OPERS now jumping into the fray

Second Ohio group jumps in with effort to review its state retirement system

Jim Provance, The Blade, Toledo, Ohio

Sat, July 17, 2021

Jul. 17—COLUMBUS — Even as an outside-funded, deep dive into Ohio teachers' retirement system continues, an effort is under way to do the same with the pension fund for most other government employees.

"There are certain uniquely positive features — including strong participant organizations and board members willing to break from the pack and speak out —with these funds that lead me to believe that these investigations could have very positive outcomes, outcomes that have not happened anywhere else in the United States," said Ted Siedle.

The former Securities Exchange Commission attorney, financial forensics investigator, and co-author of the book "Who Stole My Pension?" has already been hired by a group of about 1,000 retired teachers who've challenged decisions made by the State Teachers Retirement System.

Now a Kickstarter campaign is being launched to raise funds for a similar forensics audit of the Public Employees Retirement System.

Together, the two funds have assets of about $200 billion.

Like the STRS effort, in which retired teachers raised an estimated $75,000 to pay for the audit, a Facebook discussion group, Save Ohio Pensions, for members of all five state employee funds hopes to raise a similar amount for a PERS review.

"I think there's enough known about the STRS audit now," said Paul Guyton, 55, a retired state Department of Rehabilitation and Correction employee from South Charleston near Springfield and a Save Ohio Pensions leader.

"It is clear they're uncovering some things that give good cause for them to call for further action," he said. "For the two to happen in the same time frame is very valuable. We need things to happen. We need the legislature to take note."

PERS spokesman Mike Pramik said the fund has not been contacted by anyone seeking to perform an audit.

Mr. Siedle recently issued what is expected to be the first of a series of preliminary reports examining STRS investment policies.

The report criticizes STRS for a lack of transparency when it comes to earnings and fees associated with alternative investments like those with hedge funds and equity firms. It chastises the legislative Ohio Retirement Study Council for shirking its statutory responsibility to commission an independent audit every 10 years.

Of most interest to its active and retired members, the preliminary report contends that STRS's alternative investments have "massively underperformed" compared to other types of investments.

The report suggests that better earnings from a passive investment strategy and savings from excessive fees and performance-based bonuses to inside staff would have been more than enough to restore retired teachers' annual cost-of-living adjustments that were eliminated in the name of improving the fund's long-term solvency.

The report was part of the reason that STRS board member Wade Steen, an investment expert first appointed by Gov. John Kasich in 2016 and reappointed by Gov. Mike DeWine last year, asked Ohio Attorney General Dave Yost last week to appoint "transparency counsel" for him as he questions what the board has been told.

He urged board leadership in a letter to call a special meeting so that he and incoming board member Rudy Fichtenbaum may pursue discussion of reducing investment costs, restoring the COLA, and reducing the contribution rate for active teachers.

Mr. Fichtenbaum, [Professor Emeritus of Economics] at Wright State University in Dayton, was recently elected to the board to represent retirees and will take his seat on Sept. 1.

"Is there fraud?" Mr. Steen asked in his July 14 letter. "That is a question for others to answer. But based on my analysis, there seems to be questions considering the state used incorrect investment costs which overstated the total fund return, which resulted (in) $7.8 million in performance-based incentives."

Read the rest of the article here. 

Jim Provance is Columbus Bureau Chief at The Toledo Blade.

A MESSAGE FROM TED SIEDLE ON THE STRS PUBLIC RECORDS LAWSUIT

July 16, 2021

From John Damschroder

A MESSAGE FROM TED SIEDLE ON THE STRS PUBLIC RECORDS LAWSUIT

Yesterday, following our initial court-ordered mediation, STRS provided us with records we requested six months ago regarding CEM Benchmarking, the firm STRS uses to benchmark its investment costs, and Cliffwater LLC, its alternative investments consultant. As you may recall, STRS had previously indicated that these two firms claimed providing the documents we requested pursuant to Ohio public records law would somehow result in irreparable harm to them. Now, after incurring $5,000 in legal fees for stonewalling, the so-called highly confidential CEM and Cliffwater documents have been handed over.

As promised, we are providing all the newly-released documents to you.

The more significant litigation regarding all the investment documents we requested -- none of which have been released to us -- continues. We do not believe that investment prospectuses and other materials which are required to be provided to ALL investors under the federal securities laws should be withheld from Ohio teachers whose retirement security is at risk in these funds. Wall Street must not be permitted to manipulate Ohio public records laws to thwart federal securities law compliance. There is no reason why Ohio teachers should be denied information regarding their retirement investments which all other investors worldwide are routinely provided. 

Edward "Ted" Siedle is a former SEC attorney, investment banking and securities industry professional, and longtime Forbes writer. He is the nation's leading expert in forensic investigations of money managers and pensions, focusing upon excessive and hidden investment fees and risks, conflicts of interest and wrongdoing. He was named as one of the 40 most influential people in the U.S. pension debate by Institutional Investor Magazine for 2014 and 2015. His preliminary report on his forensic investigation of STRS, The High Cost of Secrecy, was released June 7, 2021.

John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.

Wade Steen to Rita Walters, Robert McFee and Carol Correthers: I will not tolerate interference from the staff, nor from the Board Chair or others.

July 14, 2021 

From Wade Steen

To Rita Walters, Board Chair 

Robert McFee, Vice Chair

Carol Correthers, Vice Chair-Elect

This letter responds to your letter dated June 22, 2021, a copy of which is enclosed along with the requested analyses.

I wrote to Board Chair Rita Walters nine months ago, on October 14, 2020, regarding the staff obstructing my ability to fulfill my fiduciary duty. Ms. Walters has yet to acknowledge my email and, as far as I am aware, Ms. Walters never investigated my concerns. A copy of the email is enclosed.

I, along with fellow Board investment expert Yoel Mayerfeld, expressed concerns during the August 2020 Retirement Board meeting regarding the investment performance and benchmarks used in calculating staff bonuses and were told by staff the actual performance was not the benchmark used for bonuses. After the bonuses were approved, Yoel followed up with staff regarding the alternative investments benchmark and was informed the benchmark was in fact, the actual performance. Perhaps most troubling, "actual performance" was not the alternative investments benchmark in the Statement of Investment Objectives and Policy (SIOP) at the time bonuses were approved.

Regarding the solution I referenced, please call a special meeting so that I and Board-Elect Dr. Rudy Fichtenbaum may lead a discussion on how STRS Ohio can utilize its balance sheet along with technology to significantly reduce its Wall Street costs and allow for the restoration of the cost-of-living adjustment; reduction of current employee contributions from 14% to possibly 4%, which would result in a 10% pay raise for Ohio's teachers; and lowering the retirement age.

I am compelled to request that Attorney General Dave Yost appoint transparency counsel for me as an STRS Ohio Retirement Board member so that I may arrive at my own conclusion about what the facts are and what they mean, in an effort to exercise my fiduciary duty as the Governor's appointee to the State Teachers Retirement Board. I will not tolerate interference from the staff, nor from the Board Chair or others. I trust this letter provides you the clarification you sought.

Sincerely,

Wade Steen, CPA

Member - Retirement Board

Cc:    Mr. William J. Neville, STRS Ohio Executive Director

         The Honorable Dave Yost, Ohio Attorney General

         The State Teachers Retirement Board

Edward Siedle on Transparency

"A manager of traditional stock and bond assets cannot get away with claiming the values of publicly-traded stocks are higher than the quoted prices. 

"So, this is not a sandbox the savvy scammer wants to play in.

"However, assets that are not publicly-traded and therefore lack clear-cut, readily ascertainable values -- like real estate, venture capital, and private equity, are tailor-made for scamming."

~ From Edward Siedle's book How to Steal a Lot of Money - Legally, page 130.

He also notes "Transparency is always the scammer's enemy, secrecy his friend." Still wondering why secrecy is the order of the day with STRS management while transparency continues to be hidden away, rotting in the closet?

Dean Dennis to elected officials: We will be asking for your support

From: Dean Dennis

To: Elected Officials

July 12, 2021

Dear Elected Official,

This is a follow up from the previous June 28, 2021 email as the timing collided with the passing of Ohio's budget.

By way of introduction, I serve on the Ohio Retired Teachers Association (ORTA) Legislative Committee and am the founder of STRS Ohio Watchdogs. ORTA's Executive Director, Dr. Robin Rayfield, serves as one of the Moderators for the STRS Ohio Watchdogs. ORTA and the Watchdogs work closely together and share the same concerns about problems at STRS.

Please familiarize yourself with the STRS Ohio Watchdogs website https://www.strsohiowatchdogs.com/ as we will be asking each of you for your support. When you visit the page please scroll down until you see the Visitor Survey and check, "I am an Ohio Legislator" so we know you have visited. Below is why you need to visit the Watchdogs:

Our pension issues have been so neglected that STRS members organized a grassroots campaign and donated $75,000 of their money for a forensic audit, which now has been completed. All this can be found on the Watchdogs website as well as an open letter by Governor DeWine's STRS Board appointee expressing his frustration with STRS management.

If you missed the previous June 28, 2021 email, please contact your administrative assistant so you can read some of the outlined problems. Your constituents are expecting you to be aware of these problems at STRS. These problems are also impacting Ohio's economy.

If you would like more information please contact Robin Rayfield at rrayfield@orta.org or, Dean Dennis at ddennis1111@gmail.com. 

Sincerely,

Dean Dennis

ORTA, Legislative Committee

STRS Ohio Watchdogs, Founder