Updated with correction
The Retired Public Employees' Association of California is asking for CalPERS board President Henry Jones to step down for participating in what the group calls an ongoing cover-up of former CIO Yu "Ben" Meng's "unlawful behavior."
Mr. Meng resigned in August in the wake of a complaint filed Aug. 4 with the California Fair Political Practices Commission on Mr. Meng's disclosure in an annual report filed with CalPERS that he personally held shares in two private equity firms — Carlyle Group and Blackstone Group — and in Ares Management's business development company.
The $417.3 billion California Public Employees Retirement System, Sacramento, had investment relationships with all three firms.
"Our demand is precipitated by your poor judgment and inappropriately secretive manner in the handling of the apparent Political Reform Act violations by Ben Meng while he was the CalPERS chief investment officer," said a letter from Rosemary Knox, president of the RPEA, a 24,000-member association of active and retired state employees.
"We view your actions in this instance as a continuation of your long-standing posture of openly opposing transparency and accountability on the part of the CalPERS board and staff," Ms. Knox said.
Mr. Jones is the elected representative of retired CalPERS members. He is currently serving his fourth term on the CalPERS board and his second one-year term as president. Mr. Jones retired in 1998 as chief financial officer of the Los Angeles Unified School District.
In response, Mr. Jones sent a letter to RPEA stating that he will not resign and that the RPEA's letter reflects "an organization that has been co-opted by those who care more about a political agenda than the best interests of the members it is chartered to represent."
He added that every decision and action as a CalPERS board member and board president is taken seriously.
"With one exception, our board is united in its commitment to leading the fund, respecting the rights of the professionals who work in the organization and serving our members, employers, and stakeholders," Mr. Jones said, referring to fellow CalPERS board member Margaret Brown.
In written statement replying to Mr. Jones reference to her in his letter, Ms. Brown said that all CalPERS board members have a duty under the California Constitution to act solely as a fiduciary for the participants and beneficiaries.
“It would be a breach of that duty to allow violations of the (state) Political Reform Act by CalPERS executives to be hidden from proper scrutiny, as has been the case until now,” Ms. Brown said. “The failures of oversight and compliance by CalPERS staff go beyond the actions of a single former employee and are matters that call for a detailed and public investigation, which my fellow board colleague, State Controller Betty Yee, has also publicly called for.”
Mr. Jones noted that CEO Marcie Frost has done an extraordinary job in executing a strategy to ensure members have retirement security.
"I am disappointed but resolute in my belief that RPEA leadership does not currently represent the best interests of retired public employees," he said.
In a written statement sent to Pensions & Investments earlier Wednesday, Mr. Jones said the "allegations are false and are part of a desperate political stunt orchestrated by the failed candidate and a current officeholder of RPEA that I defeated in our board election last fall," said Mr. Jones, referring to former CalPERS board member J.J. Jelincic, in a written statement. "These are intimidation tactics and there was no lack of transparency."
Mr. Jelincic unsuccessfully ran against Mr. Jones in a 2019 election for the retired member’s seat on the CalPERS’ board.
The retiree association letter dated Aug. 31 said that Mr. Jones knew of Mr. Meng's violations, which included personally investing in the stock of Carlyle and Blackstone, to which CalPERS had committed capital to private equity strategies during Mr. Meng's tenure. The enforcement division of the California Fair Practices commission is currently investigating two anonymous complaints filed against Mr. Meng.
Months before Mr. Meng's alleged violations became public, the letter said that Mr. Jones knew of CalPERS CEO Marcie Frost's "apparent plan to keep the violations a secret from the board as a whole and the public."
Mr. Jones said in the statement said that CalPERS staff, including the CIO, report directly to the CEO, who has responsibility for any disciplinary actions. The decision whether to terminate a CIO is shared by the CEO and the board.
Under a CEO delegation approved by the board in June, the CEO also is solely responsibly for hiring and terminating executive staff including the CIO.