Dennis Leone responds to the rhetoric

From Dennis Leone, May 4, 2009
Subject: Thank You

Jerry – Thank you for writing what you did to Meuser. I am sick-to-death of the Meuser/Myers/Ramser/Cervantes/Chapman/Nehf/Mitchell rhetoric of the bonuses being justified because the investment staff is providing “value added” (which means that our returns for the first 9 months of FY 2009 were -32.1% in comparison to Wall Street average market loss of -32.2%).

The union block on the STRS Board simply do not want to hear that base salaries averaging $156,000 for the investment staff (and spectacular fringe benefits) certainly pays for the so-called “value added.” No, they say it justifies giant bonuses on top of that.

I am also tired of hearing the age-old argument that the bonuses also are justified because we’d be spending more money using external money managers instead of our own internal money managers. Everyone could make an argument that it would cost him/her more money if they did things in a different way.

I guess I should have told my school board that I deserved a bonus check because I never recommended that my district hire a 2nd assistant supt, and therefore I was “saving” my district money by never recommending such. Maybe my wife and I are “saving” money by not buying a Florida condo that we can’t afford anyway.

Dennis Leone

The bonus situation explained.....

From Dennis Leone, May 1, 2009

Most of the confusion surrounds the fact that the board votes each spring to adopt a new bonus plan for the upcoming fiscal year (which begins each July 1), but then 6 months later the board votes to approve the cash bonus payments for the PREVIOUS fiscal year (which is 12 months after the work is done).

This means: The board voted 8-1 to adopt the fiscal year 2009 bonus plan in March of 2008, then voted 8-1 in September of 2008 to approve the actual $6 million bonus payments for the previous fiscal year (fiscal year 2008, which ended 6-30-08). This is when the firestorm really started.

But instead of stopping the bonus plan for fiscal year 2009 at this time (September, 2008), everything went forward (with only me complaining). A Columbus Dispatch article in December of 2008 said I was the ONLY board member who was pushing to have the bonuses suspended.

Then in January of 2009, the board voted 6-3-1 to approve my motion to suspend the fiscal year 2009 bonus plan effective 2-1-09. This meant two things:
...(1) No one would get bonuses for their work in the final 5 months of FY 2009; and
...(2) The board would at some point have to vote yes or no on the cash bonus payments for the first 7 months of FY 2009 (which will be $3.3 million).

The board has itself in a real pickle now. If the board votes no, the door will be open for staff to sue and argue that they have already done the work for the first 7/12 of the fiscal year.

If the board votes yes on the 7/12 cash payments, board members will look stupid because they chose NOT to stop the bonus plan last September when they could have.

STRS Board policy permits the board to modify or terminate the bonus plan at any time, and all investment staff members received a letter early last summer that explains this. The comments by board members Tim Myers and Mary Ann Cervantes that appeared in the Columbus Dispatch after the board voted 6-3-1 to suspend the bonuses effective 2-1-09 were dead wrong. Both voted no on the suspension and were quoted as saying that board was “breaking a promise” by suspending the bonuses. No promise was broken. It was dishonest to make such a statement, and they both know it.

Between the years of 1995 and 2004, approximately 350 non-investment staff members at STRS (in addition to approximately 100 investment staff members) also got big bonus checks every year. This was a major component of my 2003 report. The board finally voted to end bonuses permanently for non-investment staff in 2004. Another elimination I pushed for, which was adopted in 2005, was the STRS practice of basing bonuses paid to investment staff, in part, on SUBJECTIVE factors. It’s gone now. How stupid was that past practice? Very Wall Street.

~~~~~~~~~~~~

"The PBI program may be interpreted, amended, rescinded and/or terminated at anytime by the Board."
~ STRS Board Policy Manual, page 33

Jim N. Reed: Some observations, revelations, musings, conclusions.....and guarded optimism

From Jim N. Reed, April 21, 2009
Subject: Blockhead Solidarity, Malcontents, Closed Elections, and the Renaissance

Kathie, I noticed in a recent posting of an excellent on-point letter from Rich DeColibus to Mark Meuser that the STRS Board member's mail box refused the e-mail.

Maybe that explains why Mr. Meuser and some other Board members claim they receive very few negative letters from membership regarding their embarrassing behavior as regards past and recent Board decisions. Maybe Mr. Meuser, Mr. Myers, Ms.Ramser, and Ms.Cervantes really believe there are few stakeholders who found their votes to reject PBI suspension disgustingly absurd even though their out-of-touch decisions flew in the face of official OEA mantra.

(The only OEA-endorsed member who had the knowledge, sensitivity and courage to stare down the PBI proponents was Ms. Tai Hayden. Her sensitivity and fortitude has not gone unnoticed.)

One way to avoid being critiqued is to shut off the critic. All good reviews. A gorgeous, glowing report from the STRS Bulletin on membership satisfaction (does anyone know anyone who's been surveyed?) keeps non-informed members in the dark.

This current e-mail refusal by a Board member's service re-touches a nerve from Dyer's Dirty Regime. Upon retirement and having some serious questions regarding the way mine was processed I had occasion to make several attempts to contact STRS Board members after Dyer provided nothing but condescension, patronizing, and blatant disregard.

As a constituent I expected the courtesy of being channeled to one of my representatives of my retirement system that I had paid into for 33 years.

Wrong. Letters and phone calls to Board members at STRS were never returned by those elected/appointed officials. There was recognition of having received my contact but with each call and letter a response came from the Chief himself, Herb Dyer. Dyer would then proceed to give me the STRS punch line as to why my case, along with 5,000 others, was mishandled the way it was.

Talk about solidarity! Blockhead solidarity! One way to keep the troops in line is to have one official mouth- piece.

I was able, finally, to reach one Board member at his home. I will always be grateful to him for being willing to speak with me privately. My sense of that phone call was that he was uneasy but felt it was the right thing to do.

We must never allow any excuses offered as to why any stakeholder does not have total access to anyone we seek a response from at STRS. With the amount of contributions made to our retirement system from educators, boards of education, and local taxpayers and with 450,000 stakeholders' and beneficiaries' security dependent on Board decisions, if anyone is "entitled" to anything in the system it's truthful and fair answers for the membership.

One way of diverting attention from the mismanagement of pension funds within our once proud retirement has been for STRS-OEA ( a hyphen is all that separates them) to go on the offensive and attack the messengers of the challengers.

The written legacy of the disloyal opposition includes allegations that those who have challenged STRS-OEA are "liars," "alarmists," "dissidents," "deceivers," "panderers" (to fear and emotion), "cynics," and "malcontents" (my favorite moniker as we were branded when Dr. Leone exposed the foxes in the hen house in 2003).

Those that have insisted on muckraking reform have been accused of being destructive, deceptive, misrepresentative, just to name a few of the allegations.

What is quite ironic is that some of these same accusers were (and may still be) the disciples of the "Malfeasant Seven," the infamously indicted Board members and Executive Director who were ethically challenged, convicted, and removed from their official duties by the court (or, in Dyer's case, golden- parachuted, with a half million dollars of our funds, by the rascals on the Board before corporate slum-lording was such a well-accepted national pastime).

Membership must insist on open elections in their districts. Once again in this April's Board election attempts were made to disparage, discredit and close-out non-union candidates for the active and retired seats. All's fair in politics, right? Sure, if all contestants are competing on a level playing field.

Why should any candidate not have equal access to the electorate? And the most embarrassing shame of this type of closed election? Can anyone think of a more disgraceful venue for this type of undemocratic process to take place than in the halls of an institution of learning? How can a teacher-candidate look into the faces of their students knowing that because their opponents would not walk nor talk the union label their message was stifled. Are open, free elections only for classroom promotion and democratic idealism.

Some four years ago Dr. Dennis Leone and Mr. John Lazares inspired me to believe that there was a badly needed Renaissance at STRS. Mr. Lazares paid his dues in several ways advocating for actives and retirees as a Board member. He gave of himself until it hurt. None of us who attended his Board meetings will soon forget what he accomplished, personally and professionally.

Dr. Leone has not succumbed to the insults, allegations and confrontations from less than informed colleagues on the Board. He has more than held his own due to his expertise in financial, legislative, and administrative matters. To his much deserved credit, Dr, Leone has provided more oversight, watch-dogging, practical reform, and educator advocacy than any member in the annals of the STRS Board.

Unfortunately for the active and retired educators in Ohio, Dr. Leone's tenure has about concluded. He can rest assured that he has garnered the admiration and respect of all of those educators whom he has taught the meaning of being STRS-literate.

What of the continuing Renaissance minus a Dr. Dennis Leone? First of all, though he may not be on the Board, my best estimate is that he will be in the Board room whenever he believes the decision makers at STRS are not respecting ORC 3307.15. Much to the chagrin of some Board members, administrators, and staff I doubt that Dr. Leone will ride quietly into the education sunset.

There is new reform blood on the horizon. Men like Jim Stoll, Bob Stein, Rich DeColibus, and Ralph Roshong will continue to challenge STRS to provide integrity, transparency, sensitivity and trust for its membership.

The days of unrestrained, out-of-touch mismanagement, and disregard for ORC 3305.17 leading to stakeholder insecurity are going to be closely monitored by a new generation of watchdogs, whistle blowers and reformers inside and outside STRS Ohio.

Jim N. Reed

Dennis Leone re: Mary Ann Cervantes' viewpoint and empowering the executive director; a history lesson some wish to forget

From Dennis Leone, January 18, 2008
Subject: RE: Cervantes Response:

I agree with the retiree response sent to me: "I found her response lacking in substance." D.L.

Dennis Leone to John Curry and Molly Janczyk, January 14, 2008
Subject: Re: Cervantes Response: Request Again: Ques. for STRS Board Members: 1/10/08

John and Molly: I take exception with Mary Ann's quotation below. Her comment -- "Certainly STRS's recent court case has cost this pension millions of dollars due to unfair labor practices" is a huge exaggeration. In the fall of 2005, non-investment staff members received one more bonus check after they sued to get it. Since the prior board eliminated the program mid year, instead of the end of the year, the court was prepared to award the non-investment staff one more, final bonus check. The judge felt there was an implied contract because the STRS employee handbook said they'd be eligible (upon approval of the executive director, who -- surprise -- approved the bonuses), and even though said employees had no individual contracts or union contract. The millions that were spent were due to the bonuses and the inappropriateness of the board legal counsel agreeing to also pay the employees' personal PERS contributions even though he did not have board approval to do so. This was the matter, to refresh your memory, when John Lazares and I begged the board NOT to approve the settlement agreement unless we had a document in hand. The board majority felt no document was needed, which meant that there was no way to prove anything when the board's legal counsel changed the final terms of the settlement agreement WITHOUT prior board approval. This whole thing was NOT so much a matter of the board engaging in an unfair labor practice (that seems Mary Ann's union-trained mind speaking again) as it was simply ignorance on the board's part for offering the non-investment staff bonuses in the first place, and also allowing the arrangement to be in the employee handbook -- giving the executive director the power to award them. History lesson. Some people want to forget.

Dennis Leone

'Block 4' exposed: They WANT the executive director to have the power to pay those legal fees!!

Dennis Leone to Molly Janczyk, January 17, 2008
Subject: Questions Posed at STRS Board Meeting

Molly – at today’s STRS Board meeting, I posed three questions publicly to Asst. State Attorney General John Patterson. Here are they, plus Patterson’s answers, which are on the tape of the meeting:

1. If an STRS employee in member benefits feels she was threatened by an angry retiree, and if this employee goes outside and decides to hire a law firm to give her advice, then if this employee turns in a legal bill to Damon Asbury after the fact, isn’t it true that Damon has the power to have STRS pay the bill without board involvement or board action?

Patterson answer: Yes, current board policy gives him this power.

2. Does the board have the power to decide that such a bill will not be paid?

Patterson answer: Yes.

3. If you (John Patterson) happened to recommend to the board that STRS pay the legal fees of a staff member in a situation like this, doesn’t the board have the power to tell you no, we’re not going to do that?

Patterson answer: Yes.

So much for Mark Meuser’s belief that the State Attorney General will always decide whether the board will or will not provide outside legal counsel advice to an employee, of whether a bill must be paid. The bottom line is that it’s the board power to decide what to do. It is plainly nuts that this board permits the executive director to make these kinds of crazy expenditures, when simple policies would prevent it. Meuser, Cervantes, Chapman and Ramser just need to tell the truth – which is that they WANT the executive director to have the power to pay these things.

Dennis Leone

Dennis Leone to STRS Board re: Curtis letter; "The whole thing smells bad"

Dennis Leone to Tom Curtis, August 5, 2007
Subject: FW: 080507 Curtis To Leone, Divestment

Tom -- I agree with you that any decision for a divestment plan is contrary to the spirit of 3307.15. What the Board majority will say, however, is that since the official Board resolution states that our ultimate divestment plan will not compromise the total assets at STRS, this is supposed to make it okay. In other words, even though tons of staff time will be needed to find different investments to make up for divestment changes, the Board majority will tell you that their fiduciary role also has not been compromised because total STRS assets have not be compromised. That’s similar to the philosophy that existed when pension money was spent (in the past) on “team building” – you know, for Kings Island, concerts, baseball games, the Columbus Zoo Light Show, parties, booze, super-expensive dinners, etc. The Board can always find a way to say that their actions (like spending pension money on the private legal fees of staff members) are proper for staff morale or staff retention, etc.

What is difficult for me to accept about the Board’s divestment resolution is that when the decision was made, the Board knew the matter was headed back to a Senate subcommittee for reconsideration and additional discussion. This was stated publicly by Mary Ann Cervantes BEFORE THE VOTE. Did this slow down the Board? No. Full speed ahead. Why? Because the staff wanted a vote to be taken. The whole thing smells bad.

Dennis Leone

Dennis Leone: STRS Report, March 2007

Ohio Retired Teachers Association (ORTA)

QUARTERLY REPORT*

By Dennis Leone, STRS Retiree Board Member

March, 2007

After my last column was published in October of 2006, the Board agreed to re-visit a motion I made months earlier to prohibit Board action on vendor contracts unless the Board first had an opportunity to review a summary of the proposed contracts. My original motion, as you may recall, was defeated 8-2, with only John Lazares joining me in support. Many retirees, in the months following, expressed their consternation over the 8-2 vote.

I am pleased to report that on October 20, 2006, the Board voted 7-2 to approve a motion I made (seconded by Lazares) that will require the STRS staff to provide a summary of all proposed contracts for services provided directly to the Board, and for any proposed contract in excess of $100,000. Former Board member Geoffrey Meyers and current Board member Mark Meuser voted against this initiative.

I am also pleased to report that 13 changes I desired in the Board’s travel and expenditure policies were adopted 9-0 on February 15, 2007. The changes were long overdue. Here are some highlights:

1. There will be no reimbursements for meals in the future unless itemized receipts are provided. This is the only way to make sure that pension money is not being used to purchase alcohol.
   

2. Airplane tickets must be purchased 30 days in advance, and Board members who choose not to do this will pay the difference in cost between the two tickets. Also, Board members – not STRS – will personally pay for any additional fees charged by the airline if ticket reservations are changed for personal reasons.
   

3. The previously adopted $6,000 maximum for individual Board members to spend on out-of-state trips per year did not include the conference fee for registration or tuition. Now it does. Board member Conni Ramser last year spent well over $6,000 on out-of-state trips, but this was not in violation of Board policy because her conference registration fees weren’t part of the calculation. They will be now.
   

4. Meal reimbursements are now limited to $10 for breakfast, $15 for lunch, and $25 for dinner. Previously, Board members could spend up to $60 per day, which meant that if Board members passed on breakfast and received a free lunch, they could – and did – spend $40 or $50 on a single dinner. My original proposal called for spending limitations of $5, $10, and $20, but the majority disagreed.
   

5. No overnight lodging will be provided by STRS on the day that Board meetings end or the day after conferences conclude. I will never understand why the previous policy permitted this. It was so wrong.
   

6. Board members will not be reimbursed for expenses while attending in-state meetings unless they are a formally invited speaker or an official participant at the meeting, or unless the Board votes to approve attendance in advance. There were examples in the past when some Board members would decide on their own to attend an association meeting and expect to receive a travel reimbursement.
   

7. STRS funds will not be used ever again to purchase credit cards, fax machines, fax lines, or lap top computers for Board members. Also, Board members cannot expect STRS to pay for their personal long distance phone calls when they are attending meetings. It was an embarrassment that Board policies permitted these things, and that – up until a few months ago – several Board members still were contending that such expenditures and reimbursements were reasonable.
   

Two points of irony regarding the above changes:

No. #1: Three weeks to the day after the Board adopted the revisions, Gov. Strickland ordered a meal reimbursement freeze for certain state agencies like the Ohio Board of Regents – a group that used taxpayer money for a $1,000 dinner. (Sound familiar?)

No #2: My push for the travel policy changes was triggered after Gary Hollow, from OEA-R and NEOEA-R, made a public records request for the travel expenditure report of one Board member – me. He did not express any interest in seeing what the other Board members were spending. He wanted to see what only Dennis Leone was doing. Damon Asbury then produced a travel expenditure report for all board members. What did it show? Credit cards had been purchased for Board members Conni Ramser, Michael Billirakis, Jeff Chapman, Mary Ann Cervantes, and Steve Puckett. A fax line, with a monthly fee, had been purchased for the home of Michael Billirakis. STRS paid for the long distance phone calls Steve Puckett made when he attended a conference in Orlando. Single meals costing in excess of $40 existed for several board members. I wonder how Mr. Hollow and OEA would have reacted if the travel reports for only Dennis Leone or John Lazares had shown these types of expenditures? I think I know.

I wish to explain why John Lazares and I were the only board members who voted no on November 16, 2006, when the board set the reimbursement rates for Medicate Part B retirees, and therefore increased the out-of-pocket costs for said retirees. We both felt: (A) The Board needed to first consider other options for change, like the $1.4 million dollar premium fee STRS pays yearly to provide a small $1,000 life insurance plan for all retirees; and (B) We couldn’t support such an increase for Medicare retirees when STRS money still was being used for things like Board member credit cards, fax lines, lap tops, and phone bills. ORTA, in my opinion, should have supported Lazares and me on this issue.

Finally, I have an obligation to share with retirees why I disagree with published projections by STRS that our current 47-year unfunded liability is projected to hit the desired 30 years by 2009. Note the four charts below:

(Click image to enlarge.)


....................................................................................................

The increase of about 3,500 retirees per year is what we expect. However, the average decrease of 1,626 active teachers per year over the past three years was not expected. Another decline not expected has been the payroll growth in the past three years. STRS budgets for an anticipated payroll growth of 4.50% per year – not the 2.71% average we’ve received over the past three years. The staff projects only a 2.50% increase for fiscal year 2007. What’s keeping our heads above water? The fantastic investment returns we’ve received – averaging a whopping 14.45% over the past three years. Through eight months in fiscal year 2007, we’re receiving another 12.50%. (STRS budgets for returns totaling 8.0%.) My point is simply this: Absent a continuation of the great investment returns, we will not offset the realities (if they continue) of the other three areas shown above. I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn. More on this, and my recommendations for such a plan, later………

*Note: While this article was submitted to ORTA in a timely fashion, they refused to publish it or give an intelligible reason why.

Original posting date: March 11, 2007; redated to assure appearance on blog