"UC Santa Barbara Paper Scrubs Regents Story--"UC Regents Face Ethics Allegations" Reprint via Spot.us

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UC Santa Barbara paper scrubs regents story

Posted on 2011 April 15 | Leave a comment

It’s like a tale straight from the pages of 1984, where a newspaper publishes a story one day, only to make it vanish the next, leaving no trace behind.

What makes the tale especially interesting to esnl is the subject of the story: A call for an investigation of potential conflicts of interest in votes by members of the University of California Board of Regents, and, in particular, Richard Blum, the politically well connected regent and former construction company magnate who is married to U.S. Senator Diane Feinstein.

The story appeared in Thursday’s print and online editions of The Daily Nexus, the campus newspaper of UC Santa Barbara. Today, a click on the link brings the familiar 404 message:

404 |Error 404 – Page not found! Sorry, but the page you were looking for is not here.

Because the story should be of interest to our readers, we offer it here in full:

UC Regents Face Ethics Allegations

By Jenna Ryan
Published on April 14, 2011

A petition started by a UC Berkeley activist group last spring is demanding that California’s Attorney General address allegations about certain UC Regents’ unethical, vested interests in UC investments.

While UC administrators staunchly refute the claims, the petition has 257 signatures as of press time and accuses 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.

“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,” (anyone else see the problem with that??  Of course, the investigation was scuttled from the get-go...it's what Feinstein et al does best) 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 ignored the University’s explanations. (What? Like the investigative journalist is just going to take the University's explanations of unethical behavior at face value!)

“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.” (yeah......right....just a coincidence, I'm sure.)

Based on the UC Regents’ involvement in the private equity market, Byrne’s eight-article series was published on the web-based spot.us forum, and 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.

Byrne’s findings accuse Blum of conspiring with his wife U.S. Senator Dianne Feinstein to profit from the UC system’s investments while laying off teachers and employees and increasing tuition by 30 percent.  

Furthermore, Byrne’s findings stated that CalPERS — the second largest employee union in the country — had teamed up with Blum to pay $4 million a year to a company Schwarzenegger had partial ownership in, as well as take over half a billion dollars in investments. (And prior to this undertaking, Blum was in charge of the Carpenter's Health and Welfare Trust Fund, at that time 2003, that public trust fund was the largest investment portfolio I believe in the nation. Seriously, any other person walking God's green earth would be investigated, indicted, tried, convicted and sentenced...but not these two...must be nice to be above the law.)

According to Byrne’s investigative 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 Berkeley visiting scholar Gray Brechin said a lack of wider media circulation regarding the claims can be attributed to the political influence of Blum and Feinstein.

“Byrne previously investigated conflicts of interest between Regent Richard Blum and his wife, Senator Dianne Feinstein,” Brechin said in an e-mail. “Those articles, like his current work, never appeared in the Blum/Feinstein home newspaper, the San Francisco Chronicle. That hardly surprises me since the couple is now one of the most powerful in the United States. … They move in the very highest of San Francisco’s political and society circles.”

UC Associate Vice President for Communications Lynn Tierney said Byrne’s claims don’t necessarily indicate a conflict of interest. (Maybe in their world, but not out here in the 'real' one.)

“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.” (And here's the main source of the problem...both Mr. Blum as Regent, and Ms. Feinstein as Senator are both bound by laws and rules that forbid 'even the hint of conflict'...what part of that do they apparently not understand?  Kinda like the WWD contract specifically stipulating water deliveries in excess years only.)

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 the response to his evidence was thoroughly 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. (Again, seriously?  These people have no morals, in their twisted reasoning, they don't owe anyone anything except more deposits to their personal bank accounts...we must stop expecting conscientious behavior from unconscionable people.)

“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.” (Kinda...duh!!)

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.