A petition started by a UC Berkeley activist group last spring is demanding that California’s Attorney General address allegations that certain UC Regents have unethical, vested interests in UC investments.
While UC administrators staunchly refute the claims, the petition has 257 signatures as of press time and accuses state officials including former Governor Arnold Schwarzenegger and UC Regents Richard Blum and Paul Wachter of promoting UC decisions for personal financial gain. Circulated by the UC Berkeley Solidarity Alliance, the petition is based off of conclusions from investigative journalist Peter Byrne’s work, specifically an eight-article series he published through pubicly-funded community reporting site spot.us.
“We feel that criminal conflicts of interest may have occurred and that it is the duty of the California Attorney General, Kamala Harris, to investigate these circumstances,” petition organizer Ricardo Gomez, a fourth-year UC Berkeley interdisciplinary studies field major, said. “Not only are these potential conflicts of interest ethically wrong, the UC has lost billons of dollars from the investment fund, meaning less resources for students, faculty and workers.”
UC Vice President and General Counsel for Legal Affairs Charles Robinson said the University denies any accusations and has rigid infrastructure in place to safeguard against conflicts of interest. Additionally, Robinson said Byrne’s findings largely ignore the University’s explanations.
“The companies referenced in the stories for the most part are large publicly-traded entities that have issued millions of shares of stock available for purchase by the general public,” Robinson said in a press release. “The asserted overlap of investments by the University and these Regents is substantially more likely to be the result of independent decisions by like-minded investors than the result of concerted activity.”
Based on the UC Regents’ involvement in the private equity market, Byrne’s eight-article series criticized relationships that benefited the Regents and Schwarzenegger but jeopardized the UC system’s financial stability. Byrne was recognized earlier this month by the Society of Professional Journalists with the James Madison Freedom of Information Award.
According to Byrne’s series, Gerald Parsky, Richard Blum and Paul Wachter ‘took control’ of the UC investment strategy around 2004.
“Sitting on the board’s investment committee, the three men steered away from investing in more traditional instruments — such as blue-chip stocks and bonds — toward largely unregulated ‘alternative’ investments, such as private equity and private real estate deals,” Byrne wrote. “According to UC internal reports, the dramatic investment change has led to an ‘overweighting’ of investments in private equity.”
UC Associate Vice President for Communications Lynn Tierney said Byrne’s claims don’t indicate a conflict of interest.
“It’s misguided to assume that there’s a conflict of interest simply because there’s an overlap between personal investments by University of California Regents and investments made by the UC Treasurer’s Office,” Tierney said. “The real issue is whether Regents communicate with the Treasurer’s Office about specific investments. They haven’t and wouldn’t, period.”
However, Byrne maintains that his findings are sound. He said the UC Regents have yet to file any formal complaint or present contending evidence.
“The UC general council went over the whole thing with a fine-toothed comb and was not able to identify a single error of fact,” Byrne said. “People of tremendous professional repute looked at the data and decided that these were clear conflicts of interest.”
Byrne also said that UC response to his evidence was insufficient.
“I would be gratified if the University or any of the Regents mentioned in [my] story said ‘I’m sorry, you are right, we should not have done that, we will not do it again,’” Byrne said. “Instead of taking any measures to address the problem so it could not happen again, they are digging in and saying that it is okay for them to flout common sense and conflict of interest laws.”
To read Byrne’s series accusing the Regents of ethical mismanagement in investment decisions, visit http://spot.us/pitches/337-investors-club-how-the-uc-regents-spin-public-funds-into-private-profit/story.
Jack Crosbie contributed to this article.
*Editor’s Note – April 19, 2011
The Daily Nexus pulled the article “UC Regents Face Ethics Allegations” from its website last week, pending further editorial review. The article was removed from the website due to editorial staff agreement that concerns about a quote attributed to a UC visiting fellow merited further review. After discussion the staff decided to repost the article sans the quote in question, which we deemed not appropriately researched. The Daily Nexus apologizes for this error. Further questions may directed to firstname.lastname@example.org.
*Editor’s Note – April 20, 2011
The article “UC Regents Face Ethics Allegations” is once again under review by Daily Nexus editorial staff. The Daily Nexus apologizes for the wait. Further questions may be directed to email@example.com.
*Editor’s Note – April 22, 2011
Previous versions of the article “UC Regents Face Ethics Allegations” contained information and quotes that were misleading and inappropriately reported by the Nexus. After review, several portions were removed or changed. The Daily Nexus regrets these errors. Further questions may be directed to firstname.lastname@example.org.