Incumbent Wins CalPERS Race: But…

The following is a table with the unofficial results of the most recent CalPERS election. No real surprise; with an incredibly low turnout, the incumbent won by a large margin.

Board candidate uses CalPERS address, phone writes Ed Mendel in his post to CalPensions. CalPERS board member running for re-election, George Diehr, listed the CalPERS headquarters address in Sacramento and a CalPERS-funded home telephone as the contact information on a campaign brochure and website.

Dr. Diehr is head of the Investment Committee and Vice President of the Board but appears to be somewhat oblivious as to the laws governing campaigns. According to the post:

Diehr, preferring not to list his home address, said he thought the CalPERS address was acceptable because he had used it in filing documents, drawing no objections.

Of course using his address at CalPERS to disclose his potential financial conflicts of interest is much different than potentially soliciting campaign funds to a state office. Most funds in CalPERS campaigns come from unions, so he may not have received any contributions to a state building. Additionally, he has apparently agreed to pay any cost to CalPERS. However, the law doesn’t appear to be predicated on the actual expenditure of moneys by public agencies.

Government Code section 8314 states,

It is unlawful for any elected state or local officer, including any state or local appointee, employee, or consultant, to use or permit others to use public resources for a campaign activity, or personal or other purposes which are not authorized by law.

I’m relatively sure Diehr knows the use of state property is prohibited. In fact, a related legal opinion written by Legislative Counsel at my request was sent to CalPERS in 2007. (download pdf)

As far as I can tell, Diehr is doing a good job at CalPERS. Unfortunately, this latest action demonstrates continued inattention by a long line of board members to ethics laws. Whether or not use of the state address and/or phone number constituted an actual violation of law deserving of a fine of up to $1,000 a day is up to others to decide. However, it is clear that CalPERS and its board members are too frequently in the news for questionable activities. Why would Diehr be so careless?

There is little question it has resulted another black mark on the reputation of CalPERS, however small. CalPERS finally instituted a hot-line for people to disclose ethical violations and took several additional measure.  That’s great but, of course, both board members and staff need a fundamental understanding of ethics laws to be able to recognize violations.

When I was the Ethics Officer for the Department of Toxic Substances Control. my duties and those of my staff included the following:

• Determine which DTSC staff would be required to file the form 700 and amend regulations as appropriate, working with the various unions and the interested public.
• Ensure that everyone required to file did file. Reports of laggards went directly to executive staff and were briefly discussed weekly until corrected. If necessary, the Director or Chief Deputy Director would call the laggards. (CalPERS board member Priya Mathur would have faced constant warnings if she had been at DTSC. It is highly unlikely that she would have missed three filing deadlines.)
• Develop and hold ethics classes at HQs and throughout our regional offices, supplementing the required online AG/FPPC class with material covering state and federal laws specific to DTSC.
• Ensure that every member of staff required to file a form 700, which was the vast majority of staff, also took the required AG/FPPC class and the supplemental class (which I usually conducted along with an attorney). CalPERS is now requiring attendance at a new “Working Values class” hosted by their legal office, diversity office and enterprise compliance office.
• Made frequent determinations concerning requests by DTSC employees (as well as those of CalEPA) to engage in outside employment, to accept gifts, to accept speaking engagements and to provide advice concerning potential conflicts of interest. (I presume this is done at CalPERS by their legal office but board and staff may feel slightly less comfortable asking for a legal opinion on what may seem to be small issues.)

Recently, after a yearlong scandal involving alleged influence peddling and corruption, Gov. Arnold Schwarzenegger signed a bill that will regulate the activities of outside deal-makers who help investment managers secure government pension fund money. (Schwarzenegger signs pension fund transparency bill, LATimes, 10/1/10)

While CalPERS is certainly making progress, their ethics is still not beyond reproach. I’m confident they will get closer but in the meantime, these little slips are embarrassing to those of us associated with the system. It is much easier to advocate for good corporate governance if your own pension fund and its board members follow only the highest ethical practices. CalPERS recently added a risk officer. They should give serious consideration to adding an ethics officer.