Column: One CalPERS board member asks tough questions about its investments. Why are his colleagues trying to muzzle him?


During a meeting of the CalPERS board in Monterey on Jan. 19, board member Bill Slaton took the floor to launch an extraordinary attack on one of his colleagues.

Slaton accused fellow member J.J. Jelincic of “repeated unauthorized disclosure of confidential material” from board meetings over the previous 18 months. He called on Jelincic, who has been elected to two four-year terms by CalPERS members, to voluntarily resign from the board. Failing that, Slaton proposed that the board ban Jelincic from all closed sessions of the board or its committees, a sanction that doesn’t appear to be within the board’s powers.

Slaton didn’t offer a single example of leaked board information. “I cannot refute an unspecific allegation,” Jelincic said, insisting that he takes great care “not to disclose things that happened in closed session.”


If you’re going to clean up CalPERS, you need very forceful directors. California should appoint more people like Jelincic.

— William K. Black, banking and finance expert

Despite the lack of specifics, board President Rob Feckner indicated that he will place Slaton’s charges on a future board agenda, probably as early as March. “This is a matter of board governance,” he told me by email, stating that he would decide on his next step after conferring with Slaton and Jelincic and considering “all the necessary and important information.”

The limits of the board’s disciplinary powers are murky, but they probably extend only to depriving sanctioned members of their travel budgets and committee chairmanships. Jelincic is concerned, however, that the board might label him a violator of his fiduciary duty, which might harm him when he runs for a third term later this year.

Slaton, a director of the Sacramento Municipal Utility District, was appointed by Gov. Jerry Brown to the CalPERS seat reserved for local government representatives in 2012. He told me by email that his criticism of Jelincic was based on the need for “trust” among board members that sensitive, closed-session matters “remain confidential.” But the dust-up may well make the next board meeting, scheduled for Monday through Wednesday in Sacramento, a tense one. Slaton’s accusation has split the 13-member board, though Jelincic reckons he may have just enough support to narrowly prevail.

Workers and retirees dependent on CalPERS benefits, as well as public officials whose agency and municipal budgets hinge on the success of CalPERS investments, should be mightily concerned about an attack on the board’s most outspoken and inquisitive member. Jelincic’s real offense is that his determined questioning has uncovered flaws in the CalPERS staff’s abilities to manage a $300-billion investment portfolio and in the board’s ability to understand its investment choices.


“CalPERS used to be the crown jewel of institutional investors because they were so competent,” says William K. Black, who supervised the cleanup of the savings and loan industry in the 1980s and 1990s and now monitors banking and finance governance issues as a professor at the University of Missouri-Kansas City law school. Now, he says, CalPERS has fallen prey to a “toxic culture” that allowed management scandals to fester and may have cost its portfolio billions.

“If you’re going to clean up CalPERS,” Black told me, “you need very forceful directors. California should appoint more people like Jelincic.”

Jelincic has roiled the placid waters of board meetings, and some board members don’t care for that. “The board members virtually never oppose the staff or board consensus,” says Michael Flaherman, a former board member who is now a visiting scholar in public policy at UC Berkeley. By attacking Jelincic, he says, “they’re venting their pique” at a member whose dissent has sometimes gained him national press.

The roots of the conflict can be traced to a meeting of its investment committee on Aug. 17, 2015, when Jelincic interrogated members of the investment staff about CalPERS’ investments in private equity, a complex and poorly regulated corner of the financial world.

Even before then, Jelincic had emerged as something of a provocateur. The former employee of the CalPERS investment office and a past president of the California State Employees Assn. who was elected to join the CalPERS board for a term beginning in 2010 had butted heads with fellow board members when he filed public records requests for documents that the board and staff had withheld from him, a step his colleagues considered a breach of decorum. Eventually the board relented. The board in 2011 censured Jelincic for alleged sexual harassment of co-workers, charges Jelincic says were exaggerated.


At the August 2015 meeting, Jelincic closely questioned Real Desrochers, the manager of the fund’s private equity investments. His goal was to determine “what are we paying and how much are we getting for our money,” he told me recently.

Private equity firms use money from institutional investors such as CalPERS to buy control of small and medium-sized companies. The institutions pay the firms fees pegged to their investment stakes and the profits produced by the investments. The firms also collect fees from the companies they control. Those fees often are poorly disclosed and prone to abuse. Sometimes they’re credited against the institutional investors’ direct fees, which can obscure the real costs of the institutions’ stakes.

Under Jelincic’s questioning, Desrochers seemed alternately confused and evasive about what CalPERS was actually paying for its private equity investments. “That the head of PE investing at one of the world’s largest PE investors apparently doesn’t understand the basic economics of management fee offsets is astounding,” says Gregg Polsky, a private equity expert at the University of Georgia, who reviewed a recording of the meeting later.

Desrochers eventually was bailed out by Slaton, who expressed his “faith” that the CalPERS staff had negotiated fees with private equity firms “as well as could be done.” Slaton implied that pressing private equity firms to be more transparent about their fees could harm CalPERS by closing it off from potentially lucrative opportunities. “There are a large number of investors for general partners to choose from,” he said. “CalPERS is not the only investor out there.”

This seriously underestimated CalPERS’ power: As the nation’s largest public pension fund, CalPERS traditionally has been an engine driving reforms in corporate and investment behavior; but on private equity, a field rife with abuse, it had been more like a rickety caboose.

The entire exchange drew the scorn of Susan Webber, an investment consultant who writes the uncompromisingly critical financial blog under the pseudonym Yves Smith, and who finds the CalPERS board “so weak as to verge on toadying to staff.” Webber sounded a prompt alarm in her blog about Slaton’s attack on Jelincic and published a transcript.


Since 2015, CalPERS has received and published better data on its private equity investments, disclosing in November that it had paid $228.4 million in fees to private equity firms in 2015-16, a period in which the portfolio returned a meager 1.7%. But Jelincic and others complained that the figure was incomplete because the private equity firms still withhold financial information.

The fee disclosure underscored that private equity returns have disappointed CalPERS for years. According to an analysis to be presented to the investment committee Monday, the $26-billion private equity portfolio, accounting for about 9% of CalPERS assets, has fallen short of its benchmark goals over the last decade by as much as 10 percentage points.

The real danger of the campaign against Jelincic is that it might silence not only his voice, but that of others. “My fear is that it’s going to have a chilling effect on people on the board, but also on the staff,” says Andrew Silton, a former chief investment advisor to the state treasurer of North Carolina. “If you’re going to pay a price for raising questions, that’s not a good prescription for running a large investment organization. Disagreement is good for the investment process.”

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7:40 a.m., Feb. 11: This post has been updated to expand on the reporting of