Censorship -- or something else? - Page 5

Why did two Bay Area newsrooms dismiss Peter Byrne's story about conflicts of interest in UC investment deals?

"We want to be clear on one point. The Chronicle is never intimidated by threats made prior to the publication of a newspaper story — and they are hardly infrequent. We make all of our decisions about publishing stories based on the high standards for journalism that we seek to uphold in the newspaper every day." Bay Citizen reporter Elizabeth Lesly Stevens told us: "After much reporting we ultimately decided that Peter's story was a lot less interesting than he thought it was, and wouldn't make for a very worthwhile column in the NY Times."

Editors note: This is the final version of the story that was supposed to run in the Chron:

By Peter Byrne


The University of California has invested hundreds of millions of dollars in business deals in which two regents who have helped oversee UC's investment portfolio also had financial interests, records show.

Since 2003, UC has invested in five private equity deals in which Regent Richard Blum also had investment interests, according to federal, state and university documents. Regent Paul Wachter had a substantial financial interest in one of those deals.

In such cases, Blum and Wachter were in a position to benefit — or lose — from university investments they oversaw. Blum served on the investment committee from 2004 to February 2010. Wachter joined in 2004 and is its current chairman.

Both regents deny any wrongdoing. The university's chief attorney has examined the investment overlap and concluded they were likely coincidental.

Yet some ethics experts say the overlapping investments create an appearance of conflicted interests. Critics say the deals may violate state and UC ethics guidelines.

Blum, an investment banker and financier who was appointed to the regents in 2002 by then-Gov. Gray Davis, is the husband of Sen. Dianne Feinstein. Wachter is CEO of Main Street Advisors,?a financial management company. He was named to the board by Gov. Arnold Schwarzenegger in 2004.

The regents' 10-member investment committee sets policy for and oversees the management of UC's $70.8 billion as of March 2011 portfolio of investments, which includes the retirement, endowment and campus foundation funds. UC's chief investment officer, Marie Berggren, regularly reports to the committee, explaining where the money is being invested and how well the investments are doing.

The investment committee's conflict-of-interest policy prohibits committee members from telling the investment officer what specific funds to invest in. But they can, and do, direct her to invest greater or lesser amounts in certain categories of funds.

Committee members must also adhere to conflict-of-interest guidelines established by the state and UC, both of which prohibit officials from influencing or voting on matters in which there is even an appearance of a personal conflict of interest. In particular, UC's policy says a conflict exists "if it is reasonably foreseeable that the decision will have a material financial effect on one or more of your economic interests." A material interest is defined as being worth more than $2,000.


Blum had investments of more than $1 million in a number of the business partnerships that UC put money into, while Wachter had up to $1 million invested in one of the deals.

UC's general counsel, Charles Robinson, examined these investments in 2010. Robinson concluded that the investment overlap was probably coincidental, and that neither Blum nor Wachter improperly steered public funds.

"Any overlap is substantially more likely to be the result of independent decisions by like-minded investors than the result of coordination," Robinson reported.

Blum called the idea that he would coordinate investments and profit from UC's financial dealings "ridiculous" and even "obscene."