August 11, 2020 By Joseph P. Farrell

We've all heard something of the looming pension fund crisis facing numerous states and local governments, but this one would  take a pretzel engineer to untangle,  and it's very disturbing. Indeed, when I read it, my immediate thought was "this explains a lot; it explains why Nuttyfornia might be so...well... nutty." Indeed, there's many implications to this article that I have to wonder if we're looking at another aspect of that "hot covert war" between China and the U.S. that I've blogged about lately. This story was found and shared by H.A.H., to whom a big thank you, especially as many of this website's members live and work in California.

Let's consider two stories:

CalPERS Chief Investment Officer Ben Meng Made False, Felonious Financial Disclosure Report; More Proof of Lack of Compliance Under Marcie Frost

UPDATE: CA Pension Fund Exec Yu Meng Resigned After Filing False Financial Disclosures, Self-Dealing

Now, note these details from the first story:

CalPERS’ Chief Investment Officer Ben Meng has filed demonstrably false financial disclosure documents, flouting the requirements of the California Fair Political Practices Commission. As a result, not only has Meng committed perjury, but CalPERS’ failure to review or require Meng to correct these documents points to a major compliance failure, since CalPERS has, or should have, records that would show that Meng’s financial disclosures were incomplete.1 Recall that this lapse follows CalPERS having had a huge spike in personal trading violations, which it has yet to explain adequately, let alone describe what it will do to prevent abuses like that from recurring. Poor controls are a disaster in the making for a financial institution, as the Wells Fargo fake account train wreck illustrates.

To make this sorry situation worse, CalPERS delayed releasing the Forms 700s until it became clear they’d be published regardless, suggesting that they were fully aware of this and potentially other lapses, yet refused to correct them.2

As we will also discuss, even the properly completed sections of Meng’s forms raise concerns, since they show that he has financial conflicts of interest with respect to private equity and has had an appetite for highly speculative instruments. The latter worrisomely may explain Meng’s appetite for risk now. Readers may recall that CalPERS has announced, with great fanfare, its plan to meet its 7% return target. It amounts to putting the available casino chips on the “more risk” numbers and then borrowing from the house to buy more chips to increase the size of the wager.3

Finally, this abuse by CalPERS top investment executive occurred just as CalPERS has been successfully moving forward legislation, AB 2473, to have its private debt investments, an area it intends to expand, exempt from Public Records Act disclosure. That means Meng could approve private debt deals that would benefit him or other CalPERS executives and the public would have no way of knowing. This bill has not yet gotten all the way through the legislature, so it is still possible it could be held back for badly-needed further review. (Emphasis added)

Note that the legislation referred to - to take all private debt investments private -- simply mirrors recent steps by the Federal government with FASAB 56 regulations, and new regulatioons being considered by the SEC. But also note, that the fundamental allegation against Meng is the filing of false disclosure documents.

But between August 2nd, when that article was composed, and August 7, Meng since resigned his position at Calpers, and the background is even more disturbing:

As we covered Thursday morning, Yu Meng, the Chinese-born Chief Investment Officer of California’s Public Employees Retirement System fund (CalPERS), abruptly resigned from his position late Wednesday. The resignation was effective immediately.

CalPERS’ investments in companies supplying China’s military complex were already under scrutiny by the Trump administration, and major questions about Meng’s allegiance to the United States were brought up by Rep. Jim Banks (R-IN) due to the fact that Meng’s prior employer was the Chinese government and since Meng has admitted to being part of the CCP’s “Thousand Talents Program” (TTP).

In the initial article, I wondered why Meng had resigned out of the blue and effective immediately. It turns out that just three days earlier, on August 2, Yves Smith at the Naked Capitalism blog posted a stunning, well-sourced exposé detailing Meng’s false filings on required financial disclosure forms, blatant self-dealing, and close ties to the highest levels of the Chinese Communist Party government.

Smith reviewed the two Statement of Economic Interest (Form 700) forms Meng filed since returning to the United States from Beijing in early 2019. The forms reveal Meng’s extensive investments in Chinese companies (some of which CalPERS also invested in), continued income from Beijing (over $110,000 in 2019), a failure to disclose more than 20 assets disposed of during the year, and his stake in private equity firms that were making bank off of CalPERS investments in exchange for a crappy return.


Meng also listed more than $100,000 in salary from the Chinese government’s State Administrator of Foreign Exchange (SAFE) for 2019, although he started his position with CalPERS in January 2019.

On his initial Form 700, completed when Meng assumed his position, he claimed to hold stock or investment interest in 13 Chinese companies:

  1. Agricultural Bank of China
  2. Bank of China
  3. China Construction Bank
  4. China Petroleum & Chemical Corp
  5. China Minsheng Bank
  6. China Telecom
  7. China Mobile
  8. China Unicom Hong Kong
  9. Industrial and Commercial Bank of China
  10. Petro China
  11. China Petroleum & Chemical
  12. PetroChina Co ADS
  13. iShares China High Cap

These holdings, the fact that retirement funds from California’s state and local government workers are invested in these Chinese companies and also enriching their pension fund’s Chief Investment Officer, and the fact that Meng continued to draw a substantial salary from the CCP while managing taxpayer dollars evidence an extremely troubling connection between him and his former (current?) boss.

All of this, as one can imagine, has stirred up a hornets' nest of controversy, but the bottom line here is that (1) Meng held equity positions in a number of Chinese companies; (2) used his position at Calpers to invest in the same on behalf of the fund, and (3) was drawing a salary both from Calpers and from an official state agency of the Chinese Communist government, or to put it country simple, was on the CCP's payroll, at the same time and he was on California's.

And both articles point out that the association of Calpers with the CCP is under investigation by the Trump Administration, which brings me to my high octane speculation of the day.

Perhaps one might qualify it as an "off-the-charts" speculation of the day. Let's begin with Dr. Charles Lieber of Harvard University's chemistry department. Remember him? Dr. Lieber was arrested by federal authorities for allegedly not disclosing his financial relationship with China in conjunction with activities he was conducting for the laboratory in Wuhan. More recently, a series of articles about the FBI's interest in pursuing Chinese economic and espionage activities has surfaced to reveal it's a major focus of that agency's activities. Finally, the Trump administration has invoked Obama era laws to promulgate a series of executive orders to deal with the corona virus scamplandemic's economic consequences. So one wonders whether Meng's resignation is all there is to the story. After all, he could hardly have done what he is allegedly to have done entirely or completely on his own.

He had to have had help. The question is, how deeply does that rabbit hole go? At this stage, we don't know. What we do know is that Senator Dianne Feinstein's Chinese chauffeur of many years was a Communist Chinese spy, and frankly, I'm simply not buying any narrative that would say she didn't know, or at least, suspect, that possibility. She's neither naive, nor stupid, and at one time chaired the Senate Intelligence committee. But we can assume that the rabbit hole goes very deep, and that possibly Feinstein's chauffeur gaffe may be a part of that pattern. And of course, let's not forget Biden's and his son's involvement in strange deals with China.

It's the Trump Administration's recent and open willingness to use those Obama era laws to deal with a national economic emergency caused by the planscamdemic that give me pause, for presumably, those same laws and precedents might allow the administration to assume direct oversight of Calpers. That would be a risky political football to kick around, and I cannot imagine Calpers' pensioners being pleased with the move. But on the other hand, I cannot imagine that they'd be all that happy knowing that their pension fund was misused to buy stakes in Communist Chinese companies, and allowing them to have a degree of influence over their pensions, either. And  it's a safe bet that lots of quiet interviews are being conducted with other Calpers management.

The long and short of it is, this is a long term story, it's one to watch. If Biden wins this November, it's a story that goes away and Calpers' relationship with the CCP perhaps continues. If not, I suspect it could become a very big story, with interconnections that, at present, we can only dream of or guess about.  As for Meng's resignation, my guess is that there's an arrest coming. And that in itself is intriguing to contemplate, because he might be offered a plea deal to name some more, and bigger, names...

See you on the flip side...