If you are a CalPERS retiree you may have received the following message from CalPERS recently:
Dear Valued CalPERS Member,
Transparency and openness are cornerstones of CalPERS’ commitment to members. In that spirit, I am writing to share that we filed a lawsuit last Friday to protect member assets.
We discovered that a 25-year employee had illegally accessed 10 dormant retiree accounts and fraudulently directed approximately $685,000 to bank accounts in the employee’s control. We have notified the 10 affected members and will make their accounts whole, and, as a part of the investigative process, we are performing a forensic audit. Dormant accounts, which comprise a small fraction of all member accounts, are where benefit payments have been returned as undeliverable. CalPERS repeatedly attempts to locate these members or their beneficiaries. These accounts have been locked and a new policy was immediately implemented, requiring three levels of security.
The lawsuit seeks to recover the stolen funds, and we are continuing to work with law enforcement on potential prosecution of alleged criminal behavior. CalPERS will exhaust every legal opportunity to recover the money stolen from the victims. You can access the legal filing here.
Our 2,800 professionals take pride in serving you with the highest degrees of professionalism, integrity, and accountability. That this could have happened in the first place is unacceptable, and the employee is no longer employed by CalPERS. The employee’s actions were an abuse of access, breach of fiduciary responsibility, and betrayal of co-workers and all dedicated public employees. We are extremely disappointed, because we take our commitment to member security so seriously.
We are fully committed to the safety and protection of your retirement assets. If you have any questions, please contact us at 888 CalPERS (888-225-7377).
Thank you for being a CalPERS member and for your commitment to public service.
Chief Executive Officer
While it is somewhat comforting that CalPERS management has taken steps to ensure that this is far less likely to happen again in the future, it does not speak well for the lack of internal controls that was prevalent before this embezzlement was discovered.
Retirees or their authorized caretakers can help to prevent this sort of fraud by ensuring that the retiree's CalPERS annuity payments are deposited directly in the retiree's bank account.