From: James McRitchie <jm@corpgov.net>
Subject: letter of March 23, 1998
Date: Wed, 1 Apr 1998 23:44:06 -0800
Dear Ms. Gillan:
Your statements on the term "fiduciary" are interesting but you cite no law or precedent. Just because it makes intuitive sense that the CalPERS Board must delegate some if its fiduciary duties doesn't mean it has legal authority to do so. Those who wrote California Constitution, Article XVI, Section 17(a) should have consulted a pension fund attorney. It is obvious they did not or that their attorney made a rather large mistake.
I probably won't be able to attend the BPAC meeting that considers implementing procedures but I think you should find other terms to apply the policies to staff and contractors. It may be a less tidy option but it would be clearer. Frankly, I don't see what the big deal is.
Look at the mess faced by the Los Angeles County Employees Retirement Association with the error in actuarial work. Call Marsha Richter or your counterpart. I doubt you will find that they believe the law is clear in including Towers Perrin as a fiduciary. It's a $1.2 billion question. Don't you think Towers Perrin would be on fairly firm ground arguing they are not liable as a fiduciary, considering the wording of the Constitution? I do not understand your resistance to this suggestion.
I also disagree with your opinion regarding my petition on the Board resolutions. I don't see that you cc'd OAL on your decision to deny the petition, as required by GC section 11340.7(d), but I assume I will see the letter soon in the California Regulatory Notice Register. I'll probably file a request for determination with OAL.
Prohibiting those who are doing business, or seeking to do business for gain with CalPERS from making political contributions to CalPERS' fiduciaries is not simply a matter which applies "only to the internal management" of CalPERS. I don't disagree that CalPERS can enforce these provisions through means other than regulations. That is not the point.
The Board is free to rescind these policies at their whim. In addition, the regulations process accords opportunity for input from interested parties. This opportunity was greatly hindered at the BPAC meeting where the language being proposed was drafted by Bill Crist on the spot. It wasn't available in advance, nor was it made available to those at the meeting, other than to Board members. By refusing to adopt regulations in this area, I believe CalPERS leaves the Legislature little choice but to enact statutory prohibitions.
Sincerely,
James McRitchie
Contact: 
jm@perswatch.net