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Court Clears Way For Case Against CalPERS, Judicial Council & Prison Healthcare Receiver

Nearly two years ago, Mr. Daniel E. Francis filed a petition for writ of mandamus against CalPERS and other based on allegations that the pension fund had laundered the salary of the receiver appointed by the U.S. District Court through the state’s Administrative Office of the Courts.  In July 2012, Judge Michael P. Kenny rejected the demurrers filed by CalPERS and the other respondents.  In his ruling, Judge Kenny described the allegations as follows:

[T]he petition and complaint alleges, in essence, that Kelso, who previously had been a state employee eligible for CalPERS membership, left state employment to accept a position as the federally-appointed Receiver for the prison health care system, in which he no longer, as a matter of fact, was a state employee.  It is further alleged that, notwithstanding the fact that Kelso was no longer a state employee, he entered into an agreement with real party in interest AOC [Administrative Office of the Courts], the sole purpose of which was to create the appearance of state employment, without the reality of such employment, in order to permit Kelso to qualify for CalPERS membership while serving as the federal Receiver.

. . . As a result of this arrangement, Kelso’s CalPERS pension will be sharply “spiked” because his salary as the federal Receiver greatly exceeds his earlier salary as a state employee, and will be counted as his highest year of compensation, such that he will become, upon retirement, one of the highest paid recipients of CalPERS pensions.  The petition and complaint further alleges that Kelso will be qualified for lifetime defined pension and health benefits through CalPERS at public expense.  It reasonably may be inferred that this will create a significant added financial burden on the CalPERS pension system.

More recently, the real parties in interest (Mr. Kelso, the Judicial Council of California, the AOC, and the California Prison Healthcare Receivership) argued that the case should not proceed based on laches.  In a ruling handed down last week, Judge Kenny concluded that Mr. Francis' claim is not barred by laches:

Although petitioner is not a public official acting in an official capacity, his action reasonably may be characterized as one in which he seeks to represent the interests of the citizens of the state, and to protect the public fisc, by enforcing the provisions of the Public Employees' Retirement Law.

Now, at long last, we may find out whether CalPERS and the real parties in interest engaged in a scheme to make Mr. Kelso one of the highest paid recipients of CalPERS pensions as alleged.

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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
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