Yu Meng, Credit: CalPERS

The saga of Yu “Ben” Meng, former Chief Investment Officer of the country’s largest public employee pension program (CalPERS) and possible Chinese Communist Party plant, is getting curiouser and curiouser.

As we reported last week, Meng hastily resigned late in the evening of August 4 after a blogger exposed his numerous personal investments in Chinese companies, some of which support the Chinese military, and his ownership stake in private equity funds in which CalPERS dollars are invested. CalPERS’ has been under the microscope all year about its investments in Chinese companies, including in Hikvision, which is the equipment that’s used by the Chinese for surveillance on the Uighur Muslim population.

A story almost certainly placed by CalPERS in Bloomberg cast Meng in a sympathetic light and, to a larger extent, CEO Marcie Frost (who’s most certainly in CYA mode).

Behind the scenes, Meng was growing increasingly upset and complained to his boss, Chief Executive Officer Marcie Frost, that he’d become a target in the political wars constantly swirling around CalPERS. When, in April, a compliance team uncovered at least one conflict-of-interest violation, it set in motion a chain of events that threatened to spark a firestorm of criticism and thrust him into the center of even more hostility.

CalPERS found that Meng approved an investment into a private-equity fund managed by Blackstone Group Inc. at the same time as he held Blackstone shares.

That kind of ethical breach is a clear no-no at virtually every investment manager, and California law required Calpers to refer it the state’s Fair Political Practices Commission, which the fund did last week.

The blogger who broke the story about Meng’s potentially felonious financial disclosure forms is calling bulls**t.

CalPERS knew, and chose to ignore, that Meng had a conflict of interest problem in January 2019, not April 2020. Meng filed his initial financial disclosure form on January 31, 2019, which was as of his assuming office date, January 2, 2019. That form showed three private-equity related positions: Blackstone, Carlyle, and a credit fund run by Ares.

CalPERS should have told Meng to dispose of his private equity stakes as soon as it received his financial disclosure forms.

Meng violated conflict of interest laws in 2019, not 2020, and with Carlyle, not Blackstone. CalPERS via Bloomberg misleadingly tries to suggest, but in 2019, with $328 million commitment to a Carlyle European fund, Carlyle Europe Partners V.

If we assume CalPERS only found out about Meng’s issues with his personal investments in April 2020 and that the ethical breach was so egregious that they were required to notify the FPPC, why was there a four-month delay in making that notification? Also, people in Meng’s position are required to clear trades or disposal of assets with CalPERS, so they should have known that he still had those assets – that is, if they were doing their jobs.

The Bloomberg piece continues:

[S]he planned to discipline him — either by cutting his incentive pay or possibly by placing a formal letter into his file. And she told him to expect a media frenzy when the FPPC publicly disclosed its own investigation into his conduct and also, with anti-China sentiment running high in the country, to prepare for a fresh round of attacks on his ethnicity and renewed speculation about his allegiances.

See what they did there? Set the stage for calling any criticism of Meng, questions about his admitted participation in the CCP’s Thousand Talents Program, or concerns that he recently returned to the United States after serving at the highest levels of the Chinese government racism.

One CalPERS board member, Margaret Brown, said that the Board, the FPPC, and other authorities were never informed of Meng’s conflicts of interest.

If Calpers is protecting privacy, due process and Meng's rights, how does Bloomberg have this info? Calpers PR machine trying to deflect that Board, FPPC, authorities were never informed. https://t.co/NvmCD8ACzv via @markets

— Margaret Brown, CalPERS Board Member (@saveyourpension) August 9, 2020

An emergency board meeting has been called for August 17. In the meantime, we will continue to investigate how Yu “Ben” Meng was hired at CalPERS in the first place.