CalPERS must release an eight-inch stack of documents relating to its doomed investment in East Palo Alto apartment complexes bought up by Page Mill Properties, a San Francisco judge ruled Tuesday morning (see ruling).
The giant public-pension fund, which lost about $100 million in the Page Mill investment, must turn over to the First Amendment Coalition reams of correspondence between CalPERS and Page Mill attorneys, San Francisco Superior Court Judge Charlotte W. Woolard ruled. The San Rafael-based nonprofit sued CalPERS in July after pension officials refused to turn over documents relating to the failed investment.
CalPERS had claimed in a petition last month that some of the records in the information request were the "subject of confidentiality agreements designed to protect trade secret/proprietary information" and to prevent disclosure of "information which would make it more difficult for CalPERS to compete strategically in the investment market...."
But Woolard rejected the argument that CalPERS' agreements with Page Mill allow the fund to withhold the requested documents.
"Assurances of confidentiality cannot convert public records to private records," Woolard wrote.
Woolard acknowledged that some of the documents in the public-records request could be subject to attorney-client privilege. But CalPERS, she wrote, "did not identify which of the request documents may be subject to that privilege." She directed CalPERS to produce a "privilege log" by Sept. 24 identifying exactly which documents could fall into this category.
"Not all of the eight inches of the documents withheld by CalPERS are attorney-client privileged communications," she wrote.
Page Mill Properties lost control of its roughly 1,800 rental units about a year ago, shortly after it missed a $50 million balloon payment to Wells Fargo. The Palo Alto-based company had bought the properties in 2007 and 2008 and became entangled in a myriad of lawsuits with the city over East Palo Alto's rent-control ordinance. Wells Fargo, which took over ownership of the properties, reached a settlement on the lawsuits with East Palo Alto last month.
City officials and tenant activists accused the company of engaging in "predatory equity" after it bought the Woodland Park properties and then spiked rents, prompting many tenants to move out. Page Mill is also facing a lawsuit from a group of investors who have accused the company of securities fraud and deception.
Peter Scheer, president of the First Amendment Coalition, said the group launched its lawsuit because it wanted to learn more about the pension funds Page Mill investment, which he called a "terrible black eye" on a fund with a reputation for socially conscious investments. He noted that Page Mill's rent increases and opposition to East Palo Alto's rent-control laws, which were part of the company's plan to gentrify the neighborhood, led to displacement of lower-income tenants.
"We're concerned about how they make their investment decisions," Scheer said. "We wanted to know what analysis led CalPERS to the conclusion that they should enter into a highly leveraged, undercapitalized investment of this kind."
Karl Olson, attorney with the San Francisco-based firm Ram & Olson who represented the First Amendment Coalition, called the Tuesday's ruling "extremely gratifying."
"It's kind of a David-and-Goliath victory whenever a small nonprofit organization sues the nation's largest pension fund," Olson said. "I think this is a situation in which the public interest in the disclosure of documents was extremely strong.
"Whenever you see such a significant loss of money, the public certainly has a right to know what happened."