Levy, Ram & Olson LLP,  Attorneys
639 Front Street, Fourth Floor
San Francisco, CA 94111-1913

November 17, 2003

VIA FACSIMILE & MAIL

The Regents of the University of California
c/o Chris Patti
University of California
Office of the General Counsel
1111 Franklin Street, 8th Floor
Oakland, CA 94607-5200
 

Re:  Coalition of University Employees, Charles Schwartz, San Jose
       Mercury News v. The Regents of the University of California
       Case No. RG03 089302

Dear Members of the Board of Regents:

          I am writing on behalf of my clients, the Coalition of University Employees and
Charles Schwartz, to open a dialogue regarding a level of transparency regarding the
University's investments which hopefully would serve the twin goals of (1) transparency
which would comply with the California Public Records Act, and (2) maximizing return on
the University's pension plan investments. This letter is written after attending the
Regents' Committee on Investments meeting held on November 5, 2003, and in advance of
the November 19-20 meeting of the Board of Regents at which we understand General
Counsel James Holtz [Holst] will make a presentation to the Regents regarding the Coalition of
University Employees v. Regents of the University of California case, in which I served as
counsel for CUE and Mr. Schwartz.

          We understand from attending the November 5 meeting that the Regents and
their investment advisers are concerned about potentially negative consequences upon the
University's pension and endowment funds from the recent litigation and from recent court
decisions ordering the public release of performance data for private equity investments.
We wish to offer some constructive proposals which can help to resolve, or at least
mitigate, those concerns. We do this because we care about the well-being of the
University and its people - including CUE's 18,000 members - at the same time that we
take strong positions in favor of the Public Records Act and other "sunshine" laws.

          We understand that General Counsel Holtz [Holst] will discuss the subject of the recent
CUE v. UC litigation during the November 19-20 meeting of the Board, and we ask that
the following proposal be presented to the Regents for their consideration at that time.

Proposal - Part A

          We, as successful plaintiffs who sought publication of the internal rate of return
("IRR") and related performance data for the individual funds in UC's private equity
investments, declare that we have no intent of seeking disclosure of "portfolio company
valuations" or of seeking portfolio company names in those rare circumstances where the
names of the portfolio companies could be harmful to the University's position (e.g. where
a private equity fund had invested in only one portfolio company). We understand that
concern over the possibility of this deeper level of disclosure - the so-called "Pandora's
box" effect mentioned at the November 5 meeting - is at the heart of some general
partners' reported threats to exclude UC from participation in future funds. We are also
open to suggestions of further actions or commitments we might make to reinforce this
"line of demarcation" regarding public disclosure of UC's investmnent data. At the same
time, the University must recognize that the battle over the release of internal rate of return
("IRR") is over and that the University must continue to comply with the Courts' recent
orders in this case and the CalPERS litigation that IRR and related data (cash in, cash out,
etc.) must be made public. We also believe that the records sought in our October 30 and
November 5, 2003 Public Records Act requests can and should be made public.

Proposal - Part B

          The Regents should apply this general principle of public disclosure to all areas
of its investment activity. For example, the University should comply with that portion of
Judge James Richman's July 24 ruling which stated that unless the Regents are discussing
a particular investment (as opposed to investments in general), the meeting should be open.
(That ruling was reaffirmed on November 14, 2003, and we urge the Regents not to seek
further review of the November 14 ruling.)  In particular, UC has begun investing in
externally managed funds for other asset classes, including real estate, absolute return, and
public equity, where we would expect full public disclosure of performance and related
data (returns, fees, commissions, turnover, etc.) on each contracted investment entity,
allowing for some confidentiality on internal data relating to the business of the external
partner/manager. This would be an advantageous time to discuss and resolve questions
about what will or will not be "public records" in connection with these newly emerging
investment relationships - thus hoping to avoid future lawsuits. A model for such regular
disclosure may be found on CalPERS' website. And we note that the argument made
about distinguishing UC from CalPERS in the area of private equity investments, an
argument we and the Courts did not find persuasive, is without any basis whatsoever in
these other areas of investment.

Proposal - Part C

          We strongly suggest that the Regents establish or spearhead the formation of a
Committee which would work toward "best practices" in the area of investment
disclosures. At the meeting November 5, one or more Regents suggested polling private
equity general partners about what level of disclosure they could live with. We respectfully
suggest that other stakeholders must be involved in the dialogue as well, because if the
Board of Regents and the general partners of the private equity firms are the only people
talking there may be a paucity of viewpoints which might leave out the public and
potentially lead to polarization and future lawsuits. To this end, we would suggest that a
committee with representatives of the Regents, private equity firms, labor unions such as
CUE, the media, and perhaps other public pension funds be formed in an attempt to deal
with these issues in a collaborative, and not confrontational, manner.

          Finally, I would request the opportunity to appear in the "Public Comment"
portion of the next Regents' meeting (telephonically, if possible) to address some of these
concerns.

          If you have any questions, please do not hesitate to give me a call.

cc: Mary Higgins
     Charlie Schwartz
     Matt Marshall
     Judy Alexander, Esq.
     Steve Mayer, Esq.