First Amendment and open government news
Vol. 15, No. 12, May 31, 2005
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FIRST AMENDMENT AND OPEN GOVERNMENT NEWS
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CFAC requests records on CalPERS' and UC's investments in hedge funds
By Peter Scheer
(CFAC, May 31) --CFAC has filed formal requests for information on hedge funds in the investment portfolios of CalPERS, the state's huge retirement system, and the University of California (UC) endowment. The requests, filed last week, seek information on the funds' performance, their riskiness, and whether CalPERS' board members or the UC regents have invested individually in them.
Hedge funds are loosely-regulated investment pools catering mainly to rich individuals and large institutions seeking positive returns even in falling markets. Hedge funds often try to reduce the risk of their investments through various "hedging"--or loss-protection--strategies. In recent months hedge funds have drawn attention because of subpar performance generally and because of reports that some funds suffered major losses when usually reliable hedging strategies failed.
CFAC does not oppose public agncies' diversification into hedge funds. We do believe, however, that tax payers in California--who are ultimately on the hook for any shortfalls in CalPERS' and UC's overall returns--are entitled to basic information on the risk characteristics, financial performance and management fees of hedge funds investing public money.
CalPERS and UC should have to disclose, for example, how much debt--or "leverage"-- their hedge funds use, and how quickly and easily the pensions can withdraw their hedge fund investments, if necessary. CalPERS has approximately $1 billion invested in hedge funds, and has authorized investment of another $1 billion. UC's hedge fund investment is about $300 million.
CFAC has been careful not to demand details about investment strategies or particular transactions. If forced to divulge competitively-sensitive information about their hedge fund investments, CalPERS and UC may be cut off from future hedge fund investment opportunities--to the detriment of taxpayers. CFAC has been sensitive to this consideration in fashioning its record requests.
In 1994 CFAC sued CalPERS for investment information focusing on private equity funds, particularly venture capital funds in which CalPERS invests. Following a settlement of that litigation, CalPERS disclosed management fees and realized profits (and losses) from VC investments. These disclosures do not include hedge fund profits, however.
The California Legislature is currently considering a bill, SB 439, to regulate disclosure by CalPERS, UC and other public agencies of their "alternative" investments--including venture capital and hedge funds. The bill seeks to balance the public's right to information with agencies' need to provide enforceable assurances of confidentiality to funds in which they invest.
CFAC is officially neutral on SB 439, although we were involved in drafting the bill. We favor SB 439's coverage of venture capital funds (for which the bill was originally drafted), but we think the need to include hedge funds--and, in particular, to limit disclosure about hedge funds' investments--has not been demonstrated.
CFAC's hedge fund request generated considerable news coverage. Here are stories from:
Los Angeles
Times
San
Jose Mercury News
Orange
County Register
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San
Francisco Daily Journal:
Press subpoenas threatened in Police Department retaliation suit in
federal court in San Francisco.
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LEGISLATION
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FEDERAL:
Federal
shield law gains traction in Congress
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CFAC HOTLINE Q & A
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The Hotline is CFAC's online legal information service. Questions from reporters, government officials, civic activists and the occasional crackpot are answered by media law specialists Roger Myers, Brooke Beros, Isela Castaneda, James Chadwick, Katherine Keating, Joshua Koltun, Rachel Matteo-Boehm, Diana Ng Fung, and Danielle Van Wert at the national law firm of DLA Piper Rudnick Gray Cary, CFAC's general counsel.
Have a legal issue? Submit
your question here.
Records of emergency response times
Q: I am trying to plead with our city council to build more fire stations, as there is a large gap in coverage in the northwest and southwest corners of my city. We are trying to obtain records of emergency response times to all areas of the city in order to help our case that additional coverage is needed, but the cities we have talked to say that most cities consider this information to be confidential and usually it is not released to the public. Are they allowed to withhold this information if it has been requested or is there some formal way in which to obtain this information?
A: The records you have requested would not appear to come under any of the specific exemptions of the Public Records act, nor would it appear that withholding this information is justifiable under the "catch-all" exemption of Government Code section 6255. It would seem particularly inappropriate if the fire departments maintain their own statistical analyses or reports on these response times. Have you actually cited the California Public Records Act to the fire departments, and if so, have they cited any particular exemptions as being applicable?
Request to Dept. of Insurance regarding bail agents
Q: My question is about records held by the Department of Insurance. I placed a request regarding information pertaining to bail agents of a certain company. I believe several of these agents may have obtained a license without revealing they have criminal records. All I wanted was their dates of birth to confirm our suspicions. However, my request was denied. Is there anyway I can legally obtain this info? I have filed a criminal complaint against this company and am seeking more evidence against them. Thank you.
A: The California Department of Insurance may properly raise the
"private personal information" exemption found in Government
Code section 6254 and/or the privacy provisions of the California Constitution
in denying disclosure of personal identifying information of its staff,
such as birth dates, phone number, social security and credit card or
bank account information. The courts have stated, however, that "[e]ach
case must undergo an individual weighing process." Braun v. City
of Taft, 134 Cal. App. 3d 332 (California Court of Appeal, 5th Dist.
1984). "The weighing process involves what public interest is served
in this particular instance in not disclosing the information versus the
public interest served in disclosing the information." Id. Given
that you have filed a criminal complaint against an insurance company
involving their bail agents, you may want to raise this issue with the
office you have filed the complaint. They may want to pursue this matter
further. After a balancing of the interests, a court may decide that disclosure
of this private information outweighs the public interest in nondisclosure
of the information in this particular case. Another option is to file
a civil action under the Public Records Act to obtain a court order for
the release of these records. You may be able to find an attorney that
may help you in this matter through the CFAC
Lawyer Assistance Request Service.
Language used in descriptions by Brown Act bodies
Q: Is a school district obligated to describe the closed session subject in language understandable to the lay person?
A: Government Code section 54954.2(a) provides that at least 72 hours prior to a regular meeting, the body must post an agenda containing a brief general description of each item to be discussed or transacted at the meeting, including items to be discussed in closed session. A "brief general description," as the term indicates, can be brief and general, usually satisfied within 20 words. However, it must be a description, not a code phrase that is unintelligible to the public. The purpose of the brief general description is to inform interested members of the public about the subject matter under consideration so that they can determine whether to monitor or participate in the meeting of the body.
The agenda description need not educate the reader about all aspects
of an item, as it would often be impossible in any "brief" or
"general" way. But it does mean, among other things, that when
it is possible to use a few words to alert the public to an obviously
consequential or controversial proposal, a failure to do just that may
violate the law if its effect is to leave those most likely to care unaware
and with lowered guard. From these general principles, it would appear
that the case docket number, alone, would not be adequate notice to the
public given that it is likely that some members of the public will not
know such number refers to a lawsuit, and those that do, are forced to
go look up the case simply to know the subject matter of the closed session
discussion.
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CFAC IN THE NEWS
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Los Angeles
Times:
CalPERS, UC fund data are sought
San Jose Mercury
News:
CalPERS, UC data sought on hedge funds
Indian
Country Today:
Bill seeks closed-door meetings for gambling commission
Marin Independent
Journal:
Worthy causes or political patronage?
Vallejo
Times Herald:
Recall bid targets Benicia school official
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EDITORIALS
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Globe:
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