To: Senator.Schiff@sen.ca.gov
From: James McRitchie <jm@corpgov.net>
Subject: Support with Amendments for SB 1753
Cc: Senator.Karnette@sen.ca.gov, Senator.Haynes@sen.ca.gov,
Senator.Burton@sen.ca.gov, Senator.Hurtt@sen.ca.gov,
Senator.Hayden@sen.ca.gov
Date: Mon, 13 Apr 1998 07:43:09 -0700
Support with Amendments for SB 1753
Dear Senator Schiff:
As I'm sure you know, the CalPERS Board adopted resolutions recently in an attempt to address conflicts of interest. However, these policies don't carry the weight of law. Although they fall under the definition of
regulations (Gov Code, section 11342(g)) because they do not relate only to internal management, the policies have not been adopted through the Administrative Procedure Act process. Therefore, the measures that you andSenator Hayden have introduced are the only hope that members of the System, such as myself, have for ensuring an end to abuses that have been reported recently in the LA Times, Sacramento Bee and elsewhere.
Although I support your bill as introduced, I urge you to make two amendments to further reduce conflicts of interest at CalPERS and better ensure decisions of the Board reflect the interests of members.
The first amendment would prohibit gifts, meals, entertainment or in-kind benefits valued at more than $25 to CalPERS Board members or staff by those doing business with or seeking to do business with CalPERS.
Section 19990(f) of the Government Code already prohibits state officers or employees from receiving or accepting, directly or indirectly, any gift "under circumstances from which it reasonably could be substantiated that he gift was intended to influence the officer or employee in his or her official duties or was intended as a reward for any official actions performed by the officer or employee."
Case law reveals the example of an ABC official who was disciplined for improperly accepting a drink from a bartender. This is very small potatoes compared to first class plane tickets, charity golf tournaments, and other gifts routinely given to CalPERS fiduciaries.
One of the problems may be that DPA would be the primary enforcer of these provisions but their representative also sits on the Board and receives these gifts. It is difficult to obtain evidence that a gift is intended to influence and CalPERS has apparently taken the view that very expensive gifts are protected by this provision. This ambiguity in current law invites abuse. By amending your bill to prohibit gifts of more that $25 to CalPERS board members and staff, you would put an end to current questionable practices.
The second amendment would reform the current elections process to require voters to rank the candidates in order of preference and to elect the individual(s) with the highest score. For example, in the last election, those voting would have ranked 23 candidates for two positions.
Under the current system it is nearly impossible to unseat incumbents who have served for up to 28 years, since those who are not satisfied with their performance often split their votes among up to almost 100 candidates. Under the current plurality system, a Board member could get elected with 5% of the votes or less. Allowing voters to rank the candidates will assure those elected reflect the will of the majority.
Thank you for introducing this important measure and for considering my suggested amendments. If you or your staff have any questions concerning the suggested amendments, please call me at 916-327-8642 (day) or 916-691-9722 (evening).
Sincerely,
James McRitchie
CalPERS member
Contact: 
jm@perswatch.net