FAC suit seeks records on pension fund real-estate investment

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FOR IMMEDIATE RELEASE
CONTACT:
Peter Scheer, Executive Director
FIRST AMENDMENT COALITION
534 4th St., Suite B
San Rafael, CA 94901
415.460.5060 / 415.886.7081 (direct)
pscheer@firstamendmentcoalition.org
http://www.firstamendmentcoalition.org/

Columbia, Mo. and San Rafael, Ca. (July 19, 2010)—The First Amendment Coalition (FAC) today announced that it has sued the California Public Employees' Retirement System (CalPERS), over access to records about the agency’s ill-fated investment in an East Palo Alto residential real estate development that has gone bust–at a loss to CalPERS of all of its $100 million stake in the controversial venture.

FAC, a nonprofit based in San Rafael, CA, filed suit Friday in San Francisco Superior Court, demanding access under the Public Records Act and Prop 59 to records shedding light on the factors influencing CalPERS’ financial commitment in 2006 to the Page Mill Properties II project. FAC’s initial record request was filed in January. Although CalPERS has turned over other records, it has withheld the offering memorandum and partnership agreement for the Page Mill deal, as well as internal emails and other relevant communications.

CalPERS’ Page Mill investment has been controversial, not only because of its losses, but also because of allegations by community groups that the project’s management sought to oust low-rent tenants in order to increase cash flow needed to finance the project’s heavy debt. CalPERS was a major investor in other real estate developments involving the displacement of low-rent tenants, including the massive $5.4 billion Peter Cooper Village and Stuyvesant Town apartment complex in lower Manahattan. CalPERS sunk $500 million into that venture, which has also collapsed.

“The public has an overriding interest in learning how CalPERS could have determined that Page Mill, despite the ouster of poor tenants, the high debt levels and other risks, was an appropriate investment for CalPERS’ assets,” said FAC executive director Peter Scheer. “Only by understanding how the investment was made can the public be confident that CalPERS has made sufficient changes to prevent this from happening again.”

CalPERS has come under increasing scrutiny due to heavy recent losses, which have triggered bills to state and local governments for bigger pension contributions. CalPERS’ performance in 2008 was one of the worst in the country among public pension plans (although, like most public pensions, it returned to profitability in 2009). Oversized real estate losses–nearly double the rate of loss on CalPERS’ investments overall–are a major reason for CalPERS’ financial woes.

CalPERS historically has been a conservative investor in real estate. Starting in 2002, however, CalPERS began a series of real estate deals involving increased leverage, large, concentrated investment positions, the use of recourse debt, and other factors that increased CalPERS’ expected returns. However, they also greatly magnified CalPERS’ risk.

“Socially responsible investors aim to do good and to do well,” said Karl Olson, the lawyer representing FAC in the CalPERS case. “In its disastrous Page Mill investment, CalPERS did bad–by funding the ouster of poor tenants from rent-regulated apartments–and did very badly.”

FAC is a section 501(C)(3) nonprofit organization dedicated to freedom of speech, freedom of information, and government accountability. FAC’s website is HERE.

This is the petition (PDF) filed Friday to initiate the lawsuit against CalPERS.

Here is FAC’s brief (PDF) in support of the petition.

Read more about the case from the San Jose Mercury News.

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In January, 2010, the John S. and James L. Knight Foundation and the NFOIC announced the $2 million, three-year grant to NFOIC, with a significant portion supporting meritorious FOI cases.

The Fund is intended to fuel the pursuit of important FOI cases by helping to defray upfront costs such as filing fees, depositions, court costs and other expenses associated with legal actions. The Fund does not cover attorney’s fees.

For more information on the Knight FOI Fund, including the selection process for grants and how to apply, see http://www.nfoic.org/knight-foi-fund.

The John S. and James L. Knight Foundation advances journalism in the digital age and invests in the vitality of communities where the Knight brothers owned newspapers. Since 1950, the Foundation has granted more than $400 million to advance quality journalism and freedom of expression. Knight Foundation focuses on projects that promote community engagement and lead to transformational change. For more, visit http://www.knightfdn.org/.

The First Amendment Coalition (FAC) is a section 501(C)(3) nonprofit dedicated to freedom of speech and government transparency and accountability at the local and national levels. FAC initiates test-case litigation and files amicus briefs in key appeals; provides free legal help and information to journalists of all kinds; and, through widely published Op-Eds, educational programs and other means, is an outspoken public advocate for the First Amendment and the public’s right to know. Based in San Rafael, CA, FAC is supported by individuals, media firms and foundations. For more, visit http://www.firstamendmentcoalition.org/.

The National Freedom of Information Coalition is a national network of state freedom of information advocates, citizen-driven nonprofit freedom of information organizations, academic and First Amendment centers, journalistic societies and attorneys. Its mission is to foster government transparency at the state and local level. A unit of the Missouri School of Journalism, the NFOIC is an affiliate of the Donald W. Reynolds Journalism Institute. NFOIC is based at the University of Missouri, home to the nation’s oldest Freedom of Information Center.