Story update: A story from Peter Byrne while researching this piece looked into the financial ties of UC regent Richard Blum and Governor Arnold Schwarzenegger. UC regents, Schwarzenegger and Wachter - Are they making a profit from University investments? Republished by the SF Public Press and Sacramento News & Review. The piece caught the attention of Senator Leland Yee who subsequently called for an audit of the UC system.With thousands of students protesting huge tuition hikes, the public needs to know who benefits from controlling the University of California’s $53 billion in Wall Street investments. That is billion, with a B!
Several very wealthy, politically powerful men are fixtures on the regent's investment committee, including Richard C. Blum (Wall Streeter, war contractor, and husband of U.S. Senator Dianne Feinstein), and Paul Wachter (Gov. Arnold Schwarzenegger’s long-time business partner and financial advisor). The probability of conflicts of interest inside this committee—as it moves billions of dollars between public and private companies and investment banks—is enormous. While some of this mammoth cash exchange takes place in the sunlight of the public eye, much of it is done behind closed doors, and the regents decline to disclose the names and activities of many of their private equity investment partners. "Dark pool" investments of this type are not available to ordinary investors--you have to know someone who manages them--like Messrs. Blum or Wachter.
It is no accident that most of the appointed regents are multi-millionaires with little or no experience in education, but with tons of experience in making lucrative deals, often by leveraging public funds. A preliminary investigation shows that the regents have invested in firms and concerns in which Blum and Wachter and other regents, including Governor Schwarzenegger, who is an ex officio regent, may have financial interests. In addition to performing their other duties, the regents operate a very exclusive type of investment club; its members are in a position to personally benefit from insider knowledge, should they chose to do so. For example, when they make decisions to re-allocate billions of dollars in equity investments, the stock market is substantially affected. And the regents do not refrain from investing substantially in entities tied to their own businesses.
Although Blum may be the most politically powerful regent, other regents are also masters of the dark art of private equity investing; historically, the regent's investment committee has been plagued by self-dealing. By following a labyrinthine trail of public records, creating databases, and interviewing investment experts, this investigation proposes to determine to what degree (if any) the current regents have been spinning public money intended to finance education into a source of financial leverage (and income) for friends, business partners, and themselves.