Liu, the Pension Trustees, Transparency, and the NYS Freedom of Information Law

Recently the NY Post made a request of the NYC Comptroller, John Liu, for copies of the contracts, invoices, and payment authorizations for the 10 highest paid investment managers for real estate, private equity and hedge funds working for the five city pension funds.

Liu has tried to build a reputation for pushing transparency in city finances.

However, in response to the request Liu refused to disclose these documents. His reason was as follows:

“such records are exempt from disclosure under New York State Public Officers Law Section 87(2)(d) as trade secrets or are submitted to an agency by a commercial enterprise or derived from information obtained from a commercial enterprise, which if disclosed would cause substantial injury to the competitive position of the subject enterprise”.

Liu did not specify whether he was invoking the trade secret or competitive injury exclusion.

This position is absurd on its face. What organization would put a trade secret or information that was competitively damaging into a commercial contract, a document that in the future could possibly be at the heart of a nasty court fight? There is nothing in these contracts that qualify as a trade secret or would injure the competitive position of the investment managers.

The idea that this specious excuse would apply to invoices and payment vouchers is delusional.

There is of course the real possibility that the public disclosure of these contracts, invoices and payment vouchers might be politically embarrassing. That is assuming that they actually exist.

In addition, Liu threw in the truly inane excuse that “such disclosure would breach the confidentiality provisions in our contracts with the funds, be contrary to industry practice and standards and potentially cause the flight of top performing funds who want to guard their confidential information”.

I do suspect that there are confidentiality provisions in the contracts. These provisions, however, are in violation of the above referenced NYS Freedom of Information Law (NYS Public Officers Law Section 87(2)). This makes them null and void.

The idea of adhering to this industry’s practice and standards is laughable.

The possibility of top preforming funds fleeing a potential customer is not credible. First of all, what makes Liu think that the pension funds have hired the top performing funds. Second, no one walks away from “2 and 20” fees. Third, the pension funds should be so lucky to escape these piranhas.

As per the city’s FY-2012 financial statement, the five city pension funds incurred $340M worth of investment expenses in 2012.

The bottom line is that if the NY Post doesn’t drag Liu into court and get a judge to force him disclose the these documents, he can continue to hide behind this garbage. While Liu is the point man here, the trustees of the five city pension funds are all equally culpable for this deception.