An appellate court ruled Thursday that the University of California is not required to obtain or reveal details of investment performance in two venture capital firms.
The decision reversed an earlier ruling from February that would have mandated the university to “make an objectively reasonable effort” under the California Public Records Act to acquire confidential financial documents and disclose the information to international news agency Reuters America.
Mark Boslet, a senior editor of two Reuters publications on venture capital and private equity, originally requested that the university reveal fund-level performance information of investments in two venture capital firms, Sequoia Capital and Kleiner Perkins Caulfield and Byers, in September 2011. After the university’s refusal to produce such documents, Reuters filed a lawsuit in January 2012.
University officials argued they did not have access to such information. Ultimately, the appellate court agreed with the university in its decision Thursday, saying that because the records were not “prepared, owned, used, or retained by the regents,” they were not considered “public” under the CPRA.
“They wanted to reach through the university for their own commercial interests,” said UC spokesperson Dianne Klein. “Reuters couldn’t get the information from the (venture capital firms), so they came to us under the CPRA.”
The university holds roughly $10 billion in endowment funds, which regularly fluctuate, according to Klein. About 2 percent of the endowment funds are invested in “private equity,” which includes venture capital firms that provide funds to startup companies that pose both high risk and high return, according to court documents.
“We are obviously disappointed by the court’s ruling and continue to believe the records are not only in the public interest, but should be disclosed under the California Public Records Act,” said Reuters spokesperson Barb Burg in an emailed statement. Burg declined to answer questions about whether Reuters is planning to appeal the most recent decision in a higher court.
This is not the first time a news agency has filed a lawsuit against the university to reveal such information. A landmark court decision in 2003 found the university was obligated to disclose performance information regarding university-invested funds in private equity to the San Jose Mercury News. Before the ruling, the regents received this information from Sequoia Capital and Kleiner Perkins in confidence.
Following the ruling, the two firms ceased providing the university with fund-specific information and stopped inviting the regents to invest in new funds for several years.
“(Venture capital firms) basically shut us out,” Klein said. “But after intensive negotiations with these two companies, they told us that we could invest in them on the condition that they would not give us these proprietary and confidential documents.”
Since the 2003 ruling, the university no longer possesses fund-specific information. Klein said the regents continue to receive aggregate information on a regular basis to understand how the university’s investments are faring.
Karl Olsen, the attorney who filed the lawsuit on behalf of Reuters, said in February that the records should be accessible to media organizations because taxpayers ultimately fund the investments.
Between 1992 and 2000, the rates of return for the university’s investments with Kleiner Perkins ranged from a high of 286.6 percent to a low of -17.5 percent. Between 1998 and 2000, rates of return for investments with Sequoia Capital ranged from a high of 90 percent to a low of -31 percent, according to court documents.
Kleiner Perkins declined to comment, and Sequoia Capital could not be reached for comment.