Toledo Blade: Auditor Faber still can't answer simple question after 14 months on STRS case

Toledo Blade

Editorial Board

October 26, 2022

https://www.toledoblade.com/opinion/editorials/2022/10/26/faber-foot-dragging/stories/20221027013

Editorial: Faber foot-dragging 

Ohio Auditor of State Keith Faber has made his Special Investigations Unit, the department devoted to public integrity probes, the focal point of his re-election campaign. But Mr. Faber has been silent on the most important case the SIU team is working. Perhaps the investigation has been delayed so as to avoid making it a political issue before the Nov. 8 election.

Since August of 2021, state auditors have been investigating an allegation raised by Wade Steen, State Teacher Retirement System of Ohio trustee, a certified public accountant appointed by Gov. Mike DeWine. Mr. Steen says $7.8 million in performance bonuses paid to STRS investment staff in 2019 was based on unreported investment management expenses of $160 million. Mr. Steen says the shaved expenses improved the five-year investment performance by 0.244 percent, making STRS in-house investment staff eligible for bonuses that would otherwise have fallen short of the benchmark required for the extra pay.

Independent pension expert Edward Siedle, hired by the Ohio Retired Teachers Association to study the STRS records looking for funds to restore the teacher’s cost-of-living-adjustment, first raised the red flag on too-good-to-be-true expenses.

STRS uses CEM Benchmarking, a Toronto-based specialist with 400 clients, to compare their costs to peer-group pension funds. CEM documents cited by Mr. Steen and Mr. Siedle disclosed that STRS-supplied investment costs did not include performance fees paid outside alternative investment funds.

After 14 months on the case, the auditor’s vaunted Special Investigations Unit has failed to answer an elementally simple question; did STRS include all costs for outside investment management when measuring their return on investment? STRS says they did; their external validation firm, with extensive knowledge of what other public pensions pay, will not validate those costs without proof STRS would not supply.

Since Mr. Faber’s SIU began this single-issue probe, STRS has twice paid multimillion-dollar bonuses to investment staff. Ohioans needed a definitive answer to STRS accounting veracity from Mr. Faber before those bonuses were paid.

Instead of putting in the necessary time to do his main job, Mr. Faber has launched an epic election-fraud theory from the safe confines of a Tea Party Republican event that is one of the most irresponsible statements by an Ohio elected official this century.

Mr. Faber told a Westerville group that while election fraud is unlikely in Ohio, election boards in the state could be facilitating ballot fraud in other states. 

Mr. Faber detailed how special paper used for voting machines could be sent from Cuyahoga County to locations in other states where it could be used to create fraudulent ballots.

There are multiple safeguards in the election administration process that puts Mr. Faber’s scenario in the lunatic fringe category.

After 14 months on the case, the auditor’s vaunted Special Investigations Unit has failed to answer an elementally simple question; did STRS include all costs for outside investment management when measuring their return on investment? STRS says they did; their external validation firm, with extensive knowledge of what other public pensions pay, will not validate those costs without proof STRS would not supply.

Since Mr. Faber’s SIU began this single-issue probe, STRS has twice paid multimillion-dollar bonuses to investment staff. Ohioans needed a definitive answer to STRS accounting veracity from Mr. Faber before those bonuses were paid.

Read the rest of the article here. 

Steve responds to Joe Lupo.....

Steve Foreman

October 25, 2022  · 

I'm not sure what Joe expected to happen in two board meetings, two executive sessions, and a handful of meetings with deputy executive staff, but I apologize. We are seeing the culture shift ever so slightly: more questions, greater requests for information, many important conversations with staff, and all this without board control... YET. It is coming. I thank all of you who I have had the pleasure of meeting at the STRS board meetings. Moreover, thank those of you who understand that this is a hefty lift and it requires us to row together in the calm waters as well as the turbulent sea.

Steven Foreman is a contributing member of STRS and an elected member of the STRS Board since September 1, 2022. He is Assistant Superintendent of the Zanesville City Schools, having served as a principal for seventeen years and currently serves as an elected councilman for the City of Zanesville, where he is active as chairperson of the city's Crime and Violence Committee. He also serves actively in a number of other posts. Read more about Steve here. 

STRS bonus scandal gets even worse

From ORTA

October 24, 2022

NBC4: Ohio retired teachers’ pension fund suffers $5.3 billion loss as staff get bonuses

Remember back in August when STRS rushed to award $10 million in staff bonuses after informing the board that they only lost $3 billion this past year?

Well it’s gotten even worse!

Recently obtained reports now show that STRS didn’t just lose $3 billion last year, it lost $5.4 billion!

Click here to watch NBC’s report on the growing scandal:

STRS owes Ohio teachers an apology and those bonuses should be returned to the fund immediately.

So what can you do to help fight back?

First, click here to thank our State Auditor for launching his Special Audit Task Force of STRS and encourage him to further investigate STRS misrepresentations and enrichment of staff.

And secondly, click here to submit a letter to the editor for your hometown newspaper to bring more awareness to STRS failures and fraud.

Your voice matters. Together we are making a difference.

Ohio Retired Teachers Association

250 E Wilson Bridge Rd, Worthington, OH 43085

614.431.7002

https://www.orta.org/ 

Rudy Fichtenbaum points out some highly unpleasant truths about STRS that are still relevant today in his 2017 letter to HPA

Excerpts from a 2017 Letter to HPA [Healthcare and Pension Advocates for STRS] 

From Rudy Fichtenbaum

October 23, 2022

In 2017 I wrote a letter to the members of HPA, a group of STRS "stakeholders." At the time I represented AAUP at HPA meetings. The entire letter is 9 pages long but in this post I will just present a few excerpts that seem like they could have been written yesterday.

~     ~     ~     ~     ~

Mike Nehf’s email Sent: Tue, Feb 7, 2017 1:20 pm with the Subject: FW: Keeping You Informed Is a Top Priority — STRS Ohio Board News states "We’re taking every step to help members learn about what is taking place at STRS Ohio. Let me know if you have suggestions or how we can help your member organizations best understand.”

If his goal is help members learn what is taking place at STRS Ohio, then he should level with them in the Newsletter. Here is an excerpt of two key sentences in the latest STRS Newsletter:

“In preparation for upcoming discussions about benefit plan design changes, the board began reviewing its options to reduce liabilities. Models of possible plan design changes indicate that the cost-of-living adjustment (COLA) is the best means possible to preserve the fiscal integrity of the pension fund because it by far has the biggest impact on liabilities.”

“Models of possible plan design changes indicate that the cost-of-living adjustment....”

Apparently the STRS staff doesn’t have the guts to tell people that they are recommending that the Board consider cutting, suspending or eliminating the COLA. I spoke with Mike Nehf after our February 9, 2017 meeting about this issue, and he claimed that he can’t tell people that they plan on cutting or eliminating the COLA because the Board has not decided. He said that he could just convey to people what the Board was discussing. So, I asked him if the Board was discussing an increase in the COLA, and he said no. So, I told him then there are only two things the Board could be discussing with respect to the COLA, 1) not changing it or 2) reducing or eliminating it. The first option is not an adjustment. The only possible adjustment is a cut or elimination of the COLA. The real reason not to say anything now is that it has the potential to cause a firestorm with members. Therefore, it seems clear to me that helping “members learn about what is taking place at STRS Ohio” is not at all the real objective. Instead, it appears to be delaying a candid report about what is taking place until after the decision in made, when it would be too late for members to pressure the Board not to cut the COLA.

So, the real problem is that no one is leveling with our members. It is clear that the staff is recommending that STRS eliminate the COLA. It is also clear this step alone will not solve the problem of the unfunded liability. Part of the problem is self-inflicted by moving to a closed funding period. The closed funding period forces the Board to make more cuts every time investment returns underperform the assumed rate of return.

The elephant in the room is that no one is talking about demanding that employers increase their contributions, even though STRS, according to Mike Nehf, is in the 25th percentile for employer contributions. Current employees are paying 3.5% above the normal cost and so they have nothing left to give. Recent retirees have given up 5 years of COLAs and other retirees have taken a 1% reduction in COLA. Now they will soon be asked to give up the entire COLA, which means that in 20 years if inflation is 2%, their pension will lose about a third of its value.

No one seems to want to raise the issue of additional employer contributions because they believe that the Legislature and Governor would not entertain such an idea. It is true that if HPA keeps meeting and a group of 15 or so leaders from stakeholder organizations sit in a room and keep talking to each other, the likelihood of legislative action is slim. But if we mobilize retirees and active employees and start having them call legislators, lobby, testify, and demonstrate as well as knocking on doors and talking to friends and relatives, there is a chance that we can change the political dynamic. This is not a partisan issue. Believe it or not there are lots of active teachers, college faculty and university faculty who vote Republican. There are lots of retirees who vote Republican. And the point that will not be lost, even on Republican legislators, is that these people, both active members and retired members, do vote. If we do not chart a new course for HPA then it will become irrelevant. When it comes to cutting pension benefits, the days of consensus are over. The retirees will not agree to the elimination of the COLA, and active members will not accept more contributions and further cuts to pension benefits.

Dr. Rudy Fichtenbaum is Professor Emeritus of Economics at Wright State University and an elected member of the STRS Ohio Board, filling a retiree seat since September 2021. He is outspoken in his advocacy for STRS stakeholders, pushing for reform of STRS Ohio on behalf of both active and retired teachers.

Cathy Steinhauser defines "fiduciary" for the STRS Board...for the fifth time

Cathy Steinhauser's speech to the STRS Board

October 20, 2022

Cathy Steinhauser, 35 yrs., a satellite teacher w/Pickaway-Ross CTC in the Circleville City School District - Family & Consumer Sciences.

STRS needs to stop the monthly propaganda of telling the membership, in emails (like E-News) and other postings, how great the system is and that is called "gaslighting". You need to acknowledge the problems you have created for this membership and find solutions to those problems. Many of us have suggested for months what to do, even a couple of the board members pointed out ways to solve certain issues - but you continue to deny the existence of problems which shows ignorance and your need to perpetuate the "status quo". Some of those issues are 1) restoring COLA permanently, 2) STRS staff and STRS investment group to "share in the sacrifice" of lost billions by way of caps or lowered salaries and NO bonuses,

3) More stable and prosperous methods of investing, 4) Reducing STRS staff as well as the investment staff, 5) Selling/renting the STRS building, to name a few. The more time spent on NOT trying to accomplish these results in more time lost in restoring our pension.

I have also observed, since attending board meetings that six members still are not being proper fiduciaries for the membership of teachers and once again, I repeat myself:

A Fiduciary is:

"A person who acts on behalf of another person or persons, putting their client's interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary requires being bound both LEGALLY AND ETHICALLY to act in others best interests."

I have now stressed this definition of your job as a board member for the 5th time. Last month you began to throw around this word but it needs to be actively and earnestly utilized in every aspect of your time on this board.

STRS is NOT a premier pension plan. When I began teaching in 1980, it may have been but over the decades STRS has managed to make our pension one of the worst due to your terrible decisions as fiduciaries and an investment staff who doesn't seem to know how to invest our money to get the best return to restore issues previously stated. What a mess you have created! You need to quit voting against your membership and get serious about change…change for the teachers who own this pension, Yes, WE Own This Pension, and you need to change it in our favor.

STRS also removes our members' comments on the STRS Facebook page. Did you all know that to do so is illegal?? Blocking users or deleting comments because they express critical opinions is against the Constitution, namely the First Amendment, and principles of transparency. I seem to recall that STRS claims to be transparent but I've discovered that's an outright lie. We have free speech rights when using social media as the Constitution guarantees this right and it doesn't go away when any one of the membership goes online. You cannot interfere with our freedom of speech because we have a right to expressing our thoughts. I've read that when someone gets censored on a public forum, the individual expressing themselves usually is correct in their post. I want the STRS Facebook page to stop posting false information in order to present themselves as they are not.