issues.

Jelincic wanted to see what CalPERS was getting for its increased spending. So he asked for the weekly reports from the lobbyists, as specified in their contracts. But the rest of the board had decided monthly reports, also specified in the contracts, are enough, and Jelincic’s informal request was denied.

The unusual Public Records Act requests by a board member helped trigger a CalPERS governance committee discussion last month of “board member behavior” that was clearly aimed at Jelincic. (See video of meeting here.)

In addition to filing the Public Records Act requests, Jelincic was criticized by other board members for “disparaging” staff in public and taking more than his fair share of time at board meetings by asking questions.

“We need to have some kind of policy where there are some strong consequences to avoid that kind of thing from happening,” said board member Henry Jones, referring to the public records request and disparagement of staff.

Jelincic

Jelincic


Jelincic is in the rare, if not unprecedented, position of being a CalPERS employee and board member. He has been a member of the investment office since 1986 and a member of the board since 2010 after his election by CalPERS members.

During his first year on the board, Jelincic was allowed to remain on the job. He was placed on leave around April 2011 and still collects his salary, $118,000 last year according to the Sacramento Bee state worker salary database.

Because of his dual positions, three opinions from the state attorney general say he should not participate in some board discussions and decisions, particularly if they are about top executives who might affect his supervision or pay if he returns to his job.

“How can you be a fiduciary if you can’t be involved in the people running the system?” Jelincic said last week of his fiduciary duty as a trustee to manage the retirement assets of CalPERS members.

Three attorneys asked to look at the opinions agreed they are wrong, Jelincic said, and the three attorneys also agreed on a rough road for righting the wrong: “If you want to spend $60,000 and four years, we can make them go away.”

One of the well-publicized disparaging remarks about CalPERS staff came last year after the board, excluding Jelincic, selected Ted Eliopoulos to be chief investment officer, replacing the late Joe Dear.

Jelincic told Pensions and Investments that he worked under Eliopoulos in the CalPERS real estate investment unit from 2007 to 2012, and “he doesn’t have the temperament or the management skills” to be chief investment officer.

As some have noted, Jelincic was censured by the CalPERS board in September 2011 for the sexual harassment of co-workers, verbally and with suggestive looks, after first being warned about complaints in 2009 by Eliopoulos and another official.

At the investment committee in August, Jelincic clashed with the chairman, Jones, while questioning staff at length about not knowing the profit share or “carried interest” paid private equity firms, which drew some criticism earlier in the national media.

Jelincic later complained in writing that staff had been inaccurate, evasive and condescending. While not agreeing that “decorum” had been breached, Jones scheduled a meeting with top staff. Jelincic walked out when not allowed to tape it.

After four years of data-system development, CalPERS last month issued one of the first reports of total private equity fees paid by a major pension fund. But some of the luster was dimmed by the criticism for not tracking the fees earlier.

A general issue that emerged at the governance committee last month is whether a board member, who disagrees with a decision of the board majority, should make their disagreement public or pursue change internally.

Klausner

Klausner


Robert Klausner, CalPERS fiduciary counsel, told the board that “external” action by a member can undermine a decision or policy adopted by a majority of the board.

“To go through the Public Records Act, or ask somebody else to do it, I think it undermines again the effectiveness of the mission of the board as a whole,” Klausner said, “and I don’t think that’s consistent with good fiduciary practice.”

Klausner’s remarks were sharply criticized by Susan Webber, writing as Yves Smith at her “Naked Capitalism” website. She also wrote a critique of Klausner’s work with a Jacksonville pension system and noted his lack of a California law license.

Last week, Klausner said his firm has two attorneys licensed in California. He said his role is “best practices,” not legal advice. He offered a detailed rebuttal of Webber’s critique, saying the issue was between Jacksonville and the pension fund, not with him.

At the governance committee, board member Richard Costigan said: “The concern I have with PRAs is what the “P” stands for. It’s public. I’m surprised we are having this discussion.”

On the other hand, Costigan said, the requests can be used to “paper people to death” and slow down an organization. He said in this case he was struggling with how the information requested by Jelincic should be released.

Board member Priya Mathur said her understanding is that what Jelincic now receives are summaries of email and other informal communications between lobbyists and staff, creating more work for the staff.

Klausner said the public release of half-developed thoughts might impede fully-developed thoughts. But some may want to know the components, he said, suggesting staff, the general counsel, and board members could work on a release policy.

Jelincic reminded his colleagues that the lobbyist contracts call for monthly and weekly reports. He said he knows there are interim emails, phone calls and other contacts between the staff and lobbyists.

“Those, quite frankly, are never identified as public records,” Jelincic said. “I would never ask for them.”

In a way, Jelincic is following in the footsteps of another CalPERS employee who became a board member. William “Scotty” Rosenberg, a CalPERS retirement advisor, retired in 1991 but did not become a CalPERS board member until 1993.

A Plan Sponsor article in July 1997 said Rosenberg “likes making waves, even if his fellow board members consider him a rabble-rouser.”

Presumably not to spend less time with Jelincic, the staff was asked to propose options this month for scheduling fewer CalPERS board meetings, a move to reduce preparation time for members and staff. The board currently holds monthly three-day meetings.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 7 Dec 15

From CalPERS Public Records Act summary report August 2015

From CalPERS Public Records Act summary report August 2015

12 Responses to “CalPERS board at odds with maverick member”

  1. James McRitchie Says:

    Jelincic plays an important role on the Board. I hope members keep reelecting him.

  2. Observer Says:

    Why is this charlatan (J.J. Jelincic) still being paid for a job he hasn’t held since 2011, with taxpayer dollars? How much is he being paid as a Board Member, which is in top of his 118K salary for doing nothing? CalPERS needs to quit cowering to the Public Employee Unions and get their house in order. Again, why is Jelincic being paid, since 2011, for a job he has been removed from for four years:

    “Jelincic is in the rare, if not unprecedented, position of being a CalPERS employee and board member. He has been a member of the investment office since 1986 and a member of the board since 2010 after his election by CalPERS members.

    During his first year on the board, Jelincic was allowed to remain on the job. He was placed on leave around April 2011 (for cause) and still collects his salary, $118,000 last year according to the Sacramento Bee state worker salary database.”

    This man has absolutely NO business being involved in any tax payer funded agency whatsoever. As the article also states: “As some have noted, Jelincic was censured by the CalPERS board in September 2011 for the sexual harassment of co-workers, verbally and with suggestive looks, after first being warned about complaints in 2009 by Eliopoulos and another official.”

    This man seems to lack any/all boundaries of decency and/or professionalism, and is a taxpayer’s nightmare and crook. Every time there is a CalPERS decision/vote to be made – he makes the decision/vote that is detrimental to taxpayers, CalPERS itself, and sanity.

    If it were up to him he would raise the discount rate to a number that would show 100% funding and tell taxpayers there‘s nothing to worry about. And when the house of cards collapses (and we’re in the process of that right now) he would blame management while promoting the idea that every local government needs to sell city/taxpayer assets to help cover the bailout of PUBLIC EMPLOYEE UNION PESIONS.

    Why does Jelincic still have a job with CalPERS? Do the unions really have that much control over the ability to TAX taxpayers because the CalPERS Board of Administration is gambling their tax dollars- and consistently losing? If so, and I think it is so, let’s fix the problem now.

  3. Joe Madrigal Says:

    JJ is my hero.

  4. Observer Says:

    Joe Madrigal Says: JJ is my hero.

    That’s fine. But what is it about about J.J., in your opinion, that makes him a hero? I would like to understand what you see in this individual that I do not. IMO, he is the epitome of what’s wrong with the CalPERS Board of Administration

  5. spension Says:

    Amazing that the CalPERS staff has played hardball over simple public information requests…. certainly gives the appearance that improper behavior is being covered up. CalPERS should have one and only one response to public information requests:

    “Here it is, sir or ma’am, can I help you with another request?”

    Anything else appears to be a coverup… hasn’t CalPERS learned that from the last 45 years of public information issues in the US, starting with Watergate? Or maybe back to the Gulf of Tonkin, more like 55 years ago?

    Yves Smith aka Susan Webber deserves kudos for bringing up this issue.

    The worst part is: DB common-fund pensions are, when well managed, by far the best retirement solution. CalPERS’ behavior is smearing mud all over the DB solution that is quite effective in other public plans throughout the Country… well, `more mud’, as Illinois, Rhode Island, Alabama etc have done their best to sully the best retirement system imaginable.

    DC plans have ended up being extraordinarily expensive due to 1)the high longevity risk; 2)the huge fees for all sorts of marketing expenses, trips for boyfriends and girlfriends to the Super Bowl, Kentucky Derby, etc.

  6. Tough Love Says:

    Quoting Spension ……….”CalPERS’ behavior is smearing mud all over the DB solution that is quite effective in other public plans throughout the Country…”

    Patently false.

    When PROPERLY valued using assumption and methodology REQUIRED by the US Gov’t of all PRIVATE Sector DB pension Plans (instead of the extremely rosy assumptions and methodology ROUTINELY employer by ALL PUBLIC Sector pension Plans), MOST Public Sector Pension Plans are so greatly underfunded that, were they Private Sector Plans, Gov’t regulation would restrict the granting of any further pension accruals.

  7. spension Says:

    “.. ROUTINELY employer by ALL PUBLIC Sector pension Plans), MOST Public Sector Pension Plans…”

    There are plenty of perfectly well-funded public sector and private sector DB funds in the US. You have no evidence that MOST are poorly funded. SOME are poorly funded, but MANY are just fine.

  8. Tough Love Says:

    Spension,

    “Private” Sector pensions are not the subject at hand, and THEY are now (on average) on the underside of 80% fully funded using FAR FAR more conservative assumption & methodology than (the extremely rosy assumptions and methodology) used by ALL PUBLIC Sector Plans.

    The majority of Public Sector Plans would …. if using the SAME assumptions & methodology REQUIRED of PRIVATE Sector Plans…. would be below 60% funded, a level so poor that they would not be allowed to credit any further pension accruals.

    DB Pensions financially “work” in the PRIVATE Sector (in the few companies still willing to take on the VERY high cost of even reasonable benefit levels) only BECAUSE OF the VERY conservative assumption & methodology required of them by Government Regulators.

  9. spension Says:

    As we’ve gone around on many times, the investigations of Ellen Schultz, a Pulitzer-winning Wall Street Journal reporter in her book
    http://www.retirementheist.com `The Retirement Heist’ document a very different story of the demise of private sector pensions. Not all companies were rotten, but a great many household name corporations transferred the middle-class pension assets to the funds that give DB benefits that are princely to upper management.

    Plenty of good DB plans in the public sector… States of Wisconsin, North Carolina, Delaware, Washington, South Dakota, etc.

    Pretending that `they’re all bad’ is just plain inaccurate, no better than claiming all the private sector got slices of the $23 trillion bailout to the private sector in 2009 (number from the SIGTARP, included all loading like interest free loans, dark bailouts of hedge funds, etc).

  10. Tough Love Says:

    Spension,

    Because you have no good answer, you are changing the focus of your point which in your words from your earlier comment was …

    ”CalPERS’ behavior is smearing mud all over the DB solution that is quite effective in other public plans throughout the Country…”

    I’m not disagreeing that PRIVATE Sector employers aggressively ended DB pensions (whether for justifiable reasons or otherwise), but that YOUR point that …….. ” the DB solution that is quite effective in other PUBLIC plans throughout the Country” ………….. is Patently False.

    You can re-read my 2 comment to you for the details, but to get right to the point …… if PUBLIC Sector DB Plans were REQUIRED to value their Plans using the SAME assumptions & methodology required (by the US Government) of Private Sector Plans, the RESULTANT funding ratios would (in MOST cases) be BELOW the 60% funding level for which (if a PRIVATE Sector Plans) no further pension credits can be granted.

  11. Tough Love Says:

    Spension, Follow-up to my last comment…

    From this link:

    http://www.statebudgetsolutions.org/publications/detail/promises-made-promises-broken-2014-unfunded-liabilities-hit-47-trillion

    The Average 2014 funded ratio for Public Sector Plans using their “official” discount rate (equal to their assumed investment return rate) of about 7.5% is 72,5%.

    However, the Average 2014 funded ratio for Public Sector Plans using the 15-year U.S. Treasury bond yield of 2.734% is 36.0%.

    Private Sector Plans use a discount rate of approximately 4%, and a simple interpolation suggests that that 4% would result in a Public Sector funded ratio of just about 45.7% ……. WAY below the 60% cutoff that would disallow any further pension accruals.

    MANY MANY Public Sector Plans are ALREADY “Dead Man Walking” …. it’s just that our Elected Officials are so afraid of the consequences of acknowledging that, that they PRETEND everything is manageable. It’s not, and Freezing them to STOP digging the financial hole we are in even DEEPER, is just step #1 in addressing this impending calamity.

  12. spension Says:

    And Many Many Public Sector DB plans are just fine… I listed 5 states… Wisconsin, North Carolina, Delaware, Washington, South Dakota….

    I don’t agree with the Treasury bond discount rate. It is a bad way to do the calculation. Over 200 years the US stock market returned 7% in real terms (10% before inflation).

    I don’t advocate using 7%, though. The whole effect is variance, not mean. Taking a lower mean doesn’t address the real issue, which is, that big fluctuations sink you (even when you’ve been good and made the required contributions). The right way to do the estimate is with numerical simulations that take fluctuations into account. In the DC business lots of people due that… see Wade Pfau, for example.

    But in DB plans, there is bonafide Risk Reduction from getting rid of the longevity risk; a second risk reducer (w/r to fluctuations) is the staggering over time of contributors. Need to do the math right!

    A lot of the examples you give in that article, like Illinois, never even made the contributions they were supposed to make. That is a different problem entirely, and not probative of the real problems.

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