Just like the movie business, speak up at CalPERS and you're blacklisted

Starting in the late 1990's, movie stars like Mel Gibson began speaking out about the atrocities of the inner workings of Hollywood. Brendan Fraser, loved for Encino Man and The Mummy, became blacklisted in the mid-2000's when he went public about his alleged assault by the former president on the Hollwood Foreign Press Association. Speak up, and you're out.

You can say the same for the government sector, especially at CalPERS which garners some of the highest paychecks in government. Often times you are put into a predicament: use your morals and ethics and get blacklisted; or go against your better judgement and keep your job. I understand the pressure people are under when they have a mortgage and day care bills to pay but what is the long-term cost of not acting with integrity?

If you think independently and speak up about things that are harmful to the members, you're out. For example, the amount of waste and unnecessary spending the fund and government does is obscene. Elon Musk's recently created DOGE identified billions of dollars of inappropriate spending by the government including $32 million for luxury cars and tens of millions per year for DEI programs at the Pentagon.

At CalPERS, they spend millions and millions of dollars on consulting services. Some of these expenditures are absolutely necessary. For example, the CalPERS Board of Administration requires all private investment transactions over a certain threshold to obtain a prudent person opinion by a qualified consultant. This creates an independent third-party opinion as to whether or not this is a good investment for the fund. The cost of these transactions normally cost, on average, $30,000. $30,000 insurance policy on a $1B investment transaction makes sense.

However, many other expenditures don't make sense. For example, CalPERS hired a consultant to come in to develop a "Culture Club" at the direction of an Executive. It is common knowledge within the Investment Office that this consultant is the Executive's personal friend. This person was paid well over $1M. Staff only saw this person make a quick five-minute presentation in the CalPERS Auditorium.

Some argue that $1M is very insignificant compared to the size of the CalPERS portfolio. I understand that argument but often times people end up filing bankruptcy based on a death from a thousand cuts.

There is a lot of fat in the government. Besides the high number of unnecessary expenditures, the amount of human capital is excessive. Some teams have double or tripled in size while also increasing the number of unnecessary consultants and services it procures. When staff began opining on the excessive spending, telling management that we should be mindful about costs, staff was reprimanded. As I stated in the previous post, these increase in expenditures are often tied to senior leaders' bonuses.

One manager began going to dinner and drinks with a consultant who was identified by the CalPERS Legal Office as being higher risk to the organization. She, along with a group of others, were identified as higher risk because they had worked for the fund for nearly 20 years full time. Many consultants who had worked for this amount of time at CalPERS began suing CalPERS for pension benefits and winning in court. The CalPERS Legal Office developed a policy and working group to combat it. When staff identified that we should not be using this particular consultant or at least having the Legal Office opine on it, management became hostile towards staff. Management subsequently hired the consultant on a full-time basis to assist them in performing their work.

When another staff member began identifying that management was approving invoices that exceeded the contract's fee schedule, he was failed on probation shortly thereafter. (Interesting enough, the invoices that were approved by management were for the same company the high-risk consultant worked for.) All of this was reported to senior leadership, who supported their lower-level managers' decisions.

If you question anything, you're done. If you don't go with the flow, you're out. Anyone who identifies fraud or waste becomes blacklisted. This has happened now so many times it's difficult to count.

The State needs to bring in an independent auditor to review the pension fund, its spending, and all of the complaints that have been filed by staff. CalPERS is rife with conflicts of interests. When staff reports ethical violations to management or through the CalPERS Ethics Hotline, they are not investigated or swept under the rug and staff is terminated for reporting it.