Parsky's Party
The UC regent whose pension fund overhaul may have cost the university
billions is now in a position to play with even more of the public’s money.
By Chris Thompson, East Bay Express, May 9, 2007
Last December, Governor Arnold Schwarzenegger created a new panel to figure out how to solve
what may be California's worst-ever budget crisis. The state's two biggest retirement funds will owe
at least $49 billion they don't have, and Californians will be paying this bill for decades. The man
Schwarzenegger chose to lead this historic undertaking is commission chairman Gerald Parsky. But
for the hundreds of thousands of teachers and state employees who depend on these funds, his
appointment should be cause for alarm. Just ask the employees of the University of California.
Parsky's reputation as a financial genius is undisputed, at least among the people who count. A
former official in Richard Nixon's Treasury Department, Parsky made a fortune in real estate, junk
bond, and venture capital investments. In the 1990s, he gradually rose through the ranks of the
California Republican Party until he became one of the state's most important power brokers. He
raised millions to organize the 1996 Republican National Convention in San Diego, and chaired the
state presidential campaigns of George W. Bush in both 2000 and 2004. Today, he reviews
candidates for California US Attorney positions on behalf of the Bush Justice Department. He has
been appointed senior economic adviser to presidential candidate John McCain; if McCain is
elected president, Parsky could well become the next secretary of the Treasury.
But it was in his capacity as a regent of the University of California that Parsky made his greatest
impact. In the ten years before he took over as chair of the Regents' Investment Committee, the
university's pension plan, which provides retirement benefits for more than 190,000 employees,
made a small fortune playing the stock market and investing in long-term bonds. The fund earned so
much money that it literally paid for itself — in fact, employees haven't had to pay into their
pension plan since 1990. These generous retirement benefits have been critical in attracting
renowned professors and researchers, who draw considerably lower salaries than they would at toptier public or private universities. Without the pension plan and other benefits, the university would
be starved of talent.
In 1999 and 2000, in a series of secret meetings, Parsky spearheaded an effort to radically remake
the pension fund's investment philosophy. Under his leadership, the regents gave hundreds of
thousands of dollars to a Los Angeles investment firm to recommend and implement changes to the
way the university invests tens of billions of dollars. At the same time, the president of that firm,
Wilshire Associates, gave tens of thousands of dollars to the very Bush presidential campaign
chaired by Parsky.
Wilshire, Parsky, and the Regents' Investment Committee farmed out control of the investment fund
to an army of pension consultants and money management firms, ending the decades-long practice
of using university staff to trade stocks themselves. Along the way, they humiliated and destroyed
the reputation of Patricia Small, the UC treasurer who had managed the investments for years and
strenuously opposed their plans. Billions of dollars in stock were bought and sold in the midst of a
massive stock market crash.
Seven years later, what was once one of the most lucrative pension plans in America is in desperate
trouble. Before Parsky and his colleagues restructured the investment strategy, the university's fund
easily made more money than the average pension plan. Now, it ranks among the country's worst
performers. Before Parsky's reforms, the university paid nothing to outside money management
companies, aside from a small venture capital arm. Last year, the UC treasurer's office paid at least
$32 million to forty different money management companies whose investment advice may have
cost the fund billions of dollars.
Now, faced with sharply declining investment revenue and rising retirement benefit costs,
university officials have asked their employees to start paying money back into the pension fund for
the first time in seventeen years. The amount is projected to steadily rise over the next few years
until it constitutes 8 percent of each employee's paycheck. Many claim that they can't possibly
afford such a blow, especially those who are struggling to pay California's record mortgages. From
professors to secretaries and janitors, more than 120,000 university workers now face one of the
worst personal financial crises in the institution's history.
Gerald Parsky led a campaign to remake the university pension plan from top to bottom, and the
retirement future of almost 200,000 people has been profoundly damaged. Thanks to Governor
Schwarzenegger, this same man has now been asked to reform two of the largest public pension
plans in the country. Hundreds of thousands of people now depend on him to make the right
decisions. In the last seven years, the employees of the University of California have learned what
happens when he makes the wrong ones.
In the late '90s, Patricia Small ran the UC treasurer's office, supervising a modest staff of analysts.
A lifer with 28 years in the system, she oversaw the university's pension portfolio, mostly stock in
65 to 80 big companies, plus some bonds and venture capital. Small's investment performance was
remarkable even by the standards of the go-go 1990s. According to university records, the
retirement fund earned an average of 15.6 percent per year from 1990 to 2000, while the median
performance for comparable multibillion-dollar portfolios was 13.5 percent. In a 2000 San
Francisco Examiner story, former regent Glenn Campbell sang Small's praises: "Her rate of return
has been outstanding, higher than almost any other university."
Parsky's rise began around the time Small started at UC. In 1971, he became a special assistant in
Richard Nixon's Treasury Department. There he met his future business partner William Simon, and
was promoted at age 32 to become an assistant secretary of the Treasury. The two went on to build
an investment firm that made both of them rich, but Simon left in 1991 following an acrimonious
business dispute. Parsky renamed his company Aurora Capital Partners, buttressed his fortune with
lucrative investments, and became a player in the California GOP. He was appointed to the UC
Regents by Governor Pete Wilson and he headed the host committee when the Republicans held
their 1996 convention in San Diego, securing the party millions in donations. Later, as a Bush fundraiser, he proved second only to Texas campaign chair Kenneth Lay.
In February 1999, when Parsky chaired the Investment Committee of the UC Regents, he convened
a series of closed-door meetings with a select panel of regents, at which the regents hired Wilshire
Associates to analyze the UC pension fund's performance. For this, the Los Angeles investment
firm was paid nearly $350,000. A few months later, its analysts returned with a dire forecast: The
fund had serious problems.
As the dot-com boom went into overdrive, Small had dumped some stock and bought up long-term
bonds. Because interest rates were remarkably high at the time, her move locked in a steady flow of
cash as a hedge against a market crash. But Wilshire claimed that her plan exposed the pension plan
to too much risk by holding so much in long-term bonds and investing in just eighty companies.
The consultant recommended dumping many of the long-term bonds and reinvesting as much as
half of the domestic stock in index funds: large, diversified collections of securities designed to
mimic overall market performance.
Small and her staff fought back in reports and letters to the regents. Long-term bonds actually
lowered the risk, she said, because their lifetimes are better synchronized with the way the fund
pays out retirement benefits. And selling and reinvesting billions in assets would cost millions in
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pg 2
brokerage commissions and fees. If the university did what Wilshire asked, it would spend a fortune
just moving cash around.
But what really bothered Small was more fundamental. As she recalled in a 2004 letter to the
regents, she was worried that the university was poised to radically and swiftly change its
investment philosophy on the advice of a single consultant. Furthermore, she wrote, Wilshire never
properly analyzed the risks of its own investment strategy. And those risks were clear to any
prudent investor. By spring of 2000, the dot-com bubble was beginning to burst, and the financial
press was filled with trepidation.
Wilshire's people were barely interested in her opinion, Small wrote in 2004. "The only time the
treasurer's office met with Wilshire for the 'office review' was for one day in the month of February
1999," she wrote. "As treasurer I was dumbstruck that not once did Wilshire ask about portfolio
risk, how it was measured and controlled. I was so startled that I complained immediately to the
Investment Committee Chairman. ... I was told 'not' to pursue the issue."
In fact, according to Small's letter, her access to the regents was suddenly, inexplicably curtailed. In
January 2000 she was ordered not to talk to any regents about investment matters outside of their
board meetings. University vice president Michael Reese denies that Small was forbidden to talk to
the regents, but refused to elaborate, citing confidentiality issues.
Former regent Ward Connerly is best known as the man who ended UC's affirmative action policy,
but he also was dedicated to its finances. He chaired both the finance and audit committees and sat
on the Investment Committee. Connerly recalled that Wilshire's people ruled the day, baffling
regents who thought the fund was doing just fine. "The whole field of money management is
surrounded by such mysteries," he said in a recent interview. "Deliberately, in many cases. They
come in with all these actuarial studies and dazzle you with bullshit. ... And so these people came in
and threw all this nonsense at you about what Harvard and Yale are earning, even though you
believe your performance is doing a magnificent job."
Parsky made Wilshire's job easier, Connerly added, by attacking Small's job performance in ways
that seemed a little too enthusiastic. "We didn't want to challenge the chair of the committee who
was himself sort of involved in this area," the former regent said. "There were those, however, who
were wondering whether this was a personal dispute between the chair and the treasurer."
By late spring of 2000, Small was fighting for her career. In a May 15 letter to Parsky that was
copied to the rest of the regents, she said that Parsky had apparently decided her conduct was so
unprofessional that he was doing a "performance review." This, she wrote, was based not upon her
years of service, but the previous two months of what Parsky had allegedly characterized as
"evidence of poor attitude, a lack of commitment to the Board of Regents, or incompetence."
UC vice president Reese responds that "annual performance reviews are standard practice for all
employees." But judging from Small's letter, this review was anything but commonplace. Indeed,
her tone was almost frantic. "I respectfully note that there seems to be a high level of
miscommunication and misunderstanding as to the reasons for my recent actions, and a
misconstruing of my motives," Small wrote. "I have no agenda other than the best interest of the
regents, the beneficiaries of the investment portfolios, and the financial protection of the university
investable assets."
Again she maintained that Wilshire was pushing major changes far too quickly. "The Board of
Regents has historically moved very cautiously when making decisions of such financial
magnitude," Small insisted. "While following a more open, informed, and independently evaluated
process may not be as 'speedy' as consultants to the university may like, the due diligence and
reasonable business judgement rules require me to advise the regents there are 'risks' of
implementing a new 'Plan' with new benchmarks without following tried and true financial
analysis."
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pg 3
Three days after Small sent her letter, the regents handed Wilshire another $350,000 contract — this
time to implement the very changes it had recommended.
Why, after so many years of stellar returns, were the regents racing to put outside money managers
in charge of tens of billions of dollars, and paying Wilshire handsomely to make it happen?
A story in the San Francisco Examiner may have shed some light on the mystery. In July 2000,
reporter Lance Williams revealed that Dennis Tito, Wilshire's president, had donated $80,000 to the
California presidential campaign of George W. Bush — the very campaign fund overseen by Gerald
Parsky — just one week before Parsky and the regents granted Wilshire its second major contract.
The previous year, Williams reported, Tito and a number of other Wilshire executives and their
wives had given a total of $10,000 to Parsky's Bush campaign. Not long after, Wilshire scored its
earlier contract to analyze the fund's performance.
Parsky denied that he was trying to fire Small, or that he'd done anything improper. "I have never
had any contact with Mr. Tito about making contributions to the Bush campaign," he told the
Examiner. But the story clearly rattled cages at UC. The Express has obtained a draft of an open
letter written by the regents' staff that Small claimed she was asked to sign. It reads in part: "Despite
misleading news reports, these steps have been undertaken with the full input of the regents, the
treasurer's office, and outside investment experts. The review was conducted in a manner consistent
with university practices and in the best interests of the university, its employees, and pension
funds. As a result, we are confident that the pension fund will continue to provide robust and secure
benefits to the university employees it serves."
According to UC's Reese, Small was never asked to sign any letter, and adds that the treasurer
contributed a quote to a press-release expressing confidence in the fund's future. Small maintained
that she was asked to sign, but would not.
In any case, the treasurer recalled spending the middle of 2000 in a shell-shocked limbo. Her
mother was entering the final stages of a terminal illness when, according to Small's 2004 letter,
John Davies, then-chair of the board of regents, quietly approached her and suggested she might
consider "retiring." By August, her lawyer had received a severance deal from the university that
included a section threatening financial retaliation if the treasurer "disparaged" the regents. Small's
lawyers, she wrote, were told she would be fired if she didn't sign the contract. So she signed.
Parsky was given ample opportunity to comment for this story, but did not. University spokespeople
said he was "traveling," and requested questions in writing. Parsky never answered them, but Reese
released the following comment: "The Express' latest series of questions assumes the inaccurate
premise that the university's investment policies were revised in 2000 as a result of personal
conflicts, business intrigue, and political conspiracy. The questions about Regent Parsky, in
particular, are based on old, discredited stories and border on character assassination." (Lance
Williams, now at The San Francisco Chronicle, says his reporting was never discredited.)
For his part, Ward Connerly is still bitter about Small's ordeal. "I thought Patty was treated badly,"
he said. "She didn't deserve her fate. I felt that then, I said and I will say that now. ... Outside money
managers would love to get their mitts on a portfolio as large as the University of California. So I
had questions whether someone was setting Patty and her staff up by making claims about her
performance and morale and other things, pointing the finger at the treasurer.
"Some very good regents who were very active when I came in ... paid a lot of attention to what
went on with the investments," Connerly said. "Just one of those guys would spend more time than
any of the present regents combined. So they were monitoring this thing, and they were tickled by
the performance, and then all of a sudden, and it really happened very hastily, there was all this
criticism of her performance?"
In November 2000, in accordance with Wilshire's recommendation, UC traders sold nearly $11.6
billion in stock in a single week. That's according to Jeffrey Heil, who managed the equity division
Parsky’s Party – East Bay Express, 5/9/07
pg 4
at the time and claims the move was perfectly appropriate. But Small insisted that it was
irresponsible. In her letter to the regents, she wondered at the rashness of the act: "How could
Wilshire have ever recommended the speed of such a major change?" she wrote.
That was just the start of the outsourcing. By late 2002 the university had laid off all its in-house
equity traders and was paying millions to external fund managers to oversee its entire stock
portfolio. According to Heil, who lost his job in 2002, that move led to a steady erosion in profits.
"All they were doing was paying these expensive outside firms with high fees to do the same as we
were doing in-house, but at a much higher cost," he said. "They were overpaying in management
fees and getting underperformance from their managers — kind of the worst of both worlds."
Because investments are always more volatile in the short term, it would be unfair to judge Wilshire
based on the UC fund's performance a short time after Small's ouster. But over almost seven years,
the numbers have shown a sustained pattern of mediocre profits. Nearly every pension portfolio in
the country is now doing better than the university's. According to a report by State Street, the
university's custodial bank, 86 percent of large US investment trusts outperformed the UC pension
fund from 2001 to 2006. Figures from the National Association of State Retirement Administrators
and the investment firm Northern Trust also highlight the university's subpar returns. Had the
pension plan even performed as well as half of its peers in the five years ending June 30, 2006, it
would have netted an additional $3.3 billion.
When asked about this downturn, the treasurer's office responded that its portfolio had beaten an
important industry benchmark, the S&P 500/Lehman Aggregate portfolio, between 1999 and 2006.
But that calculation includes the 1999-2000 fiscal year when the fund, still under Small's leadership,
beat the S&P 500 by a country mile. The university is using results from the very investment
philosophy it repudiated to obscure the failings of its new strategy.
Even some of Parsky's peers have complained. "A number of regents have asked why the
university's returns are not comparable to those of other educational institutions," the minutes of an
investment committee meeting stated last year. "Regent [Paul] Wachter recalled that a chart
showing investment results for seven large universities had appeared in The Wall Street Journal.
The results for the University of California were the worst among those institutions. He questioned
why UC cannot perform as well as Harvard."
Despite the fund's poor showing, at least a few parties made out like bandits. In fact, the close
dealings between Wilshire Associates and the university raised questions about conflicts of interest.
Besides the suspiciously timed Bush campaign contributions, UC eventually hired Wilshire to
implement its own recommendations. This violates a fundamental ethical principle, said Edward
Siedle, a former Securities and Exchange Commission lawyer who has investigated pension fund
abuse for 25 years. "It's like you going to a Ford dealer and saying, 'I'll give you a hundred dollars
to tell me what car to buy,'" he said. "And they'll say, 'Great, buy a Ford.'"
Connerly also objected to giving Wilshire the second contract. He complained, according to the
minutes of one meeting, that "by recommending a consulting fee of $400,000 in the plan, Wilshire
had effectively determined what its fee should be." In addition, he argued that hiring Wilshire
would set it up to win yet another contract — this time to serve as the university's general pension
consultant. "Connerly suggested that the continued retention of Wilshire Associates would provide
them with an advantage over other firms," the minutes stated.
Sure enough, Wilshire scored the general pension consultant contract a year later, a deal worth more
than $1.3 million over three years. And while serving in this capacity, Wilshire sold the treasurer's
office access to its proprietary Compass software, netting itself $108,000 more.
This isn't the first time Wilshire's conduct has been questioned. In late 2003, according to a story in
Money magazine, Wilshire was implicated in a "fast trading" scandal in which company officials
used specialized knowledge of overpriced securities to rapidly buy and sell millions of dollars in
Parsky’s Party – East Bay Express, 5/9/07
pg 5
mutual funds, netting a tidy profit without any risk, but running up the commission costs for smalltime investors. The scheme was perfectly legal, but reeked once again of conflicts of interest.
Mutual-fund managers knew that Wilshire, as a pension consultant, could recommend them to
handle money for Wilshire's pension-fund clients, so they had a strong incentive to let the firm dip
in and out of their funds. That scandal may have made Wilshire too hot for the university — when
its contract expired in 2004, the regents went with another company.
But the damage was done. Letting Wall Street handle its pension portfolio has cost the university a
fortune in yearly fees and commissions, even as profits have lagged. Under Small's leadership, the
fund spent roughly $5.5 million a year to buy and sell bonds and almost nothing to trade stocks. The
year after her resignation, bond commissions jumped to $11 million — last year, the university paid
more than $22 million. Meanwhile, UC paid private fund managers $32 million last year to trade
stocks it used to handle in-house.
Financial outsourcing is hardly limited to the University of California. With roughly $6 trillion in
assets at stake, public pension fund management and consulting is among the most lucrative corners
of the financial services industry. It's also one of the least regulated. In 2005, the Securities and
Exchange Commission wrapped up an eighteen-month probe of 24 pension and 401(k) fund
consultants. Nearly four in five, the SEC reported, had financial relationships with the money
managers they were recommending to their pension clients, even as most of the consultants
purported to provide impartial references. Sometimes they sold software to the money management
firms — The New York Times reported that some money managers viewed the purchases as simply
a way to ensure that their services were recommended to pension fund trustees. The SEC also found
evidence of kickbacks: Some consultants sought out managers willing to route the stock trades back
to the consultant's brokerage wing. According to The Los Angeles Times, Wilshire, one of the
companies surveyed, received a letter from the SEC "suggesting the firm improve its disclosure."
Might Wilshire have recommended managers who in turn hired it to broker the trades? That's
difficult to assess, since university officials swear they don't know who pocketed the millions in
brokerage commissions they have paid out since 2002. "The treasurer's office tracked commissions
when these assets were managed internally," spokesman Trey Davis wrote in an e-mail. "They are
not tracked now; rather, the commissions are just netted against transaction costs."
Former SEC lawyer Siedle isn't buying it. "That's horseshit," he countered. "The university knows
exactly who got paid to do what. They have to by law. A fiduciary is charged with monitoring costs.
One of the most significant costs of running a pension plan are brokerage commissions. They're
lying to you about that. And if they're not, they're really fucking up."
When asked again to review its brokerage commissions, university officials did not provide any
further information.
Indeed, it seems as if the worse the pension fund does, the less willing the university is to tell the
public. For example, comparisons of the fund's performance versus similar pension plans and
investment trusts were once a regular feature of the treasurer's annual reports. But as fund
performance began to go south, the regents and the treasurer's office became reluctant to compare it
with its peers. At an investment committee meeting on May 15, 2002, Parsky noted that the
committee "had urged that the regents not pay close attention to the university's peer institutions,
which tend to have very different investment profiles." By 2005, the regents' new pension
consultant had delivered a lengthy report arguing that such comparisons were useless: "They appeal
to the 'horse-race' mentality in the investment community."
Last January, Charles Schwartz, an emeritus physics professor from UC Berkeley, was the first to
publicly note that the university's bank had listed the pension fund among the nation's lowest
performers. When UC officials gave him the data after repeated Public Records Act requests, they
were careful to state that "The treasurer's office has moved away from peer group comparisons."
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pg 6
According to Schwartz, this was just part of a long-standing pattern of obfuscation on UC's part. For
the past seven years, this retired professor has obsessively catalogued the fund's performance and
analyzed every report by Wilshire and the treasurer's office, pointing out what he claims are critical
flaws in the consultant's risk analysis and demanding the minutes to secret regents' meetings.
The regents, many of whom are investment and business professionals, dismissed Schwartz as a
gadfly. After all, he has complained publicly for decades about the board's lack of accountability. In
the early 1990s, as a state budget crisis drove up UC student fees, Schwartz started a campaign to
"democratize" the regents, whom the governor appoints to twelve-year terms. His effort flopped,
and the professor set out to enjoy his retirement. But when Schwartz began reading news accounts
of Small's ouster, something didn't feel right. Thus began his long campaign to analyze every
financial report and catalogue every conflict-of-interest allegation against Wilshire.
Schwartz is no investment expert, but he is a physicist who knows his numbers. To him, Wilshire's
pension-fund analysis reads like mathematical nonsense. "A key part of their report was making
projections of future performance on the investments," he said. "Any such projections must involve
a lot of uncertainties. And in the Wilshire report it was just ignored. The numbers were just put
down as if they were absolutely reliable.
"About a year later, I discovered that the numbers were just plain wrong," Schwartz said. "After
some correspondence, it was admitted that yes, they made a mistake."
Schwartz eventually published a series of papers on his Web site that meticulously critique the
regents' rationale for switching investment strategies, and document his campaign to get
information. The regents continued to laugh him off — literally. In a January 2003 dispatch,
Schwartz recalled listening to a broadcast of a regents' meeting: "I heard one regent ask, 'Will you
send a copy to Professor Schwartz?' A round of laughter ensued."
They stopped laughing later that year, when Schwartz, the Coalition of University Employees, and
the San Jose Mercury News sued to force the university to release minutes of its secret meetings.
UC lawyers appealed all the way to the state Supreme Court, but eventually lost and had to comply.
The secret meetings also revealed a disturbing practice. Since the regents had to reveal pension fund
figures to the public, they discussed how they could minimize the impact by timing the disclosure to
coincide with the 2002 election. "The Chronicle will be full of other stuff," regent Peter Preuss
assured, according to a Mercury News report. At one point, Norman Pattiz asked his peers, "When
is this going to hit the fan?" When told the numbers would be made public the day after the election,
he replied, "That's good." The other regents laughed, and Bruce Lehmann, a consultant, interjected,
"Thank God the doors are closed."
At the Berkeley Faculty Club last month, professors and other employees picked at a spread of
hummus, falafel, and artichokes. But Ari Krantz, an attorney for the university's 65,000 unionized
workers, quickly tarnished the buffet with some bad news. Just a few years back, he told them, the
pension fund was making enough money to pay all of its members' retirement benefits and still have
hundreds of millions of dollars in profit. Now, Krantz announced, the fund was so broke that within
two years, it would be unable to even cover the benefits. For almost seventeen years, employees had
enjoyed an extraordinary "contribution holiday" during which they didn't have to pay into their
pension fund. Those days, he warned, were over.
From professors to janitors, UC employees get relatively meager pay — last year The Berkeleyan,
Cal's in-house newsletter, reported that they get 10 to 15 percent less than colleagues at comparable
institutions. Thousands of university employees have been willing to work for low pay precisely
because their benefits are so exemplary. Now, many worry that the regents may undo one of the
things that made working there worthwhile.
Krantz said that UC negotiators want employees to divert a portion of their paychecks to the
pension fund — up to 8 percent eventually. The university has promised to match the contribution,
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pg 7
but what seems like a generous offer is, in fact, a fraction of what the regents once paid.
"Historically, the university had paid many times what employees were paying, more like five-toone on average," Krantz said in a later interview. "Employees would pay 2 percent of salary, and the
employer would pay everything else." Now, Krantz said, there's a growing sentiment among union
members that the regents are asking ordinary workers to pay for the university's financial
incompetence. UC spokesman Paul Schwartz didn't dispute these facts but said Krantz has an
alarmist way of characterizing the situation.
The unions are still bargaining with the university over contribution terms, Krantz said. If workers
have to pay back into the fund, union leaders want UC to raise salaries to market rates. In addition,
they want the pension fund turned over to a "joint governance" board that will give employees a say
in how it is invested.
"I'm really quite angry this could happen," said Paul Brooks, a Cal spectroscopist on the unions'
bargaining team. "It's almost as though there's been a shift in the last twenty years, where UC
regents really cared for students and employees, to a private management philosophy where they
think student fees should be raised simply because they're below market."
Joe Pulido has maintained buildings at UC Berkeley for 28 years. He remembers how pleased he
was when the contribution holiday started. "Some of the people I know — it's gonna be a hardship,
because they don't make enough money to make ends meet as it is," he said. "I'm talking about a lot
of my friends. They make less than $35,000 a year as it is. People these days are living month by
month. They need the money now."
Connerly believes the university has only itself to blame. "You go from performance that had
always been consistently good, and if it's now down, and there is a consistent pattern of being down,
the employees better be asking some questions here," he said.
While UC workers ponder their new financial reality, Gerald Parsky is enjoying the highest stature
of his career. Despite his track record, his position as chairman of Governor Schwarzenegger's
special commission has raised no red flags as he sets out to tackle the profound financial problems
facing the state's largest pension plans.
Steve Mehlman, a spokesman for the California State Employees Association, said his members
were relieved that the governor didn't stack the commission with people who would try to convert
the pension funds to a 401(k) system. "We believe the panel seems to be made up of reasonable
people, and we're waiting, seeing what the panel is going to come up with," he said. Yet when asked
about Parsky's history with the UC fund, Mehlman replied, "We were not aware of this."
While no one can accuse Parsky of purposely sinking any public pension fund, he has shown a clear
predilection for hiring external managers even when they don't merit the contracts. What's more, the
circumstances regarding Wilshire's hiring suggest that Parsky may be willing to put his political
interests ahead of the public good. There's no denying he spearheaded a financial disaster that has
led to billions in lost profits, tens of millions in unnecessary fees, and tens of thousands of
employees who are now facing life- changing cuts in compensation. Now hundreds of thousands of
state employees will have to wait and see how Parsky's leadership might affect their futures. They'll
know by year's end.
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pg 8