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"Austerity on fire"...
Our eight-month investigation reveals that some members of the regents’ investment committee, who are also Wall Street heavy-hitters, have modified long-standing investment policies in a way that benefited their own financial holdings. The fallout: multiple conflicts of interest.Read the whole thing, and keep an eye out for the rest of the series.
The changes can be traced to 2003, when regents Gerald Parsky, Richard C. Blum, and Paul Wachter—all financiers by trade—took control of UC’s investment strategy. Sitting on the board’s investment committee, the three men steered away from investing in more traditional instruments, such as blue-chip stocks and bonds, toward largely unregulated “alternative” investments, such as private equity and private real estate deals. According to UC internal reports, the dramatic investment change has led to an “overweighting” of investments in private equity. One concerned regent has likened the change to “gambling in Las Vegas.”
The changes did not stop there.
By-passing the university treasurer’s in-house investment specialists, the regents investment committee hired private managers to handle many of these new kinds of less-regulated transactions. This action theoretically placed some distance between the personal financial holdings of regents and the investments made on behalf of the UC endowment and retirement funds. But it also served to increase management costs, and to limit the transparency around UCs investments, since these “external” managers are not subject to the same public disclosure laws that apply to university operations.
Unfortunately, many of these deals, while potentially lucrative, have lost significant amounts of money for UC’s retirement and endowment funds, which were worth $63 billion at the end of 2009. (These losses ultimately reduce the amount spent on education, since the endowment supports teaching activities.) And the non-transparency of these private deals enabled multiple conflicts of interest to arise without challenge.
Specifically, our investigation shows that, under the new regime on the investment committee, UC placed $2 billion into a series of private deals and publicly held enterprises with significant ties to the business activities of four regents: Wachter, Blum, Sherry Lansing, and Gov. Arnold Schwarzenegger.
After the UC Regents voted to increase employee contributions to the pension plan, they quickly moved to the next important business, which was to vote for special compensation packages for some of the highest paid people in the system. As State Senator Leland Lee wrote in a press release, the regents voted for executive salary increases totaling $6 million, and they also approved the plan to hire more administrators for a an additional $2.4 million annually. My favorite example of executive excess is UCLA Medical Center CEO David Feinberg who got a $400,000 raise and will now make $1,330,000 per year.
So after another budget presentation about the huge UC deficit, which may require another round of student fee increases, the regents and senior management must have gone to their second brains in order to approve a series of obscene compensation packages. I simply do not understand how they can justify cutting the benefits and total compensation of most of the employees, while they immediately move to increase the pay and benefits of the highest earners.
[Senior Editorial Board of the Daily Cal]: Continuing on the idea of unrest and going back to protests, there was a lot of mistrust between students and administration and campus officials after last year's various protests. Part of that was objection to the way police forces acted during the Wheeler Hall protest. Now that the Police Review Board has released its report and knowing that there is a protest scheduled for Oct. 7, what is the course of action for campus officials now, on that date, and in preparing for that date?
Birgeneau: George, you can talk about this, in part. So we learned ourselves from the Wheeler Hall protest, and students will have noted that there was nothing comparable that happened in any of the protests after that, and that there was essentially no violence after that. Good example of that was the hunger strike which occurred at the end of the semester, which I think in the end was handled probably as well as it could have been. We have a crisis management team and we also have a committee, by the way, that's looking at the recommendations of the Brazil report, again, to help us in terms of how we implement those recommendations. I would say, sort of my point of view, probably the biggest failure on the Wheeler Hall thing was communicating with the people outside of Wheeler Hall adequately and making sure that people understood what was happening. And of course, things were not helped by the fact that the first serious injury was to a policeman who was out of work for two and half months. So that set a tone for violence, which was really unfortunate. George, want to add to that?
Breslauer: I would just add to that, that occupation of buildings is not something that we can take lightly or tolerate. And if that is the form that protest takes, we may have no choice but to - and if it is intransigent - use police force in as discreet a manner as possible, as nonviolent a manner as possible, to end the occupation of buildings. On Nov. 20 last year, we were, throughout that day, sort of haunted by the fact that there were 3,800 students, in a week close to final examinations, that weren't allowed to take their classes in Wheeler Hall that day because of that occupation. And to whom do we owe the greater responsibility? And this is something we're...
Birgeneau: The Code of Student Conduct is absolutely clear. Especially in an era of high fees, the university's ultimate responsibility is to allow students to take the classes that they've paid for. That's unambiguous in the Code of Student Conduct and that's the responsibility of the faculty and of the administration to ensure that students are able to attend their classes. And, again, we hear a certain amount of noise from people who are unhappy about certain aspects of how things were handled, but we got huge numbers of e-mails from students who were very unhappy about their inability to attend class or having their classes disrupted. Students come here because they want to be educated. It's our obligation to ensure that students can obtain the education that they've paid for.
Today, several students decided to take back control of their university from big business and little bureaucrats, reclaiming a single building of University of New Orleans’ campus for they, the tuition-payers, themselves.
Despite what benevolent administrators, politicians (student or otherwise), or the police may say, we know that this financial crisis is not ours, and that we will not pay for it. We know that this “depression” effects us disproportionately and we refuse to allow those who are already hurt to be injured any further. If there will be cuts, they will be from the very top.
We would like to state how overwhelmingly impressed we were with the organized Walk Out that also took place today. Y’all are amazing. Despite the fact that no one “led” the march or “organized” the rally, the students found no trouble whatsoever in finding common ground surrounding the slow and systematic demolition of the only public university available to them in the city of New Orleans.
Unfortunately, after being forcefully removed from a university building by violent, angry campus cops wielding batons and pepper spray, and after the beatings and arrests of two of our fellow students, and after Chief Harrington put a student in a headlock and wrongfully accused him of assault, the faculty, staff, and students alike were able to finally witness the police undeniably affirm our all of our accusations -- the university and its administration empower their goons, not their students, in order to better serve private interests at the cost of public education.
Please keep our two imprisoned comrades in your thoughts. Please contact the UNO Campus Police and let them know how nasty you think Chief Harrington is for sicking his officers on students.
Again, UNO made us proud today. We can’t wait to see how students will organize themselves this semester, this year, forever.
This was only the first.