Friend of the Court Brief – Inside Story on Intel 401K Class Action, Why a Nuisance Suit

The following Friend of the Court Brief  was sent to Magistrate Judge Nathanael Cousins, United States District Court, Northern District of California regarding the Intel 401K Class Action.

January 15, 2016

TO: Judge Nathanael Cousins

San Jose Courthouse, Courtroom 7 – 4th Floor

280 South 1st Street

San Jose, CA 95113

FROM: Bill Parish, Parish & Company

10260 SW Greenburg Rd., Suite 400

Portland, Oregon 97223

SUBJECT: Friend of the Court Brief – Intel 401K Class Action, Why a Nuisance Case Resulting from a Plagiarized Analysis whose conclusions were misrepresented.

Dear Judge Cousins,

This is the third time in 20 years as a registered investment advisor I have submitted a friend of the court brief. The first was regarding the Microsoft Anti-trust case, which I supported and the second was regarding the Hewlett Packard/Compaq merger, which I opposed. This brief will explain how my work on Intel’s 401K was plagiarized and misused by plaintiff shopping attorneys. See page 28, point 113 of complaint, for reference to my blog post made in January 2014.

I am generally recognized as a national expert in evaluating retirement plans, going back to 1998 when my work was featured in a major article, also featuring then Secretary of Labor Alexis Herman, regarding the importance of adhering to the 404C prudent fiduciary guidelines.

Leading national journalists are constantly asking me to review various financial data, including financial disclosures and tax returns of local, regional and national politicians. This includes Romney’s financials for the Wall Street Journal, Jeb Bush for the LA Times, etc. In December 2015 the NY Times ran a story on Intel’s 401K that featured my comments. There is also extensive national and international coverage of my comments regarding hedge and private equity funds going back to 2003, focusing on KKR, TPG and Blackstone.

The truth is that Intel has a terrific 401K plan. Yes, like many plans it could be better yet my sense is that their plan is in the top 5 percent of all plans. Some might argue that for a good look at a bad plan which should stimulate a legal action, one might examine that of the law firm Cohen Millstein. Me I’ll just say it is “interesting.”

Most remarkable about Intel’s plan is that they so openly disclose the high fees with respect to the private equity and hedge funds, what is called carried interest. Other plans do not openly disclose these fees.

Private equity and hedge funds are an important asset class that now control trillions of the financial markets and to not participate in this would not be prudent. For that reason you see leading endowments, foundations and public pensions with enormous participation in this area.

The real problem rests with the Securities and Exchange Commission and IRS inability to enforce the rules, rules that firms like Intel need to rely on being enforced. For this reason, even though perhaps a prudent decision in the spirit of 404C, such investment does not make sense given regulatory failings, in my opinion, which I highlighted to Intel management. That was the subject of my blog post that was used by the Oregonian and led to the action. The term I used was “subject to a class action suit,” knowing full well that it would be a nuissance suit.

Attention to maintaining a top quality plan is one reason why Intel is not only a strategic holding in my personal investment portfolio yet also for my clients. It speaks very well of the firm that, after I expressed my concern, they realized that despite their best efforts to diversify such participation, it made sense to outsource it to a financial firm and also add more choices than those available previous to my observations.

So here is what really happened.

In addition to looking for good investment opportunities in the health care area,  a related goal was to shine a light on hedge and private equity funds, in general, and focus on two things. They are price fixing of generic drugs and medical procedures and tax evasion in which private equity and hedge funds are using unusable tax deductions belonging to tax-exempt limited partners. Key players here are KKR, TPG and Blackstone. And their investors include your own CalPERS and what we call OPERS up here in Oregon. Attached is the December 2015 agenda for OPERS in which KKR made a presentation and once again referenced the investment in drug based cash flows. KKR manages billions for OPERS and CalPERS together.

Perhaps you have seen some of the controversy resulting from stories that originated in the NY Times regarding hedge fund managers buying specific drugs and immediately invoking dramatic price increases and related anti-competitive practices?

I laid this out to the NY Times in November 2014 yet it took almost 8 months for the first story to appear. Enclosed is an email from Gretchen Morgenson of the NY Times responding to this story idea in late 2014. In return for the story details I asked that my name not appear in the story. She collaborated with another NY Times reporter, Andrew Pollack, and have done amazing work. Regarding the tax evasion schemes, however, still nothing has appeared, which is disappointing.


1) Email to Oregonian reporter Jeff Manning in December 2013 outlining concern regarding Intel’s 401K plan containing hedge and private equity related investments. Jeff immediately passed this along to his colleague Brent Hunsberger. Note that “Larson” referred to in point 4 is an executive at Intel Capital.

Brent was still using an Oregonian newspaper email at the time, even though he had become a contractor and was working full time for a local investment firm. Several months later he then farmed out several of my observations for comment to other investment advisors and positioned me as providing a negative comment regarding Intel.

Fully plagiarizing my work was bad enough yet completely misrepresenting the nature of my conclusions was very poor judgement. After expressing my concern Brent did update his email address and add disclosures regarding his changed role at the paper.

A subsequent story at the Oregonian was done by Mike Rogoway which accurately reflected my perspective.

Again, my purpose was to first draw attention to the dramatic increase in hedge and private equity fund investment in retirement plans, both public plans such as Calpers and Opers and private plans including Intel’s. This could then lead to a detailed discussion regarding the appropriateness of investing in generic drug and medical procedure price fixing and tax evasion, as seen in KKR.

2) Oregon PERS Investment Council Member Keith Larson. Larson, who is also an executive at Intel Capital, was the past Chair of the $70 billion fund, prior to current Chair Katy Durant. At the time Oregon and California PERS were investing aggressively in private equity firms, including KKR, who were buying cash flows from particular drugs and medical procedures. My public comments reflected in the Oregon PERS meeting minutes go back to 2013 on this issue.

3) Tax evasion via gaming residency. I had hoped the NY Times would address this issue yet thus far they have chosen to only focus on the price increases and anti-competitive behavior of these funds. Key havens for these medical related schemes include Canada, the UK and Switzerland.

As major companies including Pfizer concoct corporate tax inversions to evade most US taxes, my strategy was to start local in order to generate awareness.

For this reason I asked the Times to confirm that the Chair of Oregon’s $70 billion fund, Katy Durant, is a full tax resident of the State of Oregon for tax purposes. When asked to confirm this, Durant declined. State Treasurer Ted Wheeler confirmed he was. Durant’s husband, Gordon Sondlund, a local real estate developer, claims Washington tax residency, a state, unlike Oregon, in which there is no state income tax.

4) Conclusion: The good news is that my plan has resulted in a major national discussion on drug prices, including Senate hearings. The bad news is that Intel has had its reputation impacted by this nuisance suit given they have an outstanding retirement plan.

Thank you for considering these thoughts.

All the best,

Bill Parish

Email from Jeff Manning, Oregonian reporter


The New York Times story on Intel’s 401K plan 


Oregon Investment Council December 9, 2015 Meeting Agenda


Email from Gretchen Morgenson, New York Times reporter


The New York Times story on Drug Pricing