francisco that works between corporates and investors on better data and disclosure. delighted to be here and look forward to working with you. >> president stansbury: thank you, andrew, bo. >> we're sad so say that ellen is leaving sfers. she has been the directing manager of asset allocation, risk and innovative solutions. this is decision from a mix of a couple of things. second to last born daughter is leaving, graduated right now and heading off to college in england to join her sister, who is already there. and that, plus how housing prices, she and her husband have decided to relocate to the midwest to trade lower housing prices and much larger land in exchange for cold weather. [laughter] >> much colder. >> we have an open recruitment

for an analyst for private debt and have begun recruitment for ellen's replacement. we have the investment committee that is scheduled for june 20th. we're in conversation with commissioner driscoll, with staff travel, you recall that the meeting has been moved around a couple of times, staff has travel scheduled for june 20. we'll see, but we'll let you know well in advance. >> president stansbury: questions from the board? >> commissioner driscoll: it's more of a request/observation, than anything else. to continfund -- that's part of plan. please stand by. please stand please stand by. please stand

>> that's just a suggestion to show your thought process. >> we did not carry this out to look for positive data. >> i have a question about private debt. when do we expect to be at our allocation? >> five years. >> and our allocation% is ten? >> yes. >> how long until we get to that four% that you talked about? >> it depends on when the capitocapital is called. we do have some charts showing expected pacing. i would need to go back and look at the charts. i know the endpoint of when we get to ten, i don't know. i don't recall when we get to four. if i were to estimate, a year.

>> have we, or have you talked about -- the funds that we put money with, there are prior funds. they already have names that they are invested in. just posing a question, does it make sense to have some of our existing managers sort of create a trust or a site car so we can buy names in the secondary, if they fit certain criteria? so that we don't have to weighed a cycle to get in, or is a purposeful that we are trying to invest over the next five years? >> we are trying to take a measured approach for a couple of reasons. one is we don't want to take a lump-sum of vintage year risk. we want to spread that over a time series.

the second reason why we are doing this, is this is a hot space right now. a lot of capital is flowing out and large commitments are being made to private capital, private debt. people are looking for a place for good yield. there is a lot of thoughtfulness about the ramp up. about not being -- not going in too hard or too fast at a time where a lot of people are crowding into the space as well. i'm thrilled with the quality of the investments that we've made. this is performing really, really well. we are below double-digit returns, if you recall, last week in the presentation. but it is a hot space and i have some concerns about that. it does look like there is still a lot of capital that the space

can still absorb. but i also want to see it. >> alan martinallen martin, anyn this? >> i agree with phil's comments that it is a hot space. other people are discovering the attractiveness. others move their allocation from private debt from 10-20 and they are a 40 billion-dollar company. last week, that was the number 1 area that they talked about in terms of the opportunity to earn extraordinary returns in what is otherwise not an attractive market. i think bill is right. there are a lot of people coming into this space. i think that the amount of money that is still dislocated from the financial crisis is substantial. there is an ability to, eight, i am still very constructive about moving into that space. we should be careful. i am probably more optimistic

than he which the pace -- and -- at which the pace we could do it. you certainly don't want to be overly hazed because a number of managers that are very... those are not the ones you want to deal with. you want to do with the folks you have been through a cycle and know how to do it but it is a relatively new space. bottom line, you are right to adopt the allocation. bill is right to be cautious. i think we should push that part and i would expect to be doing more meetings with staff on ideas we have to help do that. president stansbury, we are not slowing this down, and i am not slowing this down. this has always been the expectation that to do this thoughtfully, add to spread the risk over a time series and overt managers coming to market, is to do this and five years.

we could do it in two or three. we would just be a lot more lumpy in terms of, you know, fewer managers. there'd be much larger allocations. we've been making commitments of 50, 75, 100. we are still planning to bring a couple of investments of four or $500 million. that has been slow going. there are not too many shops that can do that. we just haven't settled on one yet. >> okay. i do have some current issues. i understand the rationale. i think that there is a way to maybe go a little bit faster in this space without compromising quality. i feel like we've been talking about private debt for a while

and i understand was made some commitments, but i would like to revisit this to see if there is, you know, a way to may be move a little bit more expeditiously of what the board can give to you or what we need to do if it all makes sense. >> commissioner, i'm glad we are talking about this, because there is a great deal on this. i do think that it will be a very valuable resource. he has a really deep credit backbone. we have come a long ways. we are not in the eighth or ninth inning of making a large allocation to somebody like a gs oh, or carlisle. we are not in the eighth or ninth inning but we are no longer in the first, second or third either. >> i mean, i think it something worth exploring, talking to our

partners about the ability to create a separate trust or a sidecar. may be we are willing to pick up, you know, a block of it. i'm not saying bring back a recommendation to the board, i'm saying, please discuss it or think about it yoursel yourselff it makes sense, and then we can talk about it again. if it doesn't make sense, it doesn't make sense. >> we will pursue that. there are assets that european banks continue to need to trim to get off their balance sheet to get off for regulatory requirements. it is a large -- the largest shops that i mentioned that are absorbing those. investments that we have made so far have been more niche and specialist strategies where we have higher expected returns. some of the shops that i just mentioned, we expect more pedestrian returns. still, much better than a liquid credit. but not for the returns that we've gotten so far in the space. we will look at this.

i do think again that we are further along with making one large allocation. were not in the eighth or ninth inning. were no longer in the first, second or third. >> thank you very much. >> anymore comments or discussion from the board? ok. did i call public comment? >> no. >> any members of the public that would like to address the commission on this item? >> commissioner driscoll hit the nail on the head. bill is cherry picking another without knowing he is doing it. on the valuation, it is meaningless without the context of earnings. the 12 month earnings are 132. they are forecast to be 174 and december of 2019. that's a 32% increase.

unless he explains how in a three percentage economy, they expect earnings to increase 32% between now and december 2019, it's a meaningless number. to show you how meaningless it was... the market declined 55% from that day on. it's totally meaningless. this unemployment number is totally meaningless. he says it is the lowest at 50 years. the fact of the matter is, prime working age male population 25% to 54% is less than the ratio of the population employed right now than it was in the eighties and nineties. it's a meaningless number. people are dropping out of the workforce. the most disconcerting thing he said was about the asset allocation. the simple fact is, it right now

the equity is 60%. simple fact 43.7, in public and 63% in private. it is 49% for those two. you are 11% above it, ok? don't pretend you are there when you are not there. i'm not saying you can get there overnight. bill is an upside guy. that's great. nine out of ten years that's great. you have to hire a chief risk officer who understands the downside. allen wasn't it and he's not going to find it in the normal pools that he fishes in. >> time. thank you. are there any other members of the public that would like to address the commission? seeing then we will close public comment. next item, please. >> item ten is a discussion it item.

>> good afternoon commissioners and welcome. i'd like us to go through the monthly activity review report that is before you. just a brief refresher, on the first page, you can see our current assets. we have about 3.4 billion with the plan. moving on to the next page, you can see benchmark performance of our investments, currently. on page 3, we have some participation rate information, as well as employee information as well, that includes a number of folks that are currently contributing, on the number of folks who are retired or terminated. we have approximately 30,000, or 40,000, 38,000, actually, participants in the plan at the moment. moving on to slide four, it

shows a stable value crediting rate. we report out on this because the stable value fund is nearly a third of our assets. and so we decided to report on the crediting rate on a quarterly basis. moving on to slide five, we have our total plan allocation. this is how participants are allocating their investments across the asset classes. and slide six shows the actual demographics from an age standpoint. you can see that they are. finally, on slide seven, as you know, we have rolled out the loan program in august of 2016. it has been over a year and the loan policy states that participants can take a second loan after a 12 month waiting period. so since then, we have seen a little bit of an uptake in the loan program. that concludes the monthly activity report. i'd like to ask the commission if they have any questions. >> any questions from the board? mr driscoll? >> the credentials help.

please start adding the number of participants in the target date funds, not just the goal makers. you can make it the aggregate. >> right. so the participant assets on the targeted funds and to the accounts are provided with bold maker -- are provided that the gold maker assets are not separated out. is that the request? >> i say that -- i see the gold maker number, but that does not include the target funds. >> that's correct. >> there is a similarity in that product. i just want to see if those funds, how much of the participants are using them. >> the targeted funds or the gold making funds? >> the targeted funds. they obviously want us to see that number.

>> understood. absolutely. commissioners, i also have a brief update for you on our third party administration r.f.p. as you know, we recently released it in mid april. that was last month. i'm happy to report that everything has been completed and posted, and received on time. we have received a total of four builds. they're all from major players in the state. i would like to ask council that can say who the bidders are. i can't say who the bidders are? ok. ok. so one of them is obviously incumbent but that is good news. we will be doing the scoring anticipate presenting three summit finalists to the deferred compensation committee for interviews on july 25th, that will be a long meeting. and post review the rfps will be available for inspection on-site in the event any of the

commissioners would like to see them. we anticipate a formal recommendation to the board in n august or september depending on any additional due diligence and site visits and reference checks to the recommender. and i think that concludes my report. >> don't be surprised if it is four and not just three. don't be surprised if it is just two, ok? >> when you talk about finalists? >> semifinalists going to the committee. >> the administrative staff is here. just a question of information for service to the members, i had a member call me yesterday who said i'm going to go see a financial advisor. do you think i have all the information on the website for my benefits and is there some --

sufficient information on our investments on the deferred website? and i think -- and what -- this person has been around for a while so he referred to the blue book. remember the bluebook? i'm just going to ask you, did you think, that on our website there is sufficient information that they can just download it and take them go look when they go to see their financial advisor or whoever they are dealing with? that there is no reason for them to call and ask for anything else? >> i believe that there is more detailed information on the current website once you've logged in to see your account, and then you have to go elsewhere to find a performance -- the performance numbers. i remember the bluebook, but i believe that there is a greater access to more letters of detail on investments that you've made,

and where you hold your money than was available. >> and all the survivor benefits are broken down by classes? like, categories? tier one, you tear two, heere three? >> that's the benefit plan. rather than the deferred comp plan, now i believe, certainly with the secure member or sole, even your financial advisor, if you carry your passport cannot model away the benefits estimates and have a much better idea of what your pension would look like five years from now, three years from now, and so that i think it is a powerful tool that has been out there for two or three years. on the deferred comp side, every vendor that we've engaged, obviously had different websites that i believe, i don't think we

are receiving complaints. i think what i heard is sometimes it's difficult to find them. you have to go to different places on the website, but certainly i think the information is there. >> well,, i know that the basic website that's available to the public has been redesigned last year. we've received a lot of compliments on that. it's a lot easier to navigate and user-friendly. once a participant at logs in, they have access to all of the information a financial advisor would look for including investment information and allocation information. so it depends on what the financial advisor is looking for. generally they want a whole picture and so they would possibly get everything they need with regards to deferred compensation. i don't know what that financial advisor would need. it's part of his... >> so the statement is that everything is on the website, and if you trust your financial advisor you can give them your password and they can then look

at your individual account? >> certainly if you share your password, you can have them login to the deferred comp account. if you share your password, they can go in to the secure member portal and see how, what elements we used to calculate benefits and protect them, and the only thing that is missing is the social security part. but they can get that part somewhere else. but i believe, today, that i don't know what kind of financial advisor necessarily, but i believe all of the information that a financial advisor would need is available. at a personal level, if you are willing to share your password. >> the only thing i didn't have was my shirt password. i think you get a lot of information, so i am looking at the information that is on the website and then if you have a problem call.

>> if the financial advisor needs to know where you have your money allocated now, you only see that ones you've gotten into your own account. it's not public knowledge as to where dianne has her money invested. she shares that with us today. [laughter] but it is not public. >> thank you. that clears it up. >> let me tell you, you don't have to give your password to provide that information. if it is a licensed financial advisor, they will know if you give them your account, which is within 24 hours. we do daily valuations. the third party administrator approved it and they are required to do that. they are contracted. they manage none of our money or the participant's money. zero. when you bring your accountant with the five digit code, for every one of those, even with unit pricing, they can open up and see every single stock you

own, and how much of it you own and then you can put that with all the other stocks and bonds or saving accounts you might have. a good financial planner will want to look at all of those pieces. it is a benefit issue and there are no stocks there that are attributed to members. it is set up that way to be done that way for that very reason you are asking about. tell your concerns member to download that with the five digit, five letter code to the advisor, and they can look up every single thing. >> quarterly statements are also available. >> you can look up everything. >> print it out. >> even the mutual fund. every single one has it. >> just print it out. >> may i ask a question?

there's a recent article that referred to... do you know the article i'm talking about? >> right. >> they referred to credentials, annuity, offers. for the record, are there any annuities being offered to our participants three credentials in a deferred comp program? >> there are no annuities that are actively promoted through the deferred comp program. the assets that are in the deferred comp plan are located in a trust. the trust is not an annuity and it is not invested in an annuity. in the event a participant needs to leave the plan as a result of termination, or retirement, they have the option to take their money, and invested in anything that they want. that includes an annuity. we have worked with credentials and any vendor to ensure they are not promoting annuities to our clients directly, but they can answer questions in the event of participant -- a

participant is interested in an annuity product. we do not invest in an actual annuity. >> typically at the tax-sheltered annuity that is made. even though, all of us who have money in the plan, are participated in a tax-sheltered annuity. that is a labelling problem that people don't understand sometimes with misinformation from other people. when you go to the distribution phase, you want to take your money out. it's an incredibly flexible way of doing it. little bits, all of it, one option you have, i want to buy an annuity with some of my money. you can do that. you can call the third party administrator, and ask them and they will give you a whole range of annuities that you can buy depending on the company you want, what type you want to, that what the value is in the monthly income. the credential can put those in it but they will give you the whole shopping list, just like you can look at 20,000 mutual funds that we have and you can

look at a couple hundred annuities and which one you want to pick. less than one% of our distributions are taken out in an annuity. less than one%. i want to say is less than one tenth of a% of it periodically would you look and see where the money is going. the numbers i have seen are like three people. >> once it goes into annuity it leaves our plan. >> so with that article, you haven't quoted it wrong what people have said in that article? >> the article was e-mailed to the whole board by an individual. any media articles from this point forward will be e-mailed directly to this board. keep an eye out for many e-mails from norm which may have these stories. the article option said that the plan was simple -- synthetic. is there anything synthetic about these mutual funds? >> you know, i cannot -- i cannot know what he is thinking.

i don't know what he means by synthetic. sit -- >> synthetic options? >> synthetic options. so within our stable value product, there are underlying investments. within those investments, there are contracts that can be considered synthetic. that has nothing to do with the allegations or the comments, sorry, that this report are is providing. >> on the third point he made, he said it is unaudited. this is something that we've talked about before. i think, just for the sake of putting this about sometime over the next year, maybe a brief memo about the pros and cons, the realities, the costs, of what it would mean to audit this. this is something that i get asked about on a weekly basis. and to the extent that there is a papal is a paper dealing with

some of these things. it would be great to share that with participants because what they hear is unaudited, i'm trackable, untraceable and that scares them. to just have, to be reassured that the spoken word is not always sort of satisfying to them, but to maybe have something in writing at some point would be helpful. >> so it is a question about transparency. is that the main thing? >> i think that is the argument that is made. no one really knows who owns a securities, where they are, what is it bears. anyway, i bring that up a something we can take up down the line. but since we are talking about it. >> we are all familiar with the article. one of the changes we made recently, the board voted on it, and one of our largest equity funds, we changed it from eight standard mutual fund to a collective investment trust. we got to the fee is down, which means the members kept the money

by 50%. that reporter is saying it is an unregulated group. that's not true. the group that regulates the mutual funds is one group. the group that regulates collective investment trust is under the department treasury. they regulate the same rules, same laws, same enforcement authority. if you don't do your homework, you will miss that. why is that done? when staff made that recommendation, that was one of the requirements to make sure that security issue was not changing. again, another incorrect piece of information floated down to the members. all of those mutual funds are regulated. there is no mysterious manager. those funds and that mutual funds are managed by the exact same manager. we used this pricing scale to make transfers easier but it is the same performance level. your money is being managed by

the exact same manager. not some shadow or some parallel or some twin. >> i think the issue we have here is sometimes, if we don't get information, it is true for many things in life. and they just believe what someone else says or has. so please, let's try to deal with that sometime this year and put something in writing, maybe a fact sheet or whatever we think is good. >> perhaps we can happen is we can send the issues to committee and go and look at why it can't be issued, to address those issues. >> that would be great. >> to their credit, there at retirement council and also the staff that works with dianne, they love to get those phone calls. they left to go talk one on one with the participant city employees, whatever they want to call them. they left a talk with people exactly and sets the facts straight. [please standby for captioner switch]

>>... whether or not leaders choose to have that resonate, but there is additional information we can consider putting out more proactively, to alleviate further confusion around the plan. >> president stansbury: we'll take it up in committee. why don't we open for general public comment. is there anybody in the public

that would like to address the committee? seeing none, we close public comment. >> item 11, travel expense report for the quarter ended march 31, 2018. >> we're at three quarters of the way through the year. the report indicates that so far, we've spent $278,000 in both staff and board travel. out of $700,000 budget. so we have money sufficient to make sure that the board is able to travel for educational and informational conferences they would like. if there are questions, i would be happy to answer them. we have detailed that expenditures for that quarter. >> president stansbury: why don't we open it up for public comment? seeing none, we close public comment. next item.

>> item 12, review and approval of staff's recommendation to engage. >> the rfp was approved at the march board meeting. we received three responses from three qualified firms after reviewing the proposal. i am very pleased to ask the board to approve bartel associates to perform the audit. the recommendation is here, it's part of the board calendar sheet and i'm happy to answer questions. >> president stansbury: questions from the board? motion, there is second. any discussion from the board, any comments? no. ok, call for public comment. any members of the public that would like to address the commission regarding the actuari

actuarial au audit. seeing none, can we take this without objection. great, this passes. item 13, discussion item, the personnel committee report. >> may 9, we approved the minutes of november 1. we met in closed session. we discussed the valuations of both the executive director and the actuarial services coordinator. there will be documents coming to you to fill out and we'll be looking at having a core section in the june board meeting will be associated with the june board meeting. that's it.

>> president stansbury: comments or discussion from the board? seeing none, we'll open it up to public comment. seeing none, we will close the comments. item 14, action item, approval of the president's appointments to committees. >> president stansbury: since commissioner makras left the board, it made sense to just plug in commissioner chu to all of the spots where all of committees where makras previously was, but because we have the annual reappointment of committees in june, i thought it didn't make sense to appoint a committee chair on an interim basis for 30 days. so we'll leave the finance committee that is undergoing a little bit of a revamp. in the interim, the next 30 days, we're asking you, to sit on the committees that commissioner makras was, so we

can revisit this next month. >> commissioner chu: happy to be plugged in [laughter]. >> the election of the officers, is it june appointment of committees is july, but in effect, it really is just 40 days. >> president stansbury: ok. to that point, i think we're going to see something come forward from the governance committee in probably june related to the finance committee, correct? >> right, it's going to be based on the recommendations that you approved from the retreat. it's going to be renamed operations oversight committee. so it will have expanded mandate and authority of oversight, more on the administration of benefit side. so it's a significant expansion of terms of reference for that committee. >> president stansbury: car men, welcome to the board. >> commissioner chu: thank you. >> president stansbury: any members of the public that would

like to address the committee? close public comment. motion on the table. there is a motion, a second, take this item without objection? great, item passes, thank you very much. next item. >> item 15, discussion item, the education presentation on california government code section 1090. >> good afternoon, commissioners. city attorney's office. i'm about to give a very quick

presentation on the california government code section 1090. as you might recall from my presentation and fiduciary responsibilities, i went into a side discussion of the section and the president asked me to come back with a little presentation that would provide a little more information about what this section is about. so i'll try to make this quick. california government code, the purpose of the code is to ensure that public officers and members of boards and boards themselves, without divided loyalty. and to guard against conflict of interest and the appearance of conflict of interest. the code is probably one of the less forgiving conflict of interest codes we have to deal with, so it's very important we have a sensitivity to its

requirements. the code, shown on the slide, the members of the legislature, state, county, district, city, employees shall not be financially interested in any contract made by them in their official capacity or any body or board which they are members. what this means, a member of a board or body cannot have a financial interest in a contract that is before the body. and the body is not permitted to enter into that contract is there such an interest. it's strict in the sense that recusal is not a cure to this problem. the board members -- the board member who has the financial interest has the choice of either leaving the board, or

divesting themselves of the financial interest. section b, which is below the section i just read, means no one can abet or aid to violate subsection a. so one board member cannot assist another board member, for example, in willfully hiding such a conflict of interest. the remedies and penalties are pretty severe. according to the code, section 1092, every contract made may be voided, by any party, except the officer interested therein. the courts have taken a much stricter reading of this, to say that the contract, if you enter into a contract in which a member has a financial interest, that contract is void. it's automatically void, not a valid contract.

so it has no force or effect. but as to the board member, who might have had that interest, there are penalties if the board member willfully violated section 1090. and those penalties include a fine of not more than $1,000, imprisonment in a state prison, and permanent disqualification from holding public office. the concept of the financial interest is broad by the courts. they do not make a hyper technical reading of it so not to limit the impact. they would rather have a broad impact. but there are a limited set of exceptions to financial interest that are known as remote interests. i'll describe some of these shortly.

but if there is remote interest, financial interest not considered truly interest, it's minimal enough to be considered remote interest, the board member still must take action. it's not enough to simply recuse him or herself from the action on the contract, he or she would have to disclose the fact of that remote interest to the full board. and that disclosure, that interest, must appear in the official records of the body. and before the board can act. and when the board acts, that person must recuse themselves. the vote won't count. there are affirmative things that have to be done in that instance. it's for that reason, our office asked to be informed of if you suspect that you might have a conflict of interest, so we can look at these things, consult the remote interest category to

see whether or not the board can move forward. if we are unable to resolve that, it would mean sometimes that the board can't adapt at all until we figure out there is a true financial interest. examples of remote interest most amicable to you, if -- aolymp aapplicab aapplicable, to. if you are receiving a salary, per diem or reimbursement from a governmental entity that is before the board for a contract, that would be considered remote. if you're landlord or tenant was before the board for a contract, that would be considered a remote interest. but in each of instances, you must disclose that relationship and it must appear in the official records of the board if the board is to approve the account with that entity.

the penalties for violating the remote interest standards are the same as for the full financial interest, except that the contract is not considered void, unless the contracting party had knowledge of the remote interest at the time the contract was entered into. so there is a little bit of leniency there, but not much. so i just wanted to then go through hypotheticals to sort of try to give a little bit of reality to what these codes mean. and these codes are based on cases i've read and tried to sort of tailor them as much as i could to the board. so hypothetical one, we have a retirement board enter into a consulting contract, the advisor was the owner of the contracting firm, the contract required the board to reasonably adjust the rates of payment to the contractor on the 5th anniversary of the contract. one year before the fifth

anniversary, he was elected to the advisor. the board refused to set the rates because they thought it would violate 1090. so he was not on the board when the contract was entered, so it's ok. but after the advisor was elected to the board, a provision in the contract required some action on the board to the contract, namely readjusting the rates. we assume the rates would have been in the contract's favor. the board in this instance refused to act, said we couldn't. and we want to court for a declaration and the court said, you're right, you can't act because mr. advisor is now on the board and he has been interest in the contract, so there is nothing you can do, contractor, you have to live with the contract. so they were right in their assessment of the situation there.

second one is a little more convoluted. but, also useful. and this involves -- well, it's company x was the insurance brokerage contractor for the board. the board requested company x to procure insurance contracts. was a member of the retirement board, at the time of the request, the holder exposed her exposure to the board and said she would not take any action with the contract that would be procured by company x. she did not participate in any manner of procurement or solicitation of board or influence other members of the board. she entered into agreement with company x where she agreed not to enter into and losses would be shared by only partner of

company x. this is a little bit tricky, because the contract before the board, that the section was being applied to, was not the contract with company x, that existed and was in place. the contract that were being considered were the insurance contracts that company x was asked to put in place for the board. you can see ms. holder, did everything she felt was reasonably possible to guard against the impacts of her financial interest. she knew he had a financial interest. and in looking at this, the court said, she had a financial interest in the insurance contracts because the company x, even though she divested her interest in the insurance contract, even though reached agreement with company x she was

not to receive any profits, or suffer losses, the court said you owned 40% of company x and the company, for each contract that company x entered into, it has impact on value of company x. even though you're not getting the direct profit, if the value of company x increasings, then 40% of the greater amount is increase in value to you. so you still have an interest in the insurance contracts. you did everything you could, except what you needed to do, and what you needed to do was either leave the board, or divest yourself of the interest, but you couldn't stay on the board and be silent and still comply with 1090. but there was another aspect to this in that the court said there was possibly a remote interest. but you know, they hadn't figured it out. i'll just describe the remote

interests. which is that the company x was acting as agent or broker for the insurance company possibly. and the remote interests exception there would apply if ms. holder owned less than 3% of the shares of any of the insurance companies or each insurance company. and was acting as an agent for three years before she went on the board. and there are a few other technicalities, but the court said, you need to go back and look at that and tell me if there is remote interest. that's important, because if there is remote interest, you saw the difference between the penalties, if there is remote interest, the contract may still be valid if the contractor did not know of the remote interest at the time the contract was made. but we don't have the answer to

that question in this. and in the third is interesting, because what resulted at the end of the game. this involved a city council. i kept it that way because there is no way to lend itself to you directly. but in this hypo, in approving the housing development project, the parks city council accepted the developer's offer to allocate $600 thousand to the personal property to be transferred to the city for a park. peter mix was one of the three. peter rich abstained on voting. they agreed to sell his property to the developer. knowing that the developer would convey the property to the city. the city council approved the purchase of the parcel. he abstained from the vote. peter rich received 260,000 frdz the developer, who received

$260,000 from the city or conveyance. we have a piece of property, a developer who was going to get up with of three parcels. peter rich owned one of the three parcels and the court said, going back to the first, approval action, you had one of three parcels which could likely be used in this transfer. that is enough of an interest right there because there was a good enough likelihood that your property would be conveyed. so you should have disclosed at that point or stepped away. but it went further. this is an interesting case, because it shows the extreme. the result here was the court

deciding that the property should remain with the city. and the developer should return all of the money that it received for the property. so there was a $260,000 impact to the developer. they lost the property and they lost the money. and that's because under california law, contracts that are made in violation of contracting, principles contracting laws, to not allow the contractor to retain any of the benefits, proceeds from the contract, and the city or the public agency that is on the receiving end of the contracts, are not required to return any of the benefits they receive as a result of the contract. so the results can be quite harsh and they were harsh in this case. which went up to the california supreme court. and my last -- well, one more.

this one is a lot simpler. and in the fourth hypo, there is executive director of the retirement system of what city. who resigned. the retirement system board meeting, the member of the board announced his interest in being considered for the position of executive director. they voted to offer the position to mr. exec. they announced the vote in open session. he was present for the closed session, abstained from the closed session. mr. exec accepted the board's offer. a few days later, he submitted his written resignation to the board and commenced his employment as executive director. here is a contract at issue -- well let me just say this -- on the california law employment, relationships are considered contracts in the public sector, so the court said you had

employment contract that was at issue here. and therefore, mr. exec, who was on your board, had an interest in the contract, his own employment as the executive director. mr. exec, the court said, you really two choices. you should have resigned from the board before you told the board that you were interested in the executive director position. or just not applied for the position. so in this case, mr. exec, i think had worked for the city as the executive director for about seven months. the court said -- commanded him to return salaries and benefits he'd received from the city as a result of its employment, because the contract was void. and so that was the end of that result. so those are my hypos. and i would be happy to entertain questions.

>> president stansbury: any questions from the board? >> the money had to be returned in hypothetical 3, it the 260 or the 600? >> the 260. >> commissioner driscoll: slight change from what you laid out here, but you did in your opening comments talk about the duty of loyalty. which came up in the first educational session with this. can you tell us to whom the board and/or any board member, to whom does that duty of loyalty go? >> so, under the fiduciary concept the duty of loyalty goes to the plan and the participants in the plan and beneficiaries under the constitution. this loyalty is talking about your loyalty to the board and then that fiduciary loyalty flows down to the specific entities. >> when you said -- you said there is beneficiaries and one other word.

>> participants. >> participants and beneficiaries of 60,000, but is that as a group? >> as a group. as a group. >> we have a duty to the beneficiaries as a group. >> as a group. >> thank you. >> and 1090 was not written with the fiduciary obligations in mind, it was much broader concept. >> ok. mr. bryant, thank you very much, just a repipeline der to the board -- reminder to the board, this is something we voted on last year, where we're going to have educational presentations brought to us on a recurring basis. why don't we open up for public comment? any members of the public that would like to address the committee? seeing none, we close public comment. >> item 16, discussion item, the executive director report.

>> i had the pleasure of attending new commissioner carmen chu's swearing in and certainly welcome to her. we've had an opportunity to meet with her last week for a brief period of time and i believe there is going to be continuing orientation. and she has her own ideas of what she needs to know, so that is very refreshing. we appreciate her interest and look forward to continuing to meet with her. we sent out by e-mail a copy of the status report on her 2018 proxy voting. you got a hard copy here at this meeting just in case. meeting just in case.

>> unfortunately, working so close to retiring, he fumbled -- he finally got the bug i decided to leave. we wish him well, and we obviously