As of last Monday, the University of California Regents will be forced to disclose information regarding a number of the University’s investments into private venture capital funds, following a successful lawsuit filed by the media corporation Thomson Reuters.
The UC has invested some of its $10.65 billion endowment into various venture capital funds — including the top tier firms of Sequoia Capital and Kleiner Perkins Caufield & Byers. Reuters filed the lawsuit last year, claiming that since the University is a state government agency, it is required to release any records of interest to the public, as mandated by the California Public Records Act.
The UC Regents argued that such information is confidential since the involved firms are private companies and share only a limited amount of their information with the University. However, the Superior Court of the State of California came to a final decision last week that requires the UC Regents to request this information and make it public, if urged to do so.
However, the court also granted the UC Regents permission to release this information in March, allowing them time to make an appeal.
The University of California Office of the President declined to comment on this issue.
Karl Olson, who represented Reuters America, said the case comes ten years after a lawsuit was filed by the Coalition of University Employees and Mercury News. In these cases, it was also decided that the Regents must disclose such information to the public, but the success of the lawsuits caused some venture capital firms to threaten to cease relations with the University.
Despite the financial risk imposed by such a threat, Olson said the success of the Reuters case and earlier lawsuits is a testament to the fact that the University cannot rightfully withhold such information.
“Since the very beginning of our government, it’s been a founding principle that the public has a right to know what its government does, and here you have the University making huge investments on venture capital,” Olson said. “So for them to say that the public doesn’t have a right to know how these investments perform is highly inappropriate.”
In a Senate bill proposed on behalf of the UC Regents in 2005, it was acknowledged that the University would run the risk of losing business with venture capital firms if it was required to release financial information involving these firms. The bill stated that “confidentiality is essential to their success” — a statement that is further validated by the fact that the University has since strived to maintain discretion by concealing such information.
According to Judge Evelio Grillo, who wrote the decision, the Regents failed to demonstrate that “the public interest served by not disclosing the records and other information withheld clearly outweighs the public interest served by disclosure.” Thus, the investment information is not exempt from disclosure under the CPRA as “the legislature has determined that the public has a clear interest in the information,” according to the statement made by Grillo.
However, Grillo also said the court cannot require firms to provide this information to the Regents, as his statement reads, “Sequoia Capital and Kleiner Perkins are not parties to this action and, in addition, are not ‘public agencies’ subject to the CPRA.”
Instead, the court ruled the Regents must make an “objectively reasonable effort,” based on what the legislature deems acceptable, to obtain the information from the venture capital firms.
Despite the court’s allowing the Regents until March to appeal the decision, Olson said such a move is not likely to end in a decision favorable to the University.
“I expect them to appeal [but] I do not think that any appeal that they would file would have any merits,” Olson said.