Richard Costigan - Exemplar of What’s Wrong with the CalPERS Board

EASTSIDER-Mr. Richard Costiganhas been front and center in defending all the recent goofy hiring decisions by the CalPERS Board, which raised some questions in my mind.

 

At first, I thought maybe Costigan was just another political hack given a feel-good appointment by someone who thought they owed him something, so I decided to look deeper...after all, that’s the way Sacramento works. You scratch my back ... 

Mr. Costigan’s Background 

After I sent in my letter to the State Personnel Board, as reported bythe Naked Capitalism blog, I received a surprising response. 

He was not simply appointed by the SPB to be on the CalPERS Board, he is a gubernatorial appointee to the State Personnel Board itself. His pals on the SPB voted him to be their CalPERS representative starting in 2010. Wow! 

As a Georgia lawyer transplant, Costigan obtained his law degree there, worked for a few local firms, and then came to California around 1996. Directly, he got on the Placer County Civil Service Commission (1996 - 2003), and as a good Republican, started working for the Legislature. As he was quoted in an article:  

“When Costigan first got to Sacramento, he began working for the legislature. "I was the majority consultant to the Assembly Budget Committee on the Environment," he said. "And seven months after I got here, the Republicans lost the majority, and so I ended up a minority consultant to the Assembly Budget Appropriations Committee. And then I ended up as Director of Policy for the Assembly Republican Caucus, and then, from there, I became the Chief of Staff and oversaw all the operations for the Republicans in the state assembly." 

He also joined the seriously political heavyweight law firm Manatt, Phelps in early 2002, where he was a lobbyist, and then quickly parlayed that gig into becoming the chief lobbyist for the California Chamber of Commerce in January 2003. For this one, he had to leave Manatt. 

He then hooked up with governor Arnold Schwarzenegger, parlaying his Chamber gig into involvement with the recall Gray Davis movement and then the Schwarzenegger transition team when Arnold was elected in November 2003. Mr. Costigan’s tenure with the Schwarzenegger administration was far reaching: 

As Deputy Chief of Staff and Legislative Affairs Secretary, Costigan served as Schwarzenegger's principal liaison to the legislature. He said during his tenure in the governor's office, he oversaw all of Schwarzenegger's legislation and "tracked three to four thousand bills." In addition, he worked on a wide range of policy areas, including infrastructure, healthcare, environment, education, and economic issues.” 

In 2007, he was appointed to the State Personnel Board by Schwarzenegger, where he could both be a Board member, and return to making bucks by going back to a gig with Manatt, Phelps. Starting in 2010, he got appointed by the SPB as their CalPERS Board representative and has been re-appointed each year ever since. 

As his blurb at the Manatt website states: 

“Richard advises Fortune 100 clients across all sectors on issues such as politics, policy, regulatory matters, technology and procurement, healthcare, climate change, clean tech and renewable energy, infrastructure and development, bonds, and financing issues. 

For nearly a decade, Richard has served on the State Personnel Board, overseeing the state’s merit system. He has decided thousands of personnel cases involving complex legal issues. He has also worked on the reform of state government, California civil state and merit system processes, the creation of job classifications, employee personnel actions, and whistle-blower actions. 

Since 2011, Richard has served on the board of CalPERS, the largest public pension fund in North America. As chair of the finance and administration committee, he oversees the $1.7 billion operating budget; 2,800 positions; setting of the fund’s discount rate; risk management; liquidity and treasury management; and other financial issues. 

As chair of the finance and administration committee and member of CalPERS’ Investment Committee, Richard works on best practices and strategies, asset allocation, pension obligations, board management, shareholder responsibilities, healthcare funding and benefits.” 

So, What About Minimal Requirements for Hiring Executives at CalPERS? 

In the public sector, to even hire a clerical employee, there is a class specification, along with an application and examination packet. Yet if we are to believe CalPERS, in order to hire for the top CEO position, there are no requirements because it is exempt! Anybody believe in the tooth fairy? 

For any managerial position, exempt or no, there are a few minimum requirements that the appointing authority should observe before they go off doing a contract with some expensive headhunter firm expending significant public funds. 

First, you should have spelled out minimum requirements for the position, and a process to agree on what they should be by whomever is going to be in charge of the process. Second, you should have clear desirable qualifications to supplement the minimum requirements. You know, relevant experience and attributes that would be helpful in deciding who to hire. 

Finally, even if you use a headhunting firm, there needs to be some sort of scope of work and compensation agreement between CalPERS and the headhunting company, which outlines the process, such as how many candidates they should bring back for consideration, the time frame, background checks and the like. 

And when the process is all done, and ready for the Board to determine who is going to be hired, it would be nice to see some sort of minimal transparency. You know, like if CalPERS was a public agency. Oh wait, CalPERS already IS a public agency. 

Hah! Actually, there was no public record in this hiring process. At least nothing you or I could find -- go look at the CalPERS website and see if you can find something beyond the public relations bullshit about the great hiring decisions they have made. 

Sure, lots of great hiring decisions. Like sleazeball fiduciary counsel Robert Klausner (who they had to let go). Like why they hired a conflicted replacement (Ashley Dunning of Nossaman, LLC) who’s actually suing CalPERS on behalf of another client even as she’s being retained.  

Marcie Frost Performance? 

As for Marcie Frost, the embattled CEO hired almost two years ago with NO transparency, and strongly supported by that nonpareil lawyer, SPB Board Member, CalPERS Board member, paragon of probity Richard Costigan III, what say he? 

It should be noted that among Marcie’s great attributes was the claim that she was the head of Human Services at Washington State’s Department of Retirement Services and did a wonderful job!  Really. 

Then entirely on her watch, how can we find a headline from the Sacramento Bee:  

stating that CalPERS names ex-Jerry Brown aide as third CFO in 14 months”? 

Let’s remember the stakes here. This isn’t Marcie just pretending to be an HR whiz. This is managing our money -- the money that pays for our pensions. The position which holds, supposedly, the highest level of fiduciary responsibility for the CEO and the Board. 

But what we got was the hiring of a CalPERS Board member, Richard Gillihan, whose own job with the State was at risk as there is a change of administration coming. In a “you can’t make this stuff up” moment, I am compelled to note that his current position is Director of Human Resources for the entire State of California! God help the State. 

Amazingly, the unnoticed screaming conflict of interest struck only after he got hired, and bye bye Ghillihan, who remains on the Board. You wonder why I get outraged? 

Then, just to make sure our money is safe, Marcie and the gang went out and found one Charles Asubonten to become the CFO. In a moment of really sad but prescient irony, it turned out that, as reported in The Bee, Ousted CalPERS CFO fought to keep job after inquiry found resume embellishments.” 

Just as in the case of Ghillihan, none of this came out until CalPERS had already hired him. It’s a good article, and very directly implicates Marcie Frost, General Counsel Matt Jacobs, and Board President Priya Mahur as the major players in this total screwup. Wunderbar. I wouldn’t trust these people to do human resources for a Charter School. 

The Takeaway 

Just to circle back to the theme of this article, one Richard Costigan was on the record supporting all this crud. Not only that, as reported by Naked Capitalism, here are his learned words on the hiring of Marcie Frost: 

“The CalPERS board has no plans to further investigate or take any action regarding the misrepresentations, says board member Richard Costigan. Costigan says Frost’s educational background had no bearing on the board’s decision to hire her. ‘...I knew at the time we interviewed her she didn’t have a college degree,’ says Costigan.” 

I have spent considerable time on Mr. Costigan, because I think he is the poster child for what’s wrong with the CalPERS Board, and he has absolutely no excuses. He’s an attorney, he’s a former lobbyist and insider per his own resume, and he has used his position on two very important government Boards (the SPB being the other one) for his personal gain. Just look at his blurb on the Manatt, Phelps website, where it is clear that being on these two boards has helped him gather private clients as an attorney. 

In short, I believe he is a consummate political insider working both inside and outside of government to feather his personal economic nest. While I would love to get a list of his current and former clients to verify my suspicions, anyone want to take a bet on that happening? 

So, to me Mr. Costigan represents the abuse of power, to the benefit of Mr. Costigan and to the detriment of us, the beneficiaries. Costigan should quietly be asked to resign from his SPB seat (these are gubernatorial appointments, and, by definition, serve at the pleasure of the governor) and should definitely not be reappointed to any future term on the SPB. 

(Tony Butka is an Eastside community activist, who has served on a neighborhood council, has a background in government and is a contributor to CityWatch.) Edited for CityWatch by Linda Abrams.