Press Release (10/13/03)

Case closed, clerical workers win landmark victory for public disclosure

COALITION OF UNIVERSITY EMPLOYEES
State Headquarters: 2855 Telegraph Av., Berkeley CA (510) 845-2221 Fax (510) 845-7444
http://www.cueunion.org

NEWS RELEASE

Jason Barnett (510) 594-0224, (415) 999-0917

UC Lawyers End The Series 0-for-4

Case closed, clerical workers win landmark victory for public disclosure

Since the posting of this article, the court ruled that all of CUE's attorney fees in these efforts be paid by the Regents. CUE has just received a check, in the amount of $144,783.27, for these expenses!

Berkeley, October 13 In a much-anticipated court ruling on public disclosure, the California Supreme Court refused to hear an appeal by the University of California Board of Regents ordering them to disclose the performance of their investments in venture capital funds.

The ruling by the State Supreme Court ended attempts by the Regents to hide their investment losses from the public. This was the fourth ruling against the UC since the Coalition of University Employees brought a lawsuit against the Regents earlier this year. (See Timeline of Action in UC Public Disclosure Lawsuit.)

“From the start this case has been about open government and public disclosure,” said Mary Higgins, a Coalition of University Employees Executive Board Member from UC San Francisco. “Those of us who are depending on our pensions for retirement have a right to know how our money is being invested, and whether it is being managed responsibly. Public business does not belong behind closed doors.”

The until-now "secret" UC retirement fund has the second worst rate of return of any public fund in the nation. The fund, which manages $34 billion for 173,343 people, including 35,165 current retirees and beneficiaries, fell an average of 21 percent over the last three years-significantly worse than the 13.3 percent average loss of the UC’s self-picked benchmark fund, the Russell 3000 index.

“It would be one thing if they were protecting some sort of secret money-making recipe," said Claudia Horning, statewide President of CUE. “But over the past three years, when investments have been made in secret, the Regents have demonstrated that they can do a pretty good job of losing a lot of our money without disclosure.”

The Board of Regents have fought desperately to prevent the release of performance details of their various funds, arguing that requiring public disclosure would prevent them from participating in high-yield venture capital funds. However, according to court records provided by the UC, a significant number of the private equity funds in which the UC had invested already had their performance returns disclosed by other public institutions. Fully 22 of 65 UC funds, representing 25% of the funds' total equity, already had their performance returns disclosed. (See Excel spreadsheet of UC funds that publicly disclose investment data in other cases).

"This argument that public disclosure will force them out of some funds is really a red herring," said Karl Olson, lead counsel on the successful CUE lawsuit. "We did our own research, and a substantial number of venture capital funds already had the same kind of performance data disclosed. The Regents are conducting public business, and you can’t conduct public business in private.” (Also see Private Equity Funds that Disclose Investment Data).

Others have argued that the lawsuit raises more serious questions about UC's fiscal management. In the midst of what the UC Board has called a serious, system-wide budget crisis, the UC Board relied upon private outside legal counsel to fight the disclosure request at $500-$600 an hour. The Regents’ legal bills were well over $100,000 for outside counsel, plus the expense of five in-house lawyers who fought the case for the Regents. (Despite a public information request, UC officials have declined to state exactly how much they have spent on the seven UC lawyers who worked on the original lawsuit and appeals.)

"The retirement losses are one thing, particularly given the economy," said Higgins. "But to lose this kind of money, and then to turn around and spend more on lawyers to hide investment performance from the public, it's just amazing."

The case also marks a major victory for public disclosure advocates. The manager of the Los Angeles County Employees Retirement Association, which manages $1.25 billion in private equity, has decided to release performance data due to recent court decisions. Other venture capital firms are beginning to follow suit.

“If we have learned anything over the past couple of years, it is that the reckless management style practiced by the Ken Lays and the Dick Grassos of the financial world just doesn’t work,” stated Horning. “There is a need for more-not less-public disclosure and accountability."

"I guess that at the end of the day, I just wish the UC would stop being so concerned about making rich venture capitalists even richer, and start being more concerned about the students, faculty, employees, and retirees who have made the UC a world-class education institution," said Horning.

The Coalition of University Employees represents 18,000 clerical employees at the nine UC campuses, associated medical centers, the Office of the President, and Lawrence Berkeley National Lab. These employees include administrative and library assistants, cashiers, public safety dispatchers, and child care workers.

# # # #

For more information, contact:
COALITION OF UNIVERSITY EMPLOYEES
State Headquarters: 2855 Telegraph Av., Berkeley CA
(510) 845-2221; Fax (510) 845-7444
www.cueunion.org