Wednesday, October 28, 2009

Know Your Regents, Part Two: The Case of Richard Blum

After Gerald Parsky ended his term as the head regent, Richard Blum took over this powerful position, and this change was important for many reasons. First of all, Blum was a major investor and owner of real estate, and he had major stakes in companies that handled defense projects and infrastructure building for the U.S. Military. Blum is also married to Senator Diane Feinstein, who sat on the defense appropriations committee, while her husband was submitting bids for defense contracts. According to Feinstein, she never knew which contracts belonged to her husband’s interest because the contracts were listed without the names of the bidder. However, an investigative reporter, Peter Byrne, asked Blum’s lawyer about this potential conflict of interest, and the lawyer responded that they gave Feinstein a list of all of Blum’s bids, so she would know to remove herself when they were discussing her husband’s contracts. Congressional records show that she never did remove herself.

Since Blum, as head regent, was involved in the process of choosing the money mangers and investment strategies for the UC system, it seems highly likely that he was able to steer UC money into his own interests. In fact, we know that Blum was a major stakeholder in the construction company URS and that in May 2001, UC announced that it would pay URS $150 million to manage the reconstruction of Santa Monica Hospital. In other words, just as his wife approved her husband’s bids for defense contracts, Blum himself got the regents to accept his own company’s construction bids.

But the story gets much worse; Byrne has reported that, “URS, which designs and sells advanced weaponry, also held a $125 million design and construction contract at UC's Los Alamos nuclear weapons lab. So URS had substantial interests in UC capital projects when Blum, its principal owner, became a "decider" on construction planning and awarding contracts.” Blum was then not only married to a powerful senator who was the member of the defense appropriation committee, but as a regent, he helped steer the university into contracts with companies in which he held a major stake.
Perhaps the most destructive role Blum has played as a regent is his constant push to get the UC to invest more in real estate and high-risk derivatives. Even as the stock market was falling and real estate was crashing, Blum is on record telling the finance committee that they should increase investments into what we now call toxic assets. The UC now holds billions of dollars of assets and investments that cannot be priced, and this loss of money goes along with a loss of $23 billion in its investment and pension funds (see the assets links below).

The case of Richard Blum should leave no doubt that the regents need to be democratized and that we should all gather together at UCLA on November 18-19 to fight for a fundamental change concerning how the regents are chosen and how priorities are made in the UC system.

How to Find UC Assets:
For latest report, click here, and go to Page 3:

UCRP is the pension fund

GEP is the collective endowment fund

STIP is the short-term investment fund

TRIP is a new investment fund

High point for total assets (over $74.6 billion) is 9/30/07, click here.

Recent low point: 3/30/09 ($51 billion, click here.

New link to short alternative budget video, click here.

10 comments:

  1. Depressing, how corrupt our political and UC leadership is--we really do need to start holding them accountable, and this research is an excellent start, thanks!

    Can you post a link or reference to Blum telling the Finance Cmte that they should increase investements into what we now call toxic assets?

    Harold Marcuse

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  2. Some believe that Blum's role in compromising the university's financial health (as a member at various times of the Regents' investment and finance committees, and in collusion with such partisan manipulators as Gerry Parsky) extends beyond his recent poor advice about toxic assets. Some years ago he appeared to be involved in the machinations that led to the Regents changing not only the investment mix for the UC pension fund, but changing the cast of characters charged with managing it ... not only to the detriment of the fund's subsequent performance, but to the benefit of the various investment-management firms who captured UC's business. (This development came shortly after the Regents decided to hand the bulk of that business to the same outfit it had recently hired to assess the internal Treasurer's performance!) Several observers and news outlets have written about this coup in the past, though so far as I know none have gone far enough into it to determine precisely what Blum's role in all this may have been:

    http://www.eastbayexpress.com/gyrobase/parsky_s_party/Content?oid=426427&showFullText=true

    http://socrates.berkeley.edu/~schwrtz/WHPF13.html

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  3. I've known for some time of Blum's questionable dealings as a war-profiteer who likely exploited his wife's position on the defense appropriations committee. It comes as no surprise to learn that he also leveraged his position as head regent to his personal advantage. Add to this his role in guiding UC investments into dubious "toxic assets" and you really have something much worse than mere fiscal incompetence. Fiscal malfeasance seems like a more accurate description.

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