Former Official Criticizes CalPERS Board Member Richard Costigan’s Defense of CEO Marcie Frost’s Lies

We have been told privately that CalPERS beneficiaries, many of whom had to obtain degrees and other certifications as a condition of their employment, are deeply disturbed about the misrepresentations made by CalPERS CEO Marcie Frost during and after her hiring. Recall that this sort of conduct predates Frost joining CalPERS, since her responses on a gubernatorial questionnaire in Washington in 2013 showed her making demonstrably false statements on a document sworn under penalty of perjury.

Some influential beneficiaries have started challenging CalPERS’ dogged defense of Frost. We are reproducing an e-mail that Tony Butka sent to the head of the California State Personnel Board challenging whether its representative on the CalPERS board, Richard Costigan, is serving the SPB and by extension California well with his rejection of an investigation of Frost.

By way of background, the Financial Times’ FundFire cited Costigan claiming that the board was not going to look into the evidence documenting Frost’s misrepresentations. As we noted earlier, that claim alone should raise eyebrows, since it would be a violation of the Bagley-Keene Open Meeting Act for the board to deliberate between board meetings.1 From an August 30 FundFire story:

The CalPERS board has no plans to further investigate or take any action regarding the misrepresentations, says board member Richard Costigan. Costigan says Frost’s educational background had no bearing on the board’s decision to hire her.

“I knew at the time we interviewed her she didn’t have a college degree,” says Costigan. “I looked at her whole body of work. Those were the issues that were important to me.”

Needless to say, this is more than a bit of a dodge. First, as our posts documented, Frost did not merely lie during the hiring process by, for instance, telling Heidrick & Struggles that she was currently enrolled in a bachelor’s/master’s program at The Evergreen State College. Recall that the school never has any program of the kind, and that Frost was never enrolled in any degree program there, but merely took some writing courses for two quarters in 2010 as a “special student”. She allowed that lie to stand in the press release announcing her hiring and in her bio on the CalPERS website…until shortly after CalPERS dismissed CFO Charles Asubonten for misrepresentations during the hiring process. In addition, Frost made a false statement under penalty of perjury on a Washington state form she filed as part of being approved to head the Department of Retirement Services, as well as other misrepresentations and omissions on her resume.

Second, at least one board member who voted for Frost thought she was on the verge of getting a college degree. As we reported, board member said as much before a group of retirees. There is a world of difference from being a high school graduate who has never even applied to go to college versus one who is very close to getting a college degree. Costigan is being disingenuous at best to claim otherwise.

Third, and the elephant in the room, is that a CEO who would tell such a big and verifiable lie on a long-running basis cannot be considered to be fit to lead any organization.

Now to Butka’s e-mail:

Subject: Letter to Suzanne Ambrose
Date: Sun, 9 Sep 2018 18:25:54 -0700
From: Tony Butka
To: [email protected]
CC: [email protected], [email protected]

I am writing this missive to Suzanne Ambrose via this email address because I couldn’t find a direct email address, and trust that you can get the message to her, or if not, let me know how I can.

Dear Ms Ambrose,

I am writing this message to you because I believe that in recent hiring decisions, CalPERS has utterly failed to follow sound merit system principles. Further, I am writing because you appointed Richard Costigan as the CalPERS Board member representing your agency, and I believe he is doing a very poor job of representing the SPB.

I have taken the liberty of attaching a copy of my recent post to CityWatch, covering the hiring of CalPERS CEO Marcie Frost, as well as other troublesome hiring decisions made by the Board. The online link
to the article is

I do not take this step lightly, and I do so as a former Executive Officer for the Los Angeles County Civil Service Commission for over a decade back in the 90’s. The civil service system deserves better. If your office wants, there are some 70 pages of documents publicly available regarding the hiring process for Ms Frost, or I’m sure you can obtain the information from Mr. Costigan, who after all is a Board member as well as your agent.

I only ask that you look, obtain the information, evaluate, and determine if this result is good for CalPERS and why Mr. Costigan should continue to represent the California State Personnel Board, an agency I have respected and worked with intermittently for years.

Sincerely,

Tony Butka

4286 Verdugo View Dr
Los Angeles CA 90065
cell: 323-791-7367

PS- I would appreciate it if Board Chair Priya Mathur copies all of the
Board members on this missive, rather than treating it as private.

______

1 This is a bit of a simplification, since there is a process by which the board could arrange an emergency meeting, but that has not happened either.

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20 comments

  1. diptherio

    Am I a bad person for eating this stuff up? I know I should be outraged, but it’s gotten to the point where it just seems comical and absurdist. The more Yves uncovers, the more ridiculous CalPERS is revealed to be. Moliere couldn’t have written a better farce than what’s been going at in that monkey house of an organization. Keep up the good work!

  2. David in Santa Cruz

    CalPERS seems to be spinning CEO Frost as Chauncey Gardner in Being There, but put simply, Frost is nothing more than a flim-flammer and a bare-faced liar.

    She is a high school-educated clerk-typist who grew up in one of the most isolated communities in the country, who took advantage of Washington’s peculiar separation of their retirement system into three separate agencies to rise above her skill-set: a Clerical branch which Frost ran, an Investment branch and an Actuarial branch which she did not run. I have heard Ms. Frost speak publicly, and she appears to be as utterly ignorant of finance as you would suspect a person to be who attended a high school currently ranked by U.S. News as only 13% proficient in math and 14.9% college-ready.

    However, she is perfect as a spokesperson if your goal is obfuscation — and covering-up losses, high fees, and political kick-backs.

    Follow the money.

  3. RUKidding

    Marcie Frost appears to have good “friends” in high places. What is Marcie Frost covering up? In all seriousness, it’s irresponsible not to speculate why this completely unqualified individual remains as CEO of the either the largest, or one of the largest, pension funds in the country.

    As indicated in the post, all of the staff where I work, including me, have to have higher educational qualifications than Frost appears to have. This is a completely untenable situation.

    Ms. Frost lied big time on her application. She is utterly unqualified for this position.

    Ms. Frost should be summarily fired.

    As a CA taxpayer, as well as a CalPers contributor (and future beneficiary), I’m totally outraged by this completely unacceptable situation.

    CalPers Board: Do YOUR job and fire this incompetent liar.

  4. ScottS

    It’s The Hudsucker Proxy with the goal of running the pension into the ground and privatizing it to “save” it.

  5. Anon

    Marcie Frost hit the jackpot of state personnel incomptetence. Or a CalPERS board that was seeking readily pliable incomptetence in a CEO. There are actually very few state positions requiring leadership ability that don’t require a college degree– in hand!

    Heck, early in my career I applied for a federal position and they wanted to see my university transcripts; sent directly to them by my Alma Mater. No future accomplishments allowed.

  6. ALM

    Thank you, Yves! I am a CalPERS retiree. I have just written my state Assembly Member, my state Senator, and every member of the California Senate Public Employment and Retirement Committee and the Assembly Committee on Public Employees, Retirement, and Social Security to report my outrage that a high school graduate who brazenly lied about her qualifications is leading a public pension fund with $360 billion in assets and 1.6 million members and beneficiaries.

    It’s incredible that CalPERS ever seriously considered someone without a college degree to run the country’s largest pension fund. Frost must be a crony hire.

    1. vlade

      TIAA is larger, but I think it now has a somewhat different legal structure/ status (although technically it’s still non-profit, with profits going to policy holders).

      Doesn’t change the fact that Frost is clearly way out of her depth, college degree or not.

  7. flora

    CalPERS response to documented lying by an unqualified Frost sure looks like they know that pulling on that string will unravel a whole bunch of stuff they’d rather keep hidden. imo.

    Thanks for your continued reporting on CalPERS, PE, and pensions.

    1. Carey

      Agree flora, but why not hire someone at least minimally qualified, so as not to arouse
      suspicions in the first place? Pure impunity, as it seems, the brazenness perhaps part
      of a message?

    1. Procopius

      I don’t live in California and don’t have a pension from CALPERS, so this is really none of my business, but apparently Attorney General Becerra is studiously ignoring this situation. Are there any alternatives? Is there any way for ordinary citizens to provoke official action aside from what Yves and the NC community are already doing? It seems to be having some effect so far, but one of my faults is that I’m impatient.

  8. The Rev Kev

    Richard Costigan, III () seems to be an Arnold Schwarzenegger leftover though he got himself re-elected just last December. Funny that he is giving Frost a free pass on her fraudulent claims when one of the committees that he sits on is the Risk & Audit Committee. You would reckon that someone on that committee would point out the term ‘accessory after the fact’ to him as his endorsement of Frost would be a very large risk if it came down to a legal audit.

  9. vlade

    Good. Beneficiaries (as evidenced here in comments and the above) are the next stage – then someone in legislature needs to figure out there’s a few votes in it..

    I don’t know much about CAL politics, but isn’t the current Lt. Gov aiming for governorship, and single payer?

    I’d think that incompetency, cronyism and possible corruption at an institution like CalPERs would be one of the major threats to any single payer (i.e. “see how large public institutions are run?” attacks), so he should fight it tooth and nail anywhere he can – especially when he gets all the evidence on a silver plate courtesy of NC.

    Incidentally, who would have standing to do Frost for perjury in Washington state?

  10. Clive

    It’s been a real shocker for me just how different reality is from what image perception-management creates. I’ve only briefly visited California and certainly not spent anything like enough time to appreciate how the state operates in practice. But when it sells itself to the world — as it does, we get visit / invest in / retire to CA advertising here in Europe, big time — a key selling point is the state’s aura of being a liberal, democratic and people-centric place to live, work and do business in.

    I’d have thought, then, ever the innocent that I am, that someone, somewhere would be jumping right on this latest CalPERS scandal and keen to — as a minimum — be seen to be doing something.

    That those in positions of power and responsibility should still be holding their noses over the bad smell which continues to emanate from CalPERS is somewhat shocking. If this were, say, somewhere which is the epitome of a banana republic like perhaps Haiti or some country which is well-known for having a casual relationship with the rule of law like Uzbekistan I’d perhaps simply shrug my shoulders and say to myself, well, there you go, what can you expect?

    But this is California. The world’s first clean automobile air act. A bellwether for environmental protection. Ground zero for progressive and tolerant social policies (gay rights in SF in the 70’s were held as landmarks for Doing The Right Thing in the face of prejudice and reactionary political conservatism and that tide of human rights and an empowered and active citizenry both lapped up against and eroded away the grim small-minded moralising Conservative party government’s shores half a world away here in the U.K.). Put briefly, California was something a bit special.

    I was genuinely perplexed at what on earth had befallen the governance of the Golden State. It’s like the soft light, warm sunshine and swaying palm trees of my imagination had been transformed into Mordor on the Pacific. But when I delved into the , all became depressingly clear. The State AG (who seems about as much use as a chocolate tea pot) isn’t remotely interested in white collar crime or enforcement of state agencies statutes. Concerned citizens are thus forced to throw themselves on the scant levels of interest shown by their elected representatives. Who are more interested in gesture politics and dog-whistle issues than, oh, I don’t know, having a $350bn agency being even vaguely competent and accountable.

    It’ll take a big push by CA residents to get the to take notice. I do so hope that every CA reader hits the phones or sends letters or emails saying how digested y’all are. I wish I could but (luckily for those in Capitol Park, perhaps!) I lack the necessary standing.

      1. Clive

        I was going to fix it, but I think you’re right. People of California, you are being digested. Or at least, your politicians are eating your lunch (then sleeping on the job).

    1. fries

      The one big thing you must understand about California is that the political offices, are owned lock stock and barrel by the government worker unions. If a particular legislator doesn’t do the bidding of the unions, the unions fund someone more pliable for election. More frequently, the simple threat of doing so is enough to hold everyone in line. Yes, I know, this is a collossal conflict of interest, but no matter. As our famous Assembly Speaker Jess Unruh said: “Money is the mother’s milk of politics.” And the unions have the money and are not shy about spending it.

    1. flora

      with apologies to Coleridge:

      Data, data, everywhere,
      And all the Boards did shrink;
      Data, data, everywhere,
      Nor any crook dared link.

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