Clarification from Laura re: BP holdings at STRS

From Laura Ecklar, July 8, 2010
Subject: Re: BP Holdings at STRS

In reply to the e-mail below, the price per share that Mr. Iacone is using is incorrect for the STRS Ohio holdings. He is quoting the BP ADR (American Depository Receipts) shares that trade in the U.S. market. STRS Ohio, as well as the other Ohio retirement systems, own shares that are traded on the London stock exchange. The price of these shares is approximately one-sixth of the ADR price. Consequently, the statement that the market value of STRS Ohio’s BP stock holdings on June 28 represents approximately 0.08% of the market value of STRS Ohio’s total investment fund is correct.

I hope this information is useful to you. Thank you.

Laura Ecklar
Director, Communication Services

Mario Iacone: Simple math on BP stock and questions for STRS management

Mario Iacone to John Curry, July 8, 2010
Subject: BP Holdings at STRS

John, all the numbers on BP are very confusing. Did some simple math on it. May clarify the situation.Mario

BP stock on April 19th represented a SIGNIFICANT PORTION OF STRS HOLDINGS

Approximately 1.6% of Total STRS Asset Value.

STRS BP HOLDINGS - April 19th

14.6 million shares @ approx $60 per share.

Value would be $876,000,000 or almost 0.9 Billion

Approx 1.6% of entire STRS asset value.

(Approx 1 Billion divided by 60 Billion equals 1.6%)

Current value of 14.6 million shares @ approx $30 per share would be approx half or .45 Billion

The loss is disturbing in light of proposed benefit changes.

However, what disturbs me the most is a lack of effective RISK MANAGEMENT to protect profits and limit losses.

If lack of effective Risk Management continues, I fear that we will continually be exposed to large losses which will continue to result in reduced benefits.

I do not criticize anyone for not anticipating the BP Oil Spill.

I do question why the loss was not limited to a much smaller amount.

RH Jones: Health Reform Implementation Timeline

From RH Jones, July 4, 2010
Subject: Health Reform Implementation Timeline

To all:

This is good information.

RHJones

http://www.kff.org/healthreform/8060.cfm

Laura Ecklar: Error in BP stock chart (in the newspaper) makes it difficult to interpret

John Curry, July 7, 2010: "According to Laura [and to lessen the loss perception] ......."
Laura Ecklar to Molly Janczyk, July 7, 2010
Subject: Information Regarding BP Holdings

Yesterday, you included me on an e-mail discussing STRS Ohio’s BP holdings. Earlier today, I shared some information with another one of our members about this same topic. I am including that information below, as you may find it helpful. Thank you.

I am responding to your recent e-mail about the decline in the value of STRS Ohio’s holdings in BP stock. In your e-mail you referred to a chart that appeared in the Dayton Daily News. Unfortunately, due to an error in the chart, it is difficult to interpret.

As you look at the two columns labeled “BP shares April 19” and “BP shares June 28,” you will see the number of shares each system held at each of these points in time. However, when constructing the chart, the Dayton Daily News mistakenly inserted dollar signs on these columns. So, for example, on April 19, STRS Ohio held 14.6 million shares, not 14.6 million dollars in stock, while OPERS held 7.4 million shares and not 7.4 million dollars of stock. Then, on June 28, STRS Ohio held 10.1 million shares versus 9.39 million shares held by OPERS. In short, OPERS bought shares during this period; STRS Ohio has been a net seller.

On the chart, it is also difficult to see the footnote, which explains that the loss in value shown in the third column reflects both fewer shares and the drop in the share price for OP&F and STRS Ohio, who were both net sellers during this period. So, even if the price of the shares had not changed, STRS Ohio would show a decline in value because we have 4.5 million less shares on June 28 than we held on April 19. Conversely, the loss in value shown for three other entities listed on the chart (OPERS, SERS and Highway Patrol Retirement System) is tempered by the fact that they have increased their holdings since the oil spill. We appreciate that the chart was confusing; I hope this information provides some clarification.

You also asked what percentage of the entire portfolio did the BP investment represent. The market value of STRS Ohio’s BP stock holdings on June 28 represents approximately 0.08% of the market value of the total investment fund.

If I may, I’d like to note one additional item. You will undoubtedly read different numbers regarding the Ohio pension systems’ holdings and market values in various news outlets and other reports. This is because they often ask for different time periods. For example, a report being submitted to the ORSC by the five systems will cover the period from March 31, 2010, through June 30, 2010. During that period, the decline in market value for STRS Ohio BP stock holdings is approximately $64.3 million — again reflecting both less shares and the decline in share price.

I hope this information is useful to you. Thank you.

Laura Ecklar
Director, Communication Services
Click image (twice) to enlarge.

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STRS FLASHBACK - 7 years ago - The summer vacation the pols just couldn't make themselves come back from........

.......so they just gave lip service to an IG investigation!

From John Curry, July 7, 2010

"Meanwhile, legislators from both parties want the House and Senate to return from their summer break to override a line-item veto by Gov. Bob Taft that prevents the state’s inspector general from investigating STRS and the other four state pension funds."

Canton Repository, July 8, 2003

Montgomery seeks law to review STRS practices

By PAUL E. KOSTYU Copley Columbus Bureau chief

COLUMBUS — State Auditor Betty Montgomery now wants regular and independent performance reviews of the State Teachers Retirement System.

Montgomery is working with Ohio Sen. Kirk Schuring, R-Jackson Township, and Rep. Michelle Schneider, R-Cincinnati, to craft a law that would require reviews of the pension fund’s investments and management practices.

Montgomery said her office is equipped to handle the audit, but an outside firm should be hired so it is independent of the fund. A representative of Montgomery’s office as well as the offices of the attorney general and state superintendent of schools are voting members of the STRS board. The pension fund would be required to pay for the audit.

“Members of our public pension funds deserve to know that their dollars are being invested and managed properly,” Montgomery said.

Meanwhile, legislators from both parties want the House and Senate to return from their summer break to override a line-item veto by Gov. Bob Taft that prevents the state’s inspector general from investigating STRS and the other four state pension funds.

Rep. Tim Grendell, R-Chesterland, sent a letter last week to House Speaker Larry Householder, R-Glenford, and Senate President Doug White, R-Manchester, asking that both chambers reconvene to deal with the issue. Nearly 50 members of the General Assembly signed the letter, though Grendell said he would have had more if not for the July 4 holiday.

“The independent power of the inspector general’s office would only strengthen oversight capabilities,” he said.

Minority leaders in the Senate and the House backed the veto override. Sen. Gregory DiDonato, D-New Philadelphia, joined by eight other Senators asked White to “join our colleagues in the House in a push to provide Ohio’s pensioners greater safeguards.”

DiDonato said, “Taft has made a terrible error in vetoing this provision.”

Rep. Chris Redfern, D-Catawba Island, said, “We need to give taxpayers confidence that this sort of mismanagement can never happen again.”

Maggie Mitchell, a spokeswoman for White, said reconvening the Senate is not something that he has talked about with staff or other senators.

Dwight Crum, a spokesman for Householder, said Grendell’s request has not been reviewed, and members have not been contacted.

Because the line-item veto occurred on a House bill, overriding it would have to originate in the House.

On another front, Schuring is backing legislation by Sen. Teresa Fedor, D-Toledo, to give Inspector General Thomas P. Charles the power to investigate the pension funds.

Schuring also has introduced Senate Bill 105 with bipartisan support that would require officials and employees of the five pension funds to file financial disclosures statements with the Ohio Ethics Commission.

The flurry of legislative activity comes in the wake of a revelations that STRS spent $16.1 million in staff bonuses since August 2000, according to newly computed figures, as well as millions more on board travel and artwork at its headquarters, while the fund’s portfolio lost $12.3 billion.

Members of STRS are discussing how to prepare a class-action lawsuit. There also are plans to organize a protest march from the Statehouse to STRS headquarters at the fund’s next board meeting Aug. 15. Schuring said he will participate in the march.

Rich DeColibus to STRS board: 'Gross ineptitude on the part of the investment staff' and you need to address it

From Rich DeColibus, July 6, 2010
Subject: BP

Dear STRS Board Members,

I has come to my attention we have lost around $100 million on BP stock. It is also apparent we continue to hold some shares of BP. It is stunningly obvious BP is going to declare bankruptcy to avoid the legal malfeasance, misfeasance, and nonfeasance claims it would have to deal with for the next ten years from Gulf Coast individuals. It will do so in London, GB, court to obtain a favorable judgment. Continued holding of BP stock is simply gross ineptitude on the part of the investment staff and my expectation is that you, as a Board member, will address this situation.

I resent having to communicate what is so clearly evident to the slowest of the slow to Board members to act because of the investment staff's inaction, and you ought to resent having to intercede with what obviously needs to be done.

Rich DeColibus

Dennis Leone re: STRS $96.1 million BP stock loss

From Dennis Leone, July 6, 2010
Subject: Who loses? We do.

.......and no, no, no, STRS certainly does not need a policy (that I tried month after month to get over 4 years) that:

(1) Requires Steve Mitchell to immediately notify the board when a certain stock has suddenly gone south due to severe, abnormal, or extraordinary external circumstances;

(2) Permits the board to pull out of a stock immediately when severe, abnormal, or extraordinary circumstances cause a certain stock to suddenly go south, even if such a decision is contrary to the board's long-standing adopted policy.

No sir, Steve Mitchell certainly never wants the board to adopt such a policy (because he doesn't want the staff blamed for anything), and the board has naively believed that such is not needed because we are "in it for the long haul." How many examples do we need before something REALLY changes with our investment strategies?

I have the board minutes when Steve Mitchell advised the board to "hang in there" a few years ago because the stock market would soon rebound. He said this when we already had dropped $10 billion in assets, and then we dropped another $20 billion after he said it.

It didn't faze the board one bit, except that my colleagues on the board finally agreed (with initial resistance from Myers and other OEA reps on the board) to stop bonuses in years we lost money. Look-the-other-way ignorance on a grand scale, which is the OEA way and the ORTA way. Who loses? Retirees.

Dennis Leone

From a retiree, July 6, 2010

STRS has 2/3 of the BP investment of all Ohio Retirement Systems. BP now joins Lehman and Enron on the list of shame. We can not keep saying that this is only a small part of our investment portfolio. It is easy to be a Saturday Morning Quarterback, but -- may be some poor judgement to stay on the computer decision process with this stock. We all have 2nd guess holdings, but many bailed out of this stock at the first sign of trouble.

FYI, There are several legal actions against BP that they did not use proper safety --therefore, they are responsible as individuals for the loss.

Hey, guess which pension system lost the most on BP? We're #1

From John Curry, July 5, 2010

http://www.daytondailynews.com/news/ohio-news/ohio-public-pension-plans-losing-money-on-bp-stock-797037.html

Ohio public pension plans losing money on BP stock

Dayton Daily News, July 5, 2010
By Laura A. Bischoff, Columbus Bureau

How much money Ohio government has lost on BP stock
(Click image TWICE to enlarge)

COLUMBUS — BP’s stock price is dropping as fast as the oil gushing into the Gulf of Mexico, and it’s costing Ohio taxpayers millions of dollars.

Before the Deepwater Horizon oil rig explosion on April 20, all five public pension systems and the Ohio Bureau of Workers’ Compensation owned more than 30 million shares of BP stock. The pension systems and BWC collectively lost $177 million in value on BP stock.

Post-spill the agencies are taking a mixed approach on what to do with BP stock. Some dumped shares, some held and others bought more. Most of the funds and the BWC are managed by outside investment advisors who follow guidelines set by the systems.
(Click image to enlarge.)

The state’s second largest pension system, Ohio Public Employees Retirement System, added BP stock to its investment portfolio by purchasing 2 million more shares after the rig explosion.

BP closed at $59.48 per share on April 19 and at $27.05 on June 28 on the New York Stock Exchange.
Aristotle Hutras, director of the Ohio Retirement Study Council, and the funds themselves noted that BP stock makes up a tiny fraction of their diversified investment portfolios.

Aristotle Hutras

While $177 million is big money, the five pension funds collectively have $143.8 billion in investments.

“They’re in it for the long-haul. They are institutional investors,” Hutras said.

Contact this reporter at ?(614) 224-1624 or lbischoff?@DaytonDailyNews.com.