ORTA is issuing a “truth to power” warning

New from the Blog in ORTA

From ORTA Blog

June 26, 2024

The Ohio Retirement for Teachers Association (ORTA) is warning the press to closely follow what is happening at the State Teachers Retirement System (STRS). ORTA is issuing a “truth to power” warning.

During the past two STRS elections, ORTA’s reform-minded candidates, who advocate for transparency in investments and safer investment practices, have been resoundingly elected by our members. However, after each of these crucial elections, the STRS staff, in a concerning move, has involved Governor DeWine in an apparent attempt to disrupt the will of the voting members. In the most recent instance, a 14-page 'anonymous' document was delivered to the governor’s office and subsequently to Ohio Attorney General Yost (AG). The focus of this letter was STRS board members Steen and Fichtenbaum. Shockingly, without consulting the accused board members, the AG filed a suit against them based on unverified charges.

ORTA notes that both of these board members challenged the STRS Performance-Based Incentive (PBI) Benchmarks, which are used to award large and controversial bonuses. Steen revealed that the STRS Benchmarks were based on the investment staff’s own performance, yet bonuses were awarded. Fichtenbaum wants PBI benchmarks to be clear and relevant to what STRS projects to be their annual earnings assumption.

Are Board Members Steen and Fichtenbaum being set up? The Ohio AG has charged Steen and Fichtenbaum for not performing their fiduciary duties. ORTA views this quite differently; we think setting proper benchmarks is acting responsibly. STRS staff members must serve STRS members as fiduciaries, too. Receiving performance bonuses under opaque benchmarks merits the AG’s attention. Can Steen and Fichtenbaum receive a fair hearing? Under Ohio Code 109.98, the AG can charge board members, but under Ohio Code 3307.13, the Ohio Attorney General is the STRS legal advisor. How can you receive fair legal advice from the AG office when it sues you?

Was this happenstance? In 2006, in an independent audit required by Ohio law, the Ohio Retirement Study Council (ORSC), an oversight committee of legislators, was warned of a grave concern. The independent audit noted that Ohio Codes 190.98 and 3307.13 were in direct conflict. STRS management was warned this needed to be addressed.  Nothing was done by the ORSC, and nothing was done by STRS management.

Here we are 18 years later, and two board members are trying to fix our pension system. They are up against the will of the STRS staff who are trying to protect their investment practices and have solicited the support of the Governor’s Office and the Attorney General’s Office. And Ohio law is stacked against them. Please follow this abuse of power closely.

Click here and scroll down to watch the video Ousted STRS Board member, Wade Steen, makes dramatic return to board, armed with court order.

~     ~     ~     ~     ~

STRS Ohio Board members Rudy Fichtenbaum and Wade Steen are incurring legal fees, defending themselves against the lawsuit brought against them by A.G. Dave Yost. ORTA will use donations from the Pension Defense Fund to help them, if needed, pay their legal expenses. They have volunteered their time to support Ohio's teachers. Now it's time for us to show our support for them! Make a donation today to the ORTA Pension Defense Fund

From Edward Siedle, Pension Warriors

(A true story)

June 26, 2024

When Ohio Teachers State Pension Used Gestapo-Like Tactics To Intimidate An SEC Whistleblower

An invalid late night subpoena demanding documents within hours to scare a whistleblower who reported possible state pension wrongdoing to the SEC and others.

On the evening of August 24th, I was laying in bed in my home in Florida suffering from an upper respiratory illness—an infection that would ultimately take weeks to overcome. At 8:43 p.m., I heard pounding on the front door. Unsteady on my feet, I staggered into the dark living room where I could see car lights shining menacingly through the glass doors. A man stood outside the automobile, as the engine ran.

“What do you want and how did you get pass the security guards at the gate unannounced?” I asked in bewilderment.

“I am a process server and I am here to serve you with a subpoena from the State Teachers Retirement System of Ohio,” he said. “In Florida, the law now states that security guards have to admit process servers into gated communities for valid subpoenas.”

Well, this was no valid subpoena. The subpoena duces tecum required that I appear the following morning at 10 a.m. with copies of documents in hand related to a lawsuit brought by teachers against STRS Ohio regarding the Cost of Living Adjustment the pension had eliminated years earlier. To be clear, I had never read or reviewed the lawsuit or advised anyone, anywhere about it. I knew nothing more than the fact that a lawsuit concerning the COLA apparently existed.

Yet, if I failed to appear or furnish the records requested by 10 a.m. the following morning, the subpoena threatened, I could be held in contempt of court.

On the one hand, it was comical.

This was the very same $90 billion state teachers pension—with a staff of hundreds—which I had been suing for nearly 3 years for failing to release to the public records related to its riskiest, highest-cost private equity investments.

Documents—the pension has admitted it possesses—which may detail billions in looting by Wall Street, the pension has resisted providing to stakeholders, including teachers whose retirement security is at risk and taxpayers, for years. Yet documents regarding a lawsuit against STRS Ohio—which I had no knowledge of—the pension demanded be delivered in hours.

Documents which may detail billions in looting by Wall Street, the pension has resisted providing to stakeholders for years. Yet documents regarding a lawsuit against STRS Ohio, the pension demanded be delivered in hours

But when you look beyond the absurdity of STRS Ohio’s recklessness last year, it’s scary.

The forensic investigation of STRS Ohio I conducted in 2021, entitled The High Cost of Secrecy, exposed massive mismanagement and potential violations of state and federal law which I reported to state and federal authorites as a whistleblower. Intimidation and retaliation against whistleblowers is generally illegal. Whether intentional or not, few would dispute that being compelled to appear in a court of law with reams of documents within hours of receiving a late night subpoena is intimidating.

The High Cost Of Secrecy Preliminary Findings Of Forensic Investigation Strs Ohio 2021 (3)
1020KB · PDF file
Download

Intimidation and retaliation against whistleblowers is generally illegal. Whether intentional or not, few would dispute that being compelled to appear in a court of law with reams of documents within hours of receiving a late night subpoena is intimidating.

When a $90 billion state teachers pension—with a staff of hundreds—hunts you down in the middle of night with a bogus subpoena, it’s alarming.

When a $90 billion state teachers pension—with a staff of hundreds—hunts you down in the middle of night with a bogus subpoena, it’s alarming. 

The bogus subpoena also requested any communications with STRS board members regarding any matter whatsoever.

The bogus subpoena I was handed also requested any communications I had with STRS board members regarding any matter whatsoever. 

With respect to documents related to its board of directors, the most expeditious means of obtaining any such documents presumably would have been to ask the board members directly. Since the board members had an on-going fiduciary relationship to the pension, presumably they would have been forthcoming.

Why would a pension fund in Ohio bother a private citizen in Florida for documents readily available from its board members? The answer is that, last year, a growing number of its board members had been pressing for transparency and reforms which pension investment staff and others—including Ohio politicians and their financial backers on Wall Street—oppose. The bogus subpoena was part of a fishing expedition targeting and intimidating those board members—it had nothing to do with any legitimate COLA lawsuit discovery.

Today the transparency reform members have control of the STRS Ohio board. However, the Governor, Attorney General and virtually every other Ohio politician are working feverishly to undo the recent election results and thwart widely-popular transparency initiatives. In Ohio, it seems, politicians are far more interested in using state pension assets to attract Wall Street political contributions than prudent management of workers’ retirement savings.

For now, Gestapo tactics and intimidation by STRS Ohio seem to have ended. That’s great news. The bad news is that—even before the election results were announced to the public—Ohio politicians and their allies began their assault upon the duly elected board which is seeking to restore integrity to the pension. The teachers in Ohio are at the forefront of a desperate battle to end Wall Street mandated secrecy at our nation’s public pensions.

Thank you for reading Pension Warriors by 

Edward Siedle. This post is public so feel free to

share it.

Blade Editorial: STRS reform has begun

Blade Editorial: STRS reform has begun

Blade Editorial Board
The Toledo Blade
June 25, 2024

Reform has begun at the State Teachers Retirement System of Ohio.

The board blocked $10 million in the proposed 2025 budget for a performance-based incentive program that has become a huge part of the pay package for the STRS investment staff.

The staff bonuses have been avidly opposed by retired teachers because they add between $50,000 to $300,000 annually to the pay package of the STRS investment staff while retirees have only received 4 percent in total cost of living adjustments since 2017. They had expected 3 percent annual benefit increases, so they’re behind by 20 percent.

STRS leadership says bonuses are industry standard and portrays the staff as exceptional. Treasurer Robert Sprague’s appointed STRS board member, Alison Lanza Falls of Port Clinton, fought to keep the bonuses, claiming otherwise staff will quit. Ms. Lanza Falls spent 30 years on Wall Street and it shows. If the entire investment staff at STRS left and the pension was put on auto pilot in an index matching the broad market, history shows performance would improve.

The Nevada Public Employee Retirement System operates on this model, with just two investment department employees, paying 1/?100th of 1 percent in fees on their indexed funds. Nevada’s 10 year annualized return is 8.9 percent, easily beating the 7 percent assumed rate of return STRS needs to stay on track.

As Ohio Auditor of State Keith Faber’s Special Investigations Unit pointed out, STRS has trailed the S&P 500 index for 13 of the last 22 years. The investigation was launched because of allegations the bonuses were earned through underreporting private equity expenses.

The Auditor found no fraud but criticized the easily earned and overly lavish bonuses paid by STRS. Past STRS boards ignored the recommendation for bonus-worthy performance in the 2006 fiduciary performance audit. That document recommended a benchmark of the Russell 3000 index plus 5 percent for private alternative investments.

Instead STRS used actual performance as the benchmark for the private equity portion of their portfolio, assets were valued solely by fund managers, and magically they did well enough every year to make sure the entire investment staff met their goals for a bonus.

The reform members of the STRS board were all elected by teachers except for Wade Steen, who Gov. Mike DeWine illegally removed for more than a year because of his support for policy change at STRS.

Ohio teachers have shown with their votes for pension trustees they want an end to staff bonuses, a shift in investments to lower cost indexes, and total transparency on assets and terms on every holding in their portfolio.

The STRS reform majority got one part of the plan accomplished; now they need to keep going and fulfill the promises that got them elected by the teachers over the opposition of the STRS and Ohio political establishment.

Read the article online here.