"Nobody has ever told me that we had to ask the UC for an OK before we invested in something," Blum told The Chronicle. "I wouldn't be on the Board of Regents if I have to ask for permission to go to the bathroom."
Wachter also dismissed the idea that the overlapping investments represent a conflict. "It just doesn't make sense at all," Wachter said, adding that he's surprised that he and Blum had so few overlapping investments over the years, given the extent of their holdings. "The key thing is that you're not telling each other what to do."
But ethics experts say conflict of interest laws and regulations do not allow for such overlaps. "The regents' overlapping investments pose clear conflicts of interest," said Kirk Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University. "It is really striking that members of the investment committee stood to gain so significantly from co-investing with UC."
Robert Weissman, president of the government watchdog group Public Citizen, was more direct: "A third-grader can see that what the regents on the investment committee were doing is unethical."
Minutes from committee meetings show Blum and Wachter consistently voted to instruct the investment officer to increase the amount of money invested in private equity funds, a sector in which the two regents have substantial financial interests.
More importantly, some of those investments were tied to private equity deals in which Blum and Wachter held financial stakes.
In one example, Blum, Wachter, and UC all invested in private equity funds that partnered to buy the Las Vegas casino corporation Harrah's Entertainment in 2008.
It worked this way: The regents' investment committee oversaw an investment of $199 million in four private equity funds that helped finance the $30 billion Harrah's deal, according to documents filed with the U.S. Securities and Exchange Commission and UC financial records.
Blum held "more than $1 million" in one these funds, called TPG Capital V, according to Feinstein's economic disclosure statement. Wachter owned "up to $1 million" in two of the funds that financed the Harrah's buyout, according to his financial disclosure statements.
Blum denied any conflict. He said the money resulted from a 2006 merger between Blum's Newbridge Capital and TPG Capital. Newbridge became TPG Asia, with Blum as its co-chairman.
As a result of the merger, "I wound up having some extremely minor — less than 1 percent — interest in some of (TPG Capital's) funds," Blum said, referring to his $1 million-plus asset.
Blum said he did not engineer the arrangement, and is never consulted on matters concerning TPG Capital, which did the deal with Harrah's.
"You couldn't pay me to invest in a casino," he said. Wachter agreed that the Harrah's case presents no conflict. "With investors, there will always be overlap. The point is, if one of the regents told the UC to invest in a particular fund, manager or company, that would be a different conversation. But that's what our policy prohibits."
During his six years on the investment committee, Blum had a financial interest in four other deals in which UC was involved, according to SEC filings and UC records.
They involved Univision and Freescale Semiconductor in 2007, Sungard Data Systems in 2005, and Kinetic Concepts in 2004.
Blum said he had no control over any of the deals involving TPG Capital, but said his firm, Blum Capital Investments, was very involved with Kinetic Concepts.
He scoffed at the idea that he engineered any UC investment to enrich himself. "This is how ridiculous it is," Blum said. "So someone's going to whine because of $1 million? And somehow I'm taking advantage of the UC? I probably give away a bigger percentage of my net worth" than many people.