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

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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 ):

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 . 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 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 . :

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 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 which is incorporated in the

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. :

(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 , “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 Cfdtrade 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 Cfdtrade 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 Cfdtrade 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.
____

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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29 comments

  1. ewmayer

    Oh, dear – looks like someone would have been better-served continuing to use work computers to view porn during business hours rather than attempting to be all cyber-subterfugey.

    Keep kicking their insular, elite, corrupt asses, Yves – time for everyone to lay in a mega supply of popcorn, this is gonna be fun.

  2. Anonymoe Joe

    Correcting the distracting typo “once-wining” in the final paragraph would help its impact.

    Thank you very much for the post.

  3. Larry

    I’m not surprised by the behavior of the attorney, I’m more surprised that he didn’t use his personal mobile device in the first place to leave his hit job comment. A lawyer more than anybody else should realize the implications of using a work computer during business hours on conduct like this. Very, very sloppy.

    1. HBE

      I would be willing to bet like most choices these days he wasn’t thinking about security, but convenience.

      That was a mid length post and it was more convenient to write it on desktop than mobile.

      PS. Maybe IP lookup was just for illustrations sake but Google analytics offers network reports (audience > technology > network) that will pull out that info if an org has a dedicated IP and put in the secondary dimension as city.

  4. QuarterBack

    Did Phillips act unethically? Sure looks that way. I would consider filing a formal complaint with the California Bar, then some nice smart people in the Bar would be happy to investigate and sort this all out. Surely, Phillips would also welcome the opportunity to clarify his actions to his peers.

    1. Kim Kaufman

      I would agree with filing a complaint with the CA State Bar. But I also can guarantee the CA State Bar will find some way not to do anything. I have been through this (as part of a group filing the complaint) with a rogue attorney using the same conflict of interest issues. I did not have direct with the State Bar but I was told by the person who did that one of the attorneys reviewing the case said yeah, it looked really bad “but…” The result was nada was done. Lawyers don’t like going against their own, especially if they’re “connected.”

      1. Kim Kaufman

        And further…

        “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.”

        Failing to know the CA Bar rules and legal ethics is not an acceptable excuse.

  5. Northeaster

    Depending on who you are and connected to, no matter how bad or corrupt one is, they will always be protected. The serfdom classes not so much – Anne landed softly at a Soros funded home, which also includes a family member of a CONgress – Also a recipient of Soros monies by way of campaign donations.

    1. HotFlash

      Interesting. I also see , there, and from CalSTRS. Is this one of thos Interlocking Board’s o’ Directors? ? Both?

      Don’t recognize any Congress-critter kin, which one is that?

  6. Kokuanani

    Ohhh, this is a nasty man:

    ‘Here’s how it’s going to work. I have decided that the best way to proceed is . . .”

    The rest of his “response” is sterling as well.

    Bosses who haven’t before now throttled this type of tin horn dictator also deserve some of the blame. I’m trying to imagine on whom this sort of imperious behavior & tone generally work?

  7. John Zelnicker

    @Yves – The documents embedded at the end are incomplete. The letter from CalPERS only has the first page and then you have Slaton’s note to Jelencic placed as though it was the second page of the letter.

    Also, I don’t see the second footnote numbered in the text. I’ve read the post thoroughly and scanned it backwards and forwards and can’t find that little number 2. The footnote itself doesn’t make complete sense since I can’t figure out which document you are referring to. I suspect you had written something that referenced the footnote and then edited it out.

    Or, I just didn’t see that little number with my old eyes and it really all make sense.

    1. Trustee

      The first document has two pages. Both are included. Put your cursor on the bottom of the document and a footer appears that will allow you to see page 2.

      The second document was an attachment to an email. It is the entire document. The email itself had no content.

      1. John Zelnicker

        @Trustee – AHA! Thank you.

        I know what the second doc is, just didn’t see the footer on the first page.

        The next CalPERS post “How CalPERS General Counsel…” has footnotes that seem to indicate that the footnote I questioned above belongs in that post.

  8. Critical Thinker

    Ah yeh it mustve been all that critical thinking that landed Phillips that awesome Calpers job in support of Charles Montgomery Burns doppelganger

    Keep up the good work Yves. if Calpers is so ethical and transparent their legal team wouldnt be on nakedcapitalism.com all day

  9. reslez

    Wow, so imagine if the lawyer who’s supposed to represent you logs on to a news article and leaves semi-“anonymous” comments arguing against your side. And it was done during the work day at work using work resources. Just outrageous and beyond unethical.

    If there aren’t any consequences to this it will serve as yet more evidence of rot at CALPERS. They badly need a clean sweep.

  10. Synoia

    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”

    That is not valid if the Employee is exempt from the Fair Labor Practices Act. If the employee is exempt that are active at the supervisory level. and can exercise their own discretion.

  11. RUKidding

    Wow. Keep up the pressure Yves. You’re successfully hitting ’em where it hurts.

    I’d normally be surprised that someone in Phillips’ position could make a giant sucking error like this, but it’s just part & parcel of the apparent culture of arrogance & rabid incompetence at CalPers.

    As a CalPers contributor & future annuitant, I demand better work habits & ethics from these employees whom I’m paying for their salaries & benefits.

    Sheesh. If I did something like this on my job, I’d be fired.

  12. perpetualWAR

    I would be willing to bet if you filed a bar complaint, the CA Bar would gind jothing wrong with this. They shield their own, even when everyone can see that attorney violated the RPC.

  13. jgwilson

    I never thought human cloning would be a good idea. I’ve changed my mind. I’d support an Yves clone-army, armed with laptops and clipboards, hounding the oligarchs ’till the end of days.
    Kick-starter?

  14. Jess

    How stupid do you have to be to provoke Yves? Geez, off the top of my head I can think of about four million people I’d rather have dogging my ass than our humble blogger. Once upon a time they used to say that you knew it was going to be a bad day when Mike Wallace and the crew from 60 Minutes showed up at your doorstep. Nowadays the same can be said of attention from Ms. Smith.

    Professional death wish, or just death wish?

    1. Oregoncharles

      Bulldog tenacity, is the phrase. And since this is an animal lovers’ site:

      If it weren’t for some unfortunate resonances that don’t apply, I’d say a better analogy is a ferret. To wit: they’re saber toothed (their fangs hang out of their mouth), and have the bulldog’s ability to lock their jaws. They’re also fantastically persistent, impossible to distract, and extremely snoopy – hence, “ferreting” something out. All the qualities of a great investigator, and someone you don’t want to mess with. (end analogy)

      And since I obviously have personal experience: as a house pet, they resemble a very eccentric cat. Cute, too. Maybe an antidote?

  15. scraping_by

    A minor quibble.

    “Either Phillips was acting as a rogue employee or his comments on Cfdtrade were acceptable to the General Counsel Matt Jacobs.”

    There’s a gray middle where Phillips either acted on his own but according to the wishes of his boss, or will claim there was no quiet word about giving you a little poke and seeing what came up.

    Short of polygraphs, waterboarding, or someone being so stupid they left written evidence it’s hard to think of how this would be discovered. The simplest explanation would be the one settled on, and Mr. Phillips would end up under the next bus.

    1. Yves Smith Post author

      I say that in the post: “Did Phillips believe this action was consistent with his responsibilities?….unless Phillips knew full well that his conduct would have been approved of by the higher-ups, had it stayed secret.” It’s not hard to see that the CalPERS denial is very narrow and that there are scenarios under which Phillips was not directed to make this comment. The language from CalPERS would even cover Phillips dreaming his caper up and having gotten approval for it.

  16. Sluggeaux

    The comments above focus on the bush-leaguer CalPERS lawyer, but we really need to look at the lack of governance and oversight that tolerates this sort of behavior. During my long career as a public lawyer, the elected officials who set the budget would punish an organization engaging in this dishonest and unethical sleaze harshly in the next cycle. Instead, the CalPERS board forgoes truly independent counsel in order to pay this fool and his handlers more than they deserve.

    The CalPERS cover-up is protecting the same politicians who set the State Bar of California’s budget. I agree with the comments above — connected lawyers don’t suffer discipline in California.

  17. Paul P

    Where are the unions representing California public employees on this? NC is clamoring.
    Are the unions clamoring?

Comments are closed.