Looking Ahead: CalPERS Heads To Court

After months of begging for private equity fund performance data from the California Public Employees’ Retirement System (CalPERS), the San Jose Mercury News will finally get its day in court Wednesday. Barring any last minute change, Judge James Robertson of the San Francisco Superior Court will hear preliminary arguments on a case whose outcome could ultimately release sensitive figures from inside dozens of top-tier venture capital and buyout firms.

The Mercury News originally filed its Writ of Petition on October 16, along with several supporting documents explaining why neither CalPERS nor the people of California would suffer fiscal harm from performance data disclosure (See PE Week 10/7/02). The complaint does not ask for valuation information on underlying assets, although a Mercury News representative did not rule out a later request for that information.

“This is no time for a public agency which invest hundreds of billions of pensioners’ dollars to play hide the ball,” states the suit. “Now more than ever – now that corporate scandals have wiped out billions of dollars in retirement income and threatened the retirement security of people who devoted their lives to public service – a public agency must heed the mandate of the Public Records Act.”

CalPERS had hoped to push Wednesday’s hearing back until after its upcoming investment committee and full board hearings, but was unable to do so. Nonetheless, CalPERS and its affiliates did manage on October 25 to file a response that came in at over 600 pages. Among the papers are 18 letters from general partners, law firms and trade organizations that oppose forced disclosure.

“If IRR numbers are revealed in newspapers, then newspapers will want to know why there have been write-ups and write downs, and they will try to reveal which portfolio companies have been written down” wrote Craig Jones, president of Ticonderoga Capital. “We have experienced many situations over the past several years where an investment in written down but eventually becomes a success.”

John Gannon, general partner and CFO of Polaris Venture Partners, wrote: “If it is determined that CalPERS is required to disclose [the] information, such disclosure could diminish portfolio companies’ willingness to have us as an investor. We would ten have to strongly consider whether to allow CalPERS as a limited partner in future funds managed by us.”

The majority of CalPERS’ general partners did not write supporting letters, although all of the firms contacted by PE Week said they support CalPERS’ position. Many also said that they will get actively involved if, and when, the confidentiality of underlying assets is directly threatened. -D.P./C.B.