The University of California’s motto may be “Let
There be Light,” but a recent lawsuit accuses the university
of hiding its financial records in the dark.
The suit seeks the publication of information on venture capital
investments and records of closed meetings where the UC Board of
Regents made key financial decisions.
The suit was filed April 1 after the university refused public
records requests for information which would reveal data and
planning on the UC Retirement Plan.
The university maintains it needs to keep investment information
private to form partnerships with venture capital firms, which work
with the UC under confidentiality agreements.
“If the university were forced to release this
information, these companies wouldn’t do business with
us,” said UC press aide Trey Davis.
The lawsuit’s plaintiffs, the San Jose Mercury News, the
Coalition of University Employees and retired UC Berkeley physics
professor Charles Schwartz, make two basic arguments against the
university’s position.
First, since the university is a public agency, the plaintiffs
argue the state’s information laws provide the public with a
right to know, which trumps the university and its partners’
right to privacy.
“We believe public agencies … have an obligation to
disclose … how they’re doing,” said Judy Alexander,
an attorney for the Mercury News.
Second, keeping financial records and meetings out of the public
eye can prevent those with a stake in the university’s fiscal
health from knowing if the UC is investing in solid companies.
“They’re not telling you how the individual funds
are doing,” said CUE attorney Karl Olsen.
“You would have no way of knowing which companies are
dogs,” he added.
The university makes quarterly and annual reports on its venture
capital investments but only publishes aggregate figures on its
dealings.
The suit would have the UC make reports on university deals with
individual companies ““ information investors call the
internal rate of return.
The plaintiffs also want the university to release minutes and
tape recordings of closed meetings of the regents, who since 1999
have received investment advice from Wilshire Associates, a private
consulting firm.
According to the lawsuit, in 2000, the regents forced out the
university’s treasurer, Patricia Small, and allocated $11
billion in investments to be managed by an outside company. In
2002, the board fired the UC’s equity investment staff and
placed billions more in the hands of external managers.
The suit asks for records of meetings when these decisions were
made.
Schwartz said the plaintiffs have “a lot of questions
about the kinds of advice given.”
One reason venture capital firms seek to do business under broad
privacy agreements is to protect trade secrets, like plans to
invest in specific projects.
Alexander said the suit would require the UC to keep meetings
and figures on general investment strategy public, but would allow
confidentiality for talks on specific plans.
“We see the necessity of closed sessions to discuss making
a particular investment,” she said.
The Mercury News successfully obtained the release of similar
information from two other California pension plans.
The California State Teachers Retirement System released data on
individual investments in December in response to a records
request.
CalSTRS released the information after deciding the current
state of business requires more transparency, said CalSTRS press
aide Sherry Reser.
“The environment has changed over the past few years …
starting with Enron,” she said.
Reser would not comment on whether publicizing investment
information affected CalSTRS ability to work with specific
firms.
The Mercury News also filed against the California Public
Employees Retirement System. CalPERS settled and released figures
on investments with individual firms.
A hearing on the suit is scheduled for May 12 at Alameda County
Superior Court.