CalPERS Legal Department Employee Trolls Naked Capitalism Site, Putting Focus on Violations of Bar Rules

In early May, we received a peculiar comment on a post about CalPERS board member JJ Jelincic’s censure, CalPERS Hides Bogus Persecution: Promised Public Hearing for Lone Effective Director Held in Secret. It wasn’t that it was critical of the article; that’s hardly unusual. It was that the comment came in when the discussion had died down and seemed designed to bait us into revealing our sources:

NonFiction
May 3, 2017 at 4:25 pm

I find it astonishing that the the folks leaving comments on this article are blindly accepting its conclusions without critically thinking. There is no evidence at all that the reason Jelencic was targeted by Slaton and/or other board members is due to Jelencic’s actions with respect to PE or for any other topc. The claim by Slaton is an improper disclosure of confidential information. To conclude the attack by Slaton is based in some self-preservation of corrupt practices, is pure speculation.

“For a board member to discuss something that is already a matter of public record would not be a violation of confidentiality, yet members of CalPERS’ board seem to believe otherwise.”

Really, Susan? Do you know something that you chose not include in the article? Based on what you’ve written, this conclusion is not supported by the evidence. It appears that we do not know what the confidential information that Jelencic allegedly leaked was. We don’t know if the information was already a matter of public record; just like we don’t know if the information was highly confidential. Since we don’t know what the confidential information at issue is, it’s a shame that you brand board members as believing a public record disclosure amounts to a violation of confidentiality. What purpose does it serve you to dabble in speculation? It serves to diminish your credibility on topics that you do have valid criticism of.

We put the IP address in an IP locator. Mirabile dictu! It was someone from CalPERS (you can also confirm that the IP address was in CalPERS IP address range here):

Notice that the comment was made was during the business day in Sacramento.

We replied, starting by telling NonFiction, “My goodness, someone from CalPERS shows up after a thread has gone cold to try to impugn the post.” He switched to a wireless device and made a second comment, again during the West Coast business day, and did not deny that he was from CalPERS.

Due to the fact that his comment also exposed his internal IP address, and we discuss the IT/security implications of that in a related post, we put in a Public Records Act request for records that would identify who provided the comment. Since the Public Records Act requires state agencies to turn over only records, not information, we might not have been able to make a specific enough request to identify which computer or account was being used in the absence of having the internal IP address.

You will see, in the document embedded at the end of the post, that the CalPERS Public Records Act response did not provide all the requested data¹ but instead served up the object of our inquiry: “Christopher Phillips was the user identified with the internal IP address noted in request number three for the time period noted.” CalPERS separately confirmed that it was Phillips who made the comment.

Christopher Phillips is a member of CalPERS’ legal department, currently a senior staff attorney. He has been at CalPERS for four years. We dealt with Phillips briefly in 2014, on our unsuccessful Public Records Act lawsuit. CalPERS has tasked another staff attorney, Robert Carlin, to us when we got an attorney involved. Phillips became the contact person after we filed suit, so our belief is that he handles litigation among other matters.

What are the implications of a member of CalPERS’ legal department leaving a comment on our site during the business day using CalPERS resources regarding a CalPERS legal dispute?

California Bar Violation: General Counsel’s Office Can’t Represent Jelincic When Working Against Him

The tone of Phillips’ comment suggests he thought he had a winning strategy. Either I would ignore his comment and allow him and potentially CalPERS to depict me as exaggerating, or I would expose my sources. Given that CalPERS has accused Jelincic of leaking confidential information when, as his statement at a May board meeting demonstrates, the information was already public, it is not hard to imagine that Phillips assumed Jelincic was my source.

Phillips’ ploy raises two troubling legal issues.

The American Bar Association Model Rule requires that an attorney identify himself when communicating on behalf of a client. Here is the relevant section:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.

Phillips, by virtue of making comments on a CalPERS-related controversy using CalPERS equipment during the work day, was acting in an official capacity. His comment at a minimum was intended to cast doubt on a post critical of CalPERS, which if successful, would benefit CalPERS. And if I revealed my sources, that would be gravy. If the trail led to Jelincic, that would give his persecutors on the board the opportunity to gin up a new disciplinary action in Jelincic’s final months in office.

Phillips’ action would be a violation of the standards of professional conduct in the many states whose bar rules hew closely to the ABA model rules. For instance, in Ohio, there have been bar complaints on similar facts. However California’s Current Rules of Professional Conduct are silent on this point. But many lawyers saw the Phillips gambit as unethical. As one California attorney put it, it has “the ripe smell of a dead fish”.

A second, and more clear-cut issue, is that Phillips was acting against board member Jelincic, if nothing else by trying to advance a public relations campaign against him and a site that has consistently supported his efforts. Remember that Jelincic as a CalPERS board member is a client of the General Counsel’s office. Phillip’s disloyalty to his client Jelincic is a per se violation of his duty of loyalty as required by section 6068(e) of the California Business & Professions Code which is incorporated in the California State Bar Act

In addition, the state bar rules prohibit an attorney representing clients that have a conflict of interest without having the written consent of both parties. From Rule 3-300:

(C) A member shall not, without the informed written consent of each client:

(1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or

(2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or

(3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter.

The section of the bar rules dealing with “Organizations as Clients” also bars an attorney from representing opposed interests in his organization at the same time. From Rule 3-600:

(D) In dealing with an organization’s directors, officers, employees, members, shareholders, or other constituents, a member shall explain the identity of the client for whom the member acts, whenever it is or becomes apparent that the organization’s interests are or may become adverse to those of the constituent(s) with whom the member is dealing. The member shall not mislead such a constituent into believing that the constituent may communicate confidential information to the member in a way that will not be used in the organization’s interest if that is or becomes adverse to the constituent.

Phillips’ behavior is part of an established pattern of the General Counsel’s office violating California bar rules in the Jelincic discipline . We discuss that issue in detail in an accompanying post today.

In response to our inquiry, CalPERS has tried to downplay the idea that Phillips was acting on behalf of either CalPERS’ staff or board members hostile to Jelincic by stating that “…he was not directed by a supervisor” to make the comment. But that does not address other issues: Did Phillips believe this action was consistent with his responsibilities? Did any supervisor or co-worker have knowledge of the posting? If so, when and how did they become aware and what action did they take then?

For now, we will note that, several months prior to Phillips’ comment on our site, CalPERS acknowledged that it had more than a wee conflicts problem when board member JJ Jelincic sent General Counsel Matt Jacobs a notice of adverse interests on February 11. That led to CalPERS to pull the in-house attorney it had assigned to the censure and bring in an outside lawyer, as well as agree to pay for Jelincic to have his own counsel.

However, Jelincic’s notice of adverse interests was limited to the then-pending disciplinary matter. Board president Robert Feckner told Mike Hiltzik in a May 2 Los Angeles Times article, “As far as I’m concerned, this matter is closed.”

That meant that CalPERS legal department was again representing Jelincic. Phillips made his comments at Naked Capitalism on May 3, after the disciplinary matter was over and Feckner had reaffirmed that fact in public.

This means that Phillips was engaging in a breach of trust as well as a bar violation of precisely the same sort that Jacobs had already made. A member of the General Counsel’s office took a position adverse to a board member with whom he must maintain a confidential relationship.

Doug Smith, the former co-head of McKinsey’s organization practice and a Harvard Law School graduate, summed up what was wrong with Phillips’ and potentially Jacobs’ conduct:

We can better understand Phillips’ unethical behavior if we shift the context from NC’s website to an in person gathering. Imagine Yves hosted a MeetUp one afternoon in Sacramento. Roughly at 2pm, Christopher Phillips stands up and says exactly what he said in his troll comment. He gives a false name and does not identify himself as an attorney in CalPERS’ General Counsel’s office.

Participants later discover he’s a CalPERS lawyer and ask themselves several questions: (1) Why the subterfuge? (2) What role did his boss Jacobs have? Did Jacobs know, approve, direct, and/or discuss Phillips’ attendance? (3) Why didn’t he disclose he was an attorney for CalPERS — especially in view of the long and well known adverse relationships between Yves, NC and CalPERS as it pertains to Jelincic? (4) Who was Phillips representing: CalPERS as a whole, including Jelincic as Board member? Or, in violation of California bar rules, just the “anti-Jelincic” faction? (5) Is it really okay for attorneys to argue on behalf of their clients when the other party or parties in the room do not have their attorneys present?

Answer to #4: Clearly, Phillips was not representing Jelincic — which means he violated Bar rules. Answer to #5: No! It’s not okay.

Whether in person or online, Phillips is an agent of CalPERS. He hid his identity. He knew he was doing something wrong. He may or may not have known he violated California Bar rules and legal ethics. And, he clearly did not think through the upshot of his words which make it Jacobs’ official position that someone charged with disclosing confidential information has the burden to prove any information in question was NOT confidential — that, is, guilty until proven innocent. If Jacobs disagrees, let him refute Phillips.

Misuse of Government Resources

NC reader Sluggeaux made the point  vividly:

It is absolutely horrible that a public servant, who NonFiction does not appear to deny being, would make this sort of snide commentary using public resources. After serving as a public lawyer for 32 years before retiring as a CalPERS beneficiary, I find this conduct to be reprehensible. At least Donald Trump’s tweets are subject to open attribution.

Snide comments by evident insiders directed at well-informed reporters only serve to confirm that the lack of transparency at CalPERS only exists in order to cover-up wrongdoing and/or incompetence on the part of their very well-compensated staff.

Or as our reader and sometimes guest writer Clive put it:

What is inescapable is that CalPERS is paying its staff – and not just the office juniors, I don’t know what the hourly rate that a Senior Staff Attorney working in CA will run to, but I’ll bet it’s not cheap – to pay very close attention to what Naked Capitalism is saying about them. To misquote Monty Python, Yves isn’t a campaigner for transparency and accountability in public pension fund provision, she’s a very naughty girl.

Proof of Deficient Governance

Either Phillips was acting as a rogue employee or his comments on Naked Capitalism were acceptable to the General Counsel Matt Jacobs. If the former, it would be gross insubordination by Phillips. If the latter, it is yet more proof of diseased governance at CalPERS. As law professor and former general counsel Bill Black wrote:

This is the very definition of someone too clever by half. And this simply reiterates the point you’ve been making. CalPERS is a deeply dysfunctional organization. A key line of defense is supposed to be the General Counsel. But here, the General Counsel is a big part of the problem.

CalPERS has attempted to depict Phillips’ conduct as consistent with CalPERS’ policy. From Brad Pacheco, CalPERS’ head of Communications & Stakeholder Relations:

CalPERS has policies that allow for social media usage. The policy states, “employees are responsible for ensuring that use of any social media does not interfere with their ability to fulfill their job requirements, their work product, or their commitments to their managers, co-workers or CalPERS members or constituents.”

It is quite a stretch to try to depict a site that has done more original reporting on CalPERS in the last three years than any other publication and in the last month alone has been cited by the Wall Street Journal and New York Magazine for our work on CalPERS and Uber, respectively, as “social media”. I can’t think of a single previous instance in the history of this website where we have been put in that category.

Even more important, it’s hard to fathom how the comment on our site did not undermine Phillip’s ability to do his job with respect to representing Jelincic and maintaining his good standing with the bar…unless Phillips knew full well that his conduct would have been approved of by the higher-ups, had it stayed secret.

If CalPERS fails to reprimand Phillips and disavow his comments, it is a tacit admission that they were acceptable to the General Counsel, Matt Jacobs, and potentially consistent with general guidance given Phillips. If so, that would make him and any other members of CalPERS’ legal department who gave Phillips responsibilities that would include this sort of fishing expedition guilty of the bar violations listed above.

As Doug Smith summed up:

Phillips’ behavior signals that governance is a travesty at CalPERS. This is not governance — at least if we require adherence to core principles as an integral element for governance. Instead, anything goes: trickery, obfuscation, sophistry, and misrepresentation are just part of the workday in the General Counsel’s office.

1.6 million beneficiaries and their families depend on CalPERS. They — like everyone in the overstressed, risk-laden culture — have a zillion things to attend to just to get through each day. Which means they really, really have little choice but to rely on CalPERS’ staff, Board and attorneys to do their jobs as fiduciaries instead of, as this incident confirms, anything-goes combatants against disclosure, deliberation and governance itself.

Is CalPERS capable of shaping up? It careens from one fiasco to another, in denial as to how much it has slipped as an institution from its glory days. Tolerance of internal dissent and a more vigilant board were key parts of its once-winning formula. Both the board and senior officers need to take a hard look in the mirror. But that is what they seem most unwilling to do.
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¹ The reasons for not providing the actual data are ludicrous, but the fact that CalPERS uncharacteristically rolled so quickly says they knew the odds were high that they would not prevail if they decided to deny the request and we contested its position.

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