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Again she maintained that Wilshire was pushing major changes far too quickly. "The Board of Regents has historically moved very cautiously when making decisions of such financial magnitude," Small insisted. "While following a more open, informed, and independently evaluated process may not be as 'speedy' as consultants to the university may like, the due diligence and reasonable business judgement rules require me to advise the regents there are 'risks' of implementing a new 'Plan' with new benchmarks without following tried and true financial analysis."
Three days after Small sent her letter, the regents handed Wilshire another $350,000 contract this time to implement the very changes it had recommended.
Why, after so many years of stellar returns, were the regents racing to put outside money managers in charge of tens of billions of dollars, and paying Wilshire handsomely to make it happen?
A story in the San Francisco Examiner may have shed some light on the mystery. In July 2000, reporter Lance Williams revealed that Dennis Tito, Wilshire's president, had donated $80,000 to the California presidential campaign of George W. Bush the very campaign fund overseen by Gerald Parsky just one week before Parsky and the regents granted Wilshire its second major contract. The previous year, Williams reported, Tito and a number of other Wilshire executives and their wives had given a total of $10,000 to Parsky's Bush campaign. Not long after, Wilshire scored its earlier contract to analyze the fund's performance.
Parsky denied that he was trying to fire Small, or that he'd done anything improper. "I have never had any contact with Mr. Tito about making contributions to the Bush campaign," he told the Examiner. But the story clearly rattled cages at UC. The Express has obtained a draft of an open letter written by the regents' staff that Small claimed she was asked to sign. It reads in part: "Despite misleading news reports, these steps have been undertaken with the full input of the regents, the treasurer's office, and outside investment experts. The review was conducted in a manner consistent with university practices and in the best interests of the university, its employees, and pension funds. As a result, we are confident that the pension fund will continue to provide robust and secure benefits to the university employees it serves."
According to UC's Reese, Small was never asked to sign any letter, and adds that the treasurer contributed a quote to a press-release expressing confidence in the fund's future. Small maintained that she was asked to sign, but would not.
In any case, the treasurer recalled spending the middle of 2000 in a shell-shocked limbo. Her mother was entering the final stages of a terminal illness when, according to Small's 2004 letter, John Davies, then-chair of the board of regents, quietly approached her and suggested she might consider "retiring." By August, her lawyer had received a severance deal from the university that included a section threatening financial retaliation if the treasurer "disparaged" the regents. Small's lawyers, she wrote, were told she would be fired if she didn't sign the contract. So she signed.
Parsky was given ample opportunity to comment for this story, but did not. University spokespeople said he was "traveling," and requested questions in writing. Parsky never answered them, but Reese released the following comment: "The Express' latest series of questions assumes the inaccurate premise that the university's investment policies were revised in 2000 as a result of personal conflicts, business intrigue, and political conspiracy. The questions about Regent Parsky, in particular, are based on old, discredited stories and border on character assassination." (Lance Williams, now at The San Francisco Chronicle, says his reporting was never discredited.)
For his part, Ward Connerly is still bitter about Small's ordeal. "I thought Patty was treated badly," he said. "She didn't deserve her fate. I felt that then, I said and I will say that now. ... Outside money managers would love to get their mitts on a portfolio as large as the University of California. So I had questions whether someone was setting Patty and her staff up by making claims about her performance and morale and other things, pointing the finger at the treasurer.
"Some very good regents who were very active when I came in ... paid a lot of attention to what went on with the investments," Connerly said. "Just one of those guys would spend more time than any of the present regents combined. So they were monitoring this thing, and they were tickled by the performance, and then all of a sudden, and it really happened very hastily, there was all this criticism of her performance?"
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