‘The Hostility Is Led by Governor Walz’: How VP Pick Ignored Furious Teachers, Worked To Squash Probe of ‘Corrupt’ Pension Plan That Could Leave Teachers High and Dry

Renowned fraud investigator’s probe into misuse of teacher pension funds posed ‘a very serious risk to trust in government,’ Walz administration said

Andrew Kerr

October 10, 2024

Minnesota Gov. Tim Walz knew he had a big problem on his hands when members of his administration caught wind in February that thousands of angry public school teachers had banded together to retain a renowned pension fraud investigator to probe their state retirement plan.

The teachers’ long-simmering rage about Minnesota’s two-tiered teacher pension plan—in which teachers hired in 1989 or later get much smaller retirement payments than teachers hired before 1989—was reaching a boil. Many "Tier 2" teachers, hired after 1989, felt they were effectively subsidizing the lavish benefits of their older "Tier 1" counterparts, while their own retirement payouts would be much smaller. Even worse, they feared the chronically underfunded pension fund might not be able to afford their reduced retirement benefits when it came time for them to exit the workforce. These fears were compounded by what the teachers said was Minnesota’s "demonstrated lack of transparency" and history of presenting the public with misinformation about the pension.

And so in February, the angry teachers raised $75,000 and hired Edward Siedle, a former Securities and Exchange Commission lawyer who has won some of the largest whistleblower awards for financial fraud in American history, including forcing tens of millions of dollars in payments from J.P. Morgan over its failure to disclose conflicts of interests to wealth management clients. The educators raised the money in just 19 days, "which shows you how absolutely pissed off teachers are," Minnesota teacher Maggie Temple, a leader in the effort to hire Siedle, told the newsletter Political News Items.

As governor, Walz chairs the $146 billion Minnesota State Retirement System—which includes the teachers’ $28 billion pension fund—even though he says he’s never owned a stock or bond in his life. According to a private Facebook group set up by aggrieved teachers and viewed by the New York Post, Walz, despite being a Minnesota teacher himself, has "not shown any support whatsoever" for the teachers' pleas for more transparency.

The Minnesota teachers had Siedle conduct an independent audit of the state’s pension program. His 114-page report, published in late September, details evidence of what Siedle says amounts to systemic and brazen fraud in the Minnesota pension system Walz oversees.

The fund has claimed to outperform its benchmark index on a 1, 5, 10, 20, and 30-year basis by 0.2 percent for each and every period, a remarkably consistent performance that Siedle says is "virtually impossible."

"I was a testifying expert in the Bernie Madoff case," Siedle told the Washington Free Beacon. "Even Madoff never claimed to beat the market on all periods of time, certainly not by the exact same number. That’s, to me, either supreme arrogance or stupidity."

But instead of reacting with alarm to Siedle’s report, Walz is being accused of ignoring concerns that "the books were cooked," even taking steps to ensure the allegations would remain shrouded in secrecy.

"Walz is the chairman of the board of this $146 billion pension fund," Siedle told the Free Beacon. "He’s the fiduciary in chief. But he’s never owned a stock or a bond, so it’s like he hasn’t got a clue what’s going on here."

Siedle’s report also said that the Minnesota pension system is hiding billions of dollars in fees paid to Wall Street investment managers. In public documents, the pension fund stated that its fees are less than 0.1 percent. But Siedle says that is an "unbelievable" claim, noting that the fund is heavily invested in alternative investment vehicles—that is, in private equity as opposed to index funds—that historically charge fees of 2 percent or more. In fact, a quarter of the fund is in alternative investments, which Siedle says in and of itself makes the 0.1 percent in fees paid impossible.

Siedle said he requested documents from the Minnesota State Board of Investment (SBI) to substantiate its public performance and detail the fees it has paid to investment advisers, but the SBI refused that public records request.

"If the public isn’t able to get these documents and scrutinize and even figure out what’s going on, then the people running the money can say anything they want," Siedle told the Free Beacon.

The Walz administration’s internal response to the probe, which it worked to thwart, undermine, and smear at every turn, are as interesting as Siedle’s findings.

The governor’s internal pushback was spearheaded by the executive director of the agency that manages the teachers' pensions, the Minnesota Teachers Retirement Association, Jay Stoffel, who warned as early as March of this year that Siedle’s investigation posed "many serious risks" and would harm the Teachers Retirement Association’s "reputation as a trusted government agency," internal emails show.

The trove of internal communications, which Siedle obtained through a separate public records request, sheds light on how Walz administration staffers strategized to hamper Siedle’s audit. What it doesn’t show is any concern for the thousands of enraged public school teachers who raised $75,000 to hire a renowned financial investigator.

Stoffel, whom Walz appointed to SBI’s administrative oversight board, was given  "opposition research" on Siedle by the National Council on Teacher Retirement—a trade organization representing teacher pension funds—and his subordinates met with staffers in the state legislature to warn that Siedle "poses a very serious risk to trust in government." Stoffel warned in emails that the auditor’s investigation would lead him straight to the $140 billion SBI and its chairman, Walz.

"Mr. Siedle’s inquiries likely will be focused on SBI," Stoffel wrote in a March 11 email warning Walz administration officials about the probe. "We have met and spoken with legislative leadership, SBI staff, and others in leadership roles who could be affected by this movement." Recipients of the email included Minnesota assistant attorney general Joe Weiner and Minnesota Department of Education chief operating officer Patty Hand, among others.

The next day, on March 12, Minnesota Teachers Retirement Association legal and legislative director Rachel Barth held a meeting with Walz policy adviser Simone Frierson to update Walz on the danger posed by Siedle’s investigation and specifically to the governor himself.

"Thanks for the discussion today, Simone," Barth wrote in a lengthy email to the Walz aide after the meeting. "We are concerned about the risks this situation poses to TRA and other state agencies. Specifically, TRA’s reputation as a trusted government agency is going to be questioned … Further, the risks are not just to TRA, but the State Board of Investment (SBI) associated individuals."

Stoffel abruptly announced his retirement as executive director of the Minnesota Teachers Retirement Association at a June board meeting. This came just moments after his fellow board members had reappointed him to serve another term, meeting minutes show. He did not return a request for comment.

Lack of transparency is an endemic problem in the Walz administration, which has repeatedly minimized or dismissed proven examples of waste, fraud, and abuse since the Democratic governor took office in 2019, Minnesota’s nonpartisan auditor Judy Randall told CNN on Saturday.

Despite issuing more than a dozen reports on these abuses, Randall told CNN she’s unaware of any personnel changes linked to her audits.

"The governor’s appointees across the board at almost all agencies have been hostile and uncooperative when citizens are seeking transparency and oversight through the legislative auditor," Republican state senator Mark Koran, the vice chair of Minnesota’s legislative audit commission, told CNN. "The hostility is led by Governor Walz."

Instead, SBI’s chief investment officer Jill Schurtz, who was appointed by Walz in August 2022, met with the teachers who retained Siedle’s services at least six times and pressured them to drop him.

"In those meetings and phone calls, Schurtz asked the group to drop their public records requests multiple times, and stated that they ‘didn’t want their name associated with the investigator who took a scorched-earth approach in investigative wrongdoing,’" Siedle wrote in his report.

Further enabling the Walz administration’s lack of transparency, Siedle said, was the the state and local media’s refusal to cover the evidence of brazen fraud he uncovered in his investigation into the state’s pension system.

"Mainstream media won’t touch it," Siedle told the Free Beacon. "Now that the report is done, nobody in Minnesota has written about it, which is really remarkable because the numbers are so glaringly, staggeringly wrong."

"What led state officials to believe they could perpetuate this fraud for decades?" he said. "Were they that arrogant? Were they stupid? Were they supremely confident in their belief that the populace would remain clueless?"

"The people running the pension were brazen because there was no media scrutiny," Siedle concluded. "There’s never been any scrutiny of the pension."

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