e-mail to CalPERS on Closed Meetings June 23, 1997: Initial Inquiry ~July 14,1997: CalPERS Responds ~July 18,1997: McRitchie Rebutts June 23, 1997 2461 Second Avenue Sacramento, CA 95818 e-mail: jm@corpgov.net Office of Public Affairs CalPERS The CalPERS Board often meets in closed session in order to consider investments. Does the Board have a policy with regard to the release of minutes or disclosure of votes on motions made in such closed sessions? If so, please provide a copy. I have in mind here, the $100 million investment in a leveraged buyout partnership (Hicks, Muse, Tate & Furst) approved in March and reported by Paul Schnitt of the Sacramento Bee a month or so ago. I can understand the Board must make such decisions in private but it seems that once the investment has actually been made it would make sense to make the motions and votes, if not the deliberations, public. CalPERS Responds July 14, 1997 Dear Mr. McRitchie: Your e-mail note of June 23, 1997 has been directed to me for response. In your note, you ask whether the CalPERS Board has a policy regarding the "release of minutes or disclosure of votes on motions" in closed sessions that are held for investment purposes. Government Code section 11126(c)(16) permits a state body to hold a closed session "when considering investment decisions." The CalPERS Board has directed its staff to implement this statute very narrowly: rather than hold a closed session for every investment decision (e.g., the adoption of strategic portfolio plans or asset allocation policies), the Board will only exercise its right to hold closed sessions based on this authority when the disclosure of the decision in the market is likely to affect the ability of the System to achieve its investment objective. For example, decisions to invest in a general partnership, or to buy/sell a building, or to buy/sell a particular security, are made in closed session since the market's knowledge of those decisions is likely to impact the negotiating ability of the System or the cost of the asset. However, the Board's policies also require that, once the transaction is culminated, it is disclosed to the public through quarterly transaction reports. Government Code section 11126.1 requires state bodies that meet in closed session to designate a clerk or other officer or employee to attend and keep minutes of the topics discussed and decisions made at the closed meeting. This statute also specifically provides that these minutes are not public records and "shall be kept confidential" (emphasis added). CalPERS Board complies with this statute in every respect; it maintains detailed minutes of its closed sessions, and keeps them confidential. If you have any further questions concerning the Board's policies, please feel free to contact me. Sincerely, Kayla J. Gillan General Counsel cc: Members, Board of Administration Executive Staff McRitchie Rebutts July 18, 1997 Dear Ms. Gillan: Thanks for your July 14th response to my e-mail note of June 23rd concerning the above subject. I believe many members of the System as well as the citizens of California share my concern that they be able to hold individual Board members accountable for their decisions. As I indicated previously, I understand the Board may consider investment decisions in closed session. Thank you for describing the Board's policy to exercise this right only when the disclosure of the decision in the market is likely to affect the ability of the System to achieve its investment objective. You indicate disclosure of such investments is made quarterly. Yet, Government Code section 20191 appears to require that purchases and sales of securities be reported monthly at the next regular meeting. How does the System reconcile quarterly reporting with that requirement? Government Code section 11126.1 requires the "minute book" to be kept confidential. However, I don't see anything in that section which prohibits the Board from releasing minutes or disclosing votes specific to motions made in such closed sessions at their discretion. Is it the position of CalPERS that such minutes, or any portion thereof, cannot be released unless so ordered by the court? Please provide me with a copy of all written policies concerning closed sessions. In addition, please provide me with the System's written guidelines for accessibility of records under the provisions of Government Code section 6253. (note: my original e-mail inadvertently referred to Government Code section 5252, this was corrected in a subsequent e-mail) I think the questions raised concerning the investment in Hicks, Muse, Tate & Furst are serious enough that CalPERS would wish to take any steps necessary to avoid even the appearance of impropriety. One such step would be to disclose the votes on such decisions, as well as any debate which would not jeopardize pending decisions concerning other investments. I would like to know if this option was discussed by the Board. I would like to view whatever information is public regarding this investment, including staff recommendations, consultant recommendations, and any information concerning the Board's debate and vote. Thanks, once again, for your recent letter. If you have any questions on the above concerns, please call me at 327-1194. I look forward to hearing from you again. Sincerely, James McRitchie CalPERS Board Candidate 2461 Second Avenue Sacramento, CA 95818 e-mail: jm@corpgov.net cc: CalPERS Board Members Senator Ruben S. Ayala, author of SB 95 Senator Adam Schiff, Chair of Public Employment and Retirement Assemblyman Wally Knox, Chair of Public Employees, Retirement and Social Security August 25, 1997 Dear Mr. McRitchie: In response to your e-mail request of June 22, 1997, enclosed is a copy of the closed session materials relating to the investment in Hicks Muse by CalPERS. The CalPERS board has agreed to waive the confidentiality privilege that applies to these documents under Government Code section 11126.1. Please Contact me if you have any questions. Sincerely, KAYLA J. GILLAN General Counsel KJG: cl Enclosure Contact: jm@perswatch.net