From time to time, the CalPERS board seems determined to make us think of it as a kindergarten group playing with adult clothes.

In the past, we have documented internal overheating on J.J. Jelincic, whose main violation seems to challenge the satisfaction of other trustees about what they know about the giant retirement fund investment strategy.

There was the board’s penchant for CalPERS CEO Margie Frost, who in 2018 was given a 4% increase (to $ 330,720) and a generous $ 84,873 bonus even after questions were raised about whether he had misrepresented the credibility of his education and led a spectacular detonation of exceptions without exception. appointed to the job of chief financial officer.

Now there is what appears to be a disciplined campaign carried out against other dissident councils. He is Margaret Brown, who was elected in 2017 as a broad representative of CalPERS members – that is, civil servants and retirees – and has since urged the board and staff for their shortcomings.

On December 20, Council President Henry Jones notified Brown via email that he unilaterally imposed “personal discipline” on him, as if he was using “CalPERS” as part of his social media hand despite being advised that it violated California law and CalPERS policies .

Jones’s power to discipline Brown is clearly plenary. It does not require approval or even consultation with anyone on the 13-member administrative council, and cannot be appealed. If you think “his personal discipline” sounds like “Double Secret Trial” collected by Dean Wormer on the fire-resistant brothers of the Delta frat in the film “Animal House,” you will not get an argument here.

But it is played to laugh. This is very serious. Jones’s actions provoked Brown to file a lawsuit on June 16 in the Sacramento High Court. He seeking a court order forcing the council to cancel its discipline and give him an administrative appeal hearing before a neutral judge.

Jones’s disciplinary order prohibits Brown from accepting reimbursement for CalPERS business trips until the end of this month, except for attending board and committee meetings. That means he will be refused reimbursement for meetings with the public or his constituents, or professional conferences on important issues for the fund, such as health financing conferences.

“This is just a way to silence me,” Brown told me.

Jones also warned he would “take [her] into account in 2020 when I consider the appointment of the committee. “Indeed, he has already expelled Brown from the council’s investment committee as part of the council restructuring committee which was passed last summer.

Jones instructed Brown to undergo a new member orientation again, even though he participated in the program when he was first elected. He criticized him for “engaging in behavior that failed to meet the standards of ethical behavior anticipated by Government Policy” – that is, “improper use of the name CalPERS.”

Brown insisted there was more to it. “Sometimes my opinion does not support what the staff and majority of the council wants,” he told me.

One can sympathize, to a certain extent, with 13 board members who try to solve problems like outspoken members, especially those who value politeness less than they like. But one might also think that the CalPERS board is more worried than the alleged missteps of members.

The CalPERS investment portfolio, which is the largest public pension fund in the country, has anything but sterling players in recent years.

As of December 31, the fund’s public equity investment, which accounts for about half of a portfolio of around $ 400 billion, lagged behind their benchmark indexes in the five years, three years, one year and fiscal year to date (since July 1) timeframe.

Private equity investments, which comprise almost 7% of the portfolio, do much worse, yielding only 1.6% from July 1 to December 31, compared to the benchmark goal of 4.4%. One bright spot is real estate, which generated 6.3% in 2019, or about 1.75 percentage points above its benchmark index.

But overall, CalPERS is ranked consistently in the middle of the package 49 public pension funds tracked by the Pension & Investment bulletin. That performance may be an artifact of mere fund size, because beating the market average is more difficult for large portfolios. But that only makes it more important that the council focus on Job 1, which protects the financial interests of its members.

There is no question that Brown has become a thorn in the side of the council. On several occasions, he chose as a minority.

In 2018, he was the only board member to vote against raising salaries and bonuses for Frost. Even the then State Treasurer John Chiang, who sat on the ex officio board, choose to agree to Frost’s compensation, although he also requested an inquiry into whether Frost misrepresented his educational experience.

As we report, Frost does not have a college degree. That has been known since he was appointed as CEO in 2016. The problem is whether he misrepresents his registration in a program at Evergreen State College in Olympia, Washington, which aims to obtain a bachelor’s degree and a double master’s degree in public administration. The Evergreen administrator, however, said that there were no such dual programs.

Brown upset fellow board members again in April through his sharp criticism of CalPERS Chief Investment Officer Ben Meng over financial hedges that would reduce losses to pension funds during the stock market associated with the corona plunge virus earlier this year.

At a March 18 board meeting, official transcripts showed, Brown asked Meng how hedges do – specifically, do they work as expected.

“They have to perform well in this kind of bottom market, because they are designed to do so,” Meng answered. “And from what we know … most of this strategy went as expected.”

But Meng did not voluntarily say that CalPERS had actually removed one of the hedges just weeks before the decline. That removes the pension fund from an estimated profit of more than $ 1 billion. Meng said later that hedges were expensive and throwing them away seemed a good idea at the time.

“We must strongly reject the ‘resulting bias’ – look at recent results and then use those results to assess the benefits of a decision,” he said later in his defense.

Instead of examining Meng’s negligence on information that was clearly relevant at the March 18 meeting, the board members then piled up at Brown. In April 20 meeting from the board’s investment committee, members denounced Brown by name for allegedly bringing his criticism to the public – after “forcing and helping others get … wrong information,” in the words of Investment Committee Chairman Theresa Taylor.

“I think it is our duty to call bad behavior when we see it,” Taylor said.

Taylor’s complaint implicitly refers to a financial blog nakedcapitalism, whose owner, Susan Webber, has expertly controlled CalPERS investments and administrative failures for years. Webber, a financial analyst who writes under the name Yves Smith, said Brown was not the source he reports about Meng’s management from hedging.

What he stressed was the council’s strange misunderstanding about his own responsibilities. At the April 20 meeting, Taylor commented that “the board and staff … work as a team.”

As Webber observed, that doesn’t make sense. The board is here to oversee the work of staff, not to make fun of its employees. “In fact,” Webber stated correctly, “the only legal duty of the council is to the beneficiaries.” Sometimes that will involve calling out bad behavior by staff when they see it – like blurring the truth about hedging strategies.

Recently, Brown questioned the policy to be increase CalPERS investment in private equity and private debt through leverage – that is, effectively by borrowing to make investments. That strategy can increase the risk of the fund’s position.

All of this made Jones’s actions against Brown seem trivial. CalPERS said the council took action only after Brown warned several times that the use of the fund’s name on his social media violated the law and its rules. Brown said he changed his grip in response to the “stop and stop” warning from the council, but that never seemed to be enough.

“I don’t see this as retaliation,” said board member Rob Feckner, a former council president, who was appointed to speak for the council. Feckner observed that other board members had been disciplined, and generally accepted their proceedings without announcing them to the public. “That doesn’t bother anyone,” he told me. “We have protocols in place and we all try and follow them. When you are one of the 13 who choose not to do it, you can either let it be or overcome it. ”

That said, the council seems to take a rather crab view of the sanctity of the CalPERS name. It is true state law prohibits individuals or companies that use government agency names or badges without permission, but the law applies to abuse with the aim of implying support for “products or services,” which Brown did not do.

This law also makes exceptions for anyone who has an “explicit relationship” with government institutions – such as, for example, membership in the CalPERS administrative council?

CalPERS, like other institutional investors, is facing a long period of portfolio uncertainty thanks to the corona virus outbreak. Brown may not be as polite and tactful as his colleagues want him to be, but he raises an important problem – sometimes alone. The council must listen to what he says, and pay less attention to how he says it.