Insanity of Government


by Lou Binninger

To be reminded of the insanity of today’s government you just have to read the headlines about the governor appointing a new board member to CalPERS, the largest public employee pension fund in America.  This fund manages $362 billion of government employee retirement monies.

One headline reads, “Gavin Newsom appoints transgender city councilwoman to CalPERS.” Lisa Middleton has been a Palm Springs City Councilmember and worked at the State Compensation Insurance Fund from 1974 to 2010. Are you impressed? Except for a unique sexual bent “she” was a career bureaucrat and elected to oversee a city of 44,000 people.

The 13-member board oversees CalPERS chief executive officer and sets direction for its investment goals and health care plans affecting millions of people. However, there is no news about Middleton resurrecting the finances of a city, being an investment legend, or having the skills of Buffett. No, she’s a “woman in a man’s body,” that’s the big news here. That’s what’s relevant to direct $362 million.

The CalPERS board has shifted from once having people with noted investment skills to political patrons. Do they even have to pass an investment competency test?

CalPERS’ current tattered reputation has hurt its ability to hire people with needed expertise. CalPERS last choice for CEO was Marcie Frost, who has a high-school education, no finance training, and no experience managing investments. She then was accused of falsifying her background.

In spite of this the board approved giving Frost a 4% raise resulting in a salary of $330,720 for the 2019 fiscal year and a 26.7% bonus of $84,873 for the 2018 fiscal year.

CalPERS’ conduct provides insight into the corrupt relationships between state and local government pension systems and private equity fund managers nationally. A former CalPERS CEO is now in federal prison serving a four-and-a-half-year sentence for bribery and fraud, and a former board member killed himself before his prosecution began.

In 2002, the CalPERS board promoted Fred Buenrostro, a politically connected insider, to the position of CEO. Buenrostro is now in federal prison for fraud and bribery, after taking kickbacks from former CalPERS board member Al Villalobos. Buenrostro funneled $58 million in investments to Villalobos, who was acting as a middleman for Apollo and four smaller private equity firms. Villalobos killed himself before his trial began, and three trustees who were also implicated left the CalPERS board.

CalPERS is not an outlier. Alan Hevesi, the former comptroller of New York State and sole trustee for the state’s pension fund, went to jail, in part, for accepting bribes from a private equity firm. The former treasurer of Connecticut, Paul Silvester, entered prison for a bribery scandal involving a D.C.-based private equity firm, Carlyle.

CalPERS has been paying lavish 7% fees for investment services. Any mutual fund amateur knows that is ridiculous. How about 1-2%?

Private equity firms with an in to handling billions of pension funds direct campaign cash to politicians with connections to the big pension funds. The entire system is criminal.

            Up and down California local politicians have the same DNA as their deceptive state cousins taking money from unions, voting for unaffordable salaries and pensions, burying the taxpayers in future commitments and taking out more loans to cover current expenses.

            Supervisors and city council members cannot afford to fill job openings due to exorbitant pay and pension / health unfunded liabilities. So, officials then blame the taxpayers for not giving enough for public safety. It is all a big ruse.

Campaign finance laws are violated as politicians spend tax dollars to lobby to obtain more money from citizens, violating the public’s free speech rights. The courts, funded from taxes, typically side with the bureaucracy.

What person would of their own free will ask the government to manage money for them? Like all Ponzi schemes, the first people to cash-out get a great deal. Once the pension fund collapse occurs future retirees may be in a fix.

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