This article was a real eye-opener, the scariest thing I’ve read all year. I can’t believe the regents of the UC system could be so insensitive and irresponsible. What a disgrace. I’m disgusted and feeling very uncertain of my future retirement earnings. There should be some accountability for this. The university and the regents have a lot of explaining to do.
John Kaufman, Mission Viejo
It is disappointing that, after weeks of reporting and scores of questions about the University of California’s pension fund reforms, the Express publishes a story based solely on innuendo, old newspaper clippings, and unproved allegations by disgruntled former employees. The story fundamentally betrays a lack of understanding about the fiduciary responsibility of the Board of Regents, the role of outside investments consultants, and the university’s investment process.
The regents did not “farm out control” of the pension fund to “an army of consultants.” Like a majority of large institutional funds, UC uses management firms with greater expertise in specific investment areas than could be employed in-house. The university maintains control of its investment funds and makes the decisions about the direction, diversification, and risk profile of the university’s assets. In fact, the assistance of outside firms, while expensive, is actually a more cost-effective approach in managing UC’s $71 billion portfolio.
Most egregious is the character assassination of Regent Gerald L. Parsky, who outside the pages of the Express has a well-deserved reputation as an honest, fair, and wise consensus-builder, and whose leadership is especially valued in addressing complex, difficult investment challenges. It is this record of service and success that led the governor to ask him recently to serve on the state’s new pension commission, an appointment widely appreciated by Democrats, Republicans, and union leaders.
The bottom line ignored by the Express is this: The regents unanimously adopted a series of investment policy and management guideline changes strictly for the purpose of increasing portfolio diversification, reducing risk exposure, and improving reporting procedures to maintain the long-term strength of the university’s assets. Had they not taken these actions, the UC retirement plan’s assets today would be approximately $2.7 billion lower than if UC had remained in a traditional sixty-forty S&P 500/Lehman Aggregate mix.
Michael Reese, associate vice president, UC Office of the President, Oakland
Chris Thompson replies
Michael Reese either failed to read the story, or has simply decided to continue hiding the university’s inferior financial performance. The $2.7 billion figure he cites includes financial results from the 1999-2000 fiscal year, and conveniently so, since that was a particularly spectacular year for the retirement fund. But as I reported, university officials didn’t start implementing changes to the pension fund until the following year. The stellar performance of FY1999-2000 was due entirely to Patricia Small, the university treasurer whose policies were repudiated by the regents, and whose reputation was destroyed in the process. Now Reese is taking credit for Small’s work, which strikes me as shameful, given the way she was treated.
As noted in the story, the consequences of the UC Regents’ decisions have been unambiguous. In the ten years before they humiliated Patricia Small and remade their investment policies, the pension fund easily made more money than similar funds around the country. In the five years since the reforms were implemented, the pension fund made less money than 86 percent of similar funds and investment trusts. That’s according to figures from the university’s own bank.
Trotting out misleading information will not make the truth go away. I would personally expect a higher standard of honesty from the vice president of a public university.
Thank you so much for writing this article. I, too, am a UCB employee as well as a former student journalist, and while I am not exactly surprised by what is going on here, I am incredibly disappointed and concerned. This story MUST get out, and Parsky MUST be held accountable for his actions. This seems pretty over the line to me, so hopefully justice will ultimately prevail. I am absolutely working at UC for the benefits rather than the paycheck, though both are important, and to have the very foundation of those things cast into doubt is very troublesome indeed.
Amber Gregory, San Francisco
Connecting the dots
Those of us who are union members at UC have been raising concerns about the regents’ qualifications, impartiality, etc., for years. The news about Parsky’s hand in the investment fiasco is not new, but you did a wonderful job connecting the dots. You might also be interested to know that Parsky is also the chair of the Lawrence Livermore National Security LLC, the newly formed UC/Bechtel consortium that was just awarded the contract to manage the Lawrence Livermore National Laboratory. You can find out more about this whole nefarious, nepotistic relationship at UniversityofCalifornia.edu .
I’m sure that there’s much more to Parsky’s involvement in other matters. I hope that you can help to shed light on them. Thanks for a compelling, disturbing story.
Lisa Kermish, vice president, UPTE-CWA Local 9119 (representing professional and technical employees at UC), Oakland
Great story: Thank you. Parsky recently appeared in a video that all UC employees must watch at the end of an “ethics briefing.” The required exercise is humiliating enough, since it is simply a requirement of employment so that if an ethics breach is discovered they can point to the lowest person on the totem pole and say, “You should have known, you viewed the ethics briefing.” But to have Parsky himself at the end of the briefing earnestly tell us how important it is for us to safeguard the university’s assets because they belong to the people and future of the state of California … ugh. I’ve never seen such hypocrisy.
Linda Rosewood, Santa Cruz
“Pirates of the Web: At World’s End,” Feature, 4/25
Just plain biased
Your recent article on downloading was one-sided, uninformed, and just plain biased. David Downs goes beyond the common comparison between downloaders and murderous thieves of the high seas and actually compares the tactics of peer-to-peer networks to al-Qaeda’s. I’d be hard-pressed to think of a more loaded comparison. Declines in conventional album sales may be down, but online sales services like iTunes are picking up the slack, and the MPAA, far from “fighting for [its life],” actually set records in 2006 for US and international box office numbers, as well as numbers of movies produced and movies grossing more than $50 million, all without increasing the cost to make and market movies.
Christian Castle, who previously defended Napster but now makes his money as a “vigorous advocate for strong copyright protection and enforcement,” argues that the RIAA has never had so many people “who are trying their best to destroy them.” In reality, it’s quite the contrary. While music listeners always have and always will make copies of music they own and pass it on, the RIAA is petitioning the federal government to reduce the royalties paid to artists and songwriters while suing children, the dead, and those who don’t even own computers. Until people realize that peer-to-peer technology is both legal (see the Betamax case) and useful, articles like this one vilifying downloaders and making the RIAA and MPAA out to be victims will continue to pass as journalism.
Daniel Olsen, Oakland
I really enjoyed your article about thieving scalawags. For one, the word “scalawags” drew me in instantly. For two, your subheadings were clever, the content informative, even playful. For three, you’ve contributed to the continuity of a pretty fascinating international dialogue, basically, in my opinion, that of open source and its copious turns and twists, especially regarding profit and business models. Very intelligently and creatively written. Good stuff.
Jill Swanson, Alameda
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