Friday, October 22, 2021

Forbes article by Ted Siedle: Ohio Teachers Investigation Of State Pension Spurs Special Audit By State Auditor 

Oct 22, 2021
Ohio Teachers Investigation Of State Pension Spurs Special Audit By State Auditor
By Edward Siedle
Pension forensics expert and record-setting whistleblower award winner 
A forensic investigation commissioned by 19,000 retirees participating in the State Teachers Retirement System of Ohio spurs a special audit by State Auditor. “The information obtained to date supports a reasonable basis for conducting a special audit,” says Auditor.
As absurd as it seems, participants in pensions historically have had virtually no say in how their retirement savings are invested. When concerns regarding reckless risk-taking and revelations of avoidable losses arise, there is little pensioners can do to stop the bleeding. Underfunded state and local government pensions, not covered by the federal law protecting pensions (ERISA) or any other comprehensive law, are especially at risk. It’s no secret that public pensions are grossly mismanaged. What’s surprising is to learn that concerned active and retired school teachers in Ohio successfully banded together to commission an expert investigation of their state pension and were heard by legislators, as well as other government officials.
In a letter dated October 11, 2021, Keith Faber, the Auditor of the State of Ohio, informed the Executive Director of the $100 billion State Teachers Retirement System of Ohio that his Office had received numerous complaints evolving from a report issued by my firm, Benchmark Financial Services, Inc. titled The High Cost of Secrecy: Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio, Commissioned by the Ohio Retired Teachers Association..
The findings of the Benchmark report included that STRS had long abandoned transparency; legislative oversight of the pension had utterly failed; Wall Street may have been permitted to pocket lavish fees without scrutiny as to legitimacy; disclosure of investment costs and performance may have been misrepresented, as billions that could have been used to pay teachers’ retirement benefits had been squandered.
Read the rest of the article here.
Edward Siedle, Pension forensics expert and record-setting whistleblower award winner, 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.

Dean Dennis to STRS Board 10/21/21: Which side of the glass are you going to support?

From Dean Dennis

October 21, 2021

I am Dean Dennis, retiree.  Spokesperson for Ohio STRS Members Only Forum, Founder of the Ohio STRS Watchdogs, Member of ORTA's Legislative Committee and STRS Chair for Cincinnati Local 1520-R

First question is carried over from last month; have any Board members looked into how 2021 STRS total investment costs were only 12 basis points? It's curious that management posts the lowest investment costs in recent history, right after members raise $75,000 for a forensic audit. I guess the $75,000 was well spent because management suddenly saved around a quarter billion in investment costs. Can you look into this remarkable achievement so we can all learn from it?

Here's a question for STRS management, what is the plan to restore benefits so teachers can have a dignified retirement? You claim to be a top-tier pension plan. But for whom, your staff?  STRS management runs the only Ohio pension plan that can't provide a COLA. Under our top-tier management, active teachers receive less value for their employee contributions than any public employee. Let's look at the STRS, lobbyist. They seem to only protect the status quo. They don't address the fact that the STRS Employer Contribution has been stagnant for over 37 years and lags behind other non-Social Security states by over 8%. Who is managing our lobbyist?

More about our top-tier pension. Since July 2013, 30,000 retirees have died without receiving the pension they were promised. If you retired after July 2013, you've never even have seen a COLA. If you retired before July 2013, you have lost the equivalent of 7 years of promised COLA. 

Lastly, here's what we are facing. Inflation is projected to be at 6.1% by year's end. The largest jump since 1990. Here is the most recent Consumer Price Index information for the past 12 months: Food is up 4.6%, Clothes are up 3.4%.  Want to travel, gasoline is up 42%, airline travel is up 25%. Thinking about buying a new car, up 8.7%, a used car, up 24.4%. How about just staying home and enjoying retirement, natural gas is up 20.6%, electricity is up 5.2% and fuel oil is up 42.6%.  

In conclusion, Board members, both appointed and elected, we need you to unite. Business as usual is killing us. We are in dire need for change and fresh financial solutions. Members are frustrated. Which side of the glass are you going to support?*

* [Note: The STRS Board room is divided into two parts which are separated by a glass wall, behind which is seating for groups of attendees. Most of the teachers sit in this section.] 

Thursday, October 21, 2021

Bob Buerkle educates the STRS Board with a comparison of a 1977 retiree's benefits to those of a 2022 retiree

From Bob Buerkle

October 21, 2021

Suzanne Laird to STRS Board: You should be ashamed!

Suzanne Laird's speech to STRS Board
October 21, 2021
Good Morning Members of MY Board:
My name is Suzanne Laird, and I retired after more than 30 years of teaching.
Well, well, well.
You thought we were just a bunch of old retired teachers, who didn’t know anything.
You thought we were just a bunch of, quote, “malcontents.”
You ignored us at your own peril.
You thought you could do your own audit, or get some company like Funston to do a  whitewashed one for you?
You thought you could discredit the leading expert, Ted Siedle, by way of your “Response to the Benchmark Report?”
I think this is what they call “being hoisted by your own petard.”
Because, ladies and gentlemen, this report is what’s going to hang you. All those records you refused to share with Ted Siedle, because it was too much work?
And that “Highest Achievement in Open And Transparent” Award you bragged about the Auditor giving you? I think he’s gonna want that back.
Now, you may say, “Well, I’m only a Board member, I didn’t know any better. I took the Callan College. I believed Callan’s numbers, CEM’s benchmarks, all the questionable fees. I didn’t have TIME to read Siedle’s report!”
Ignorance is no excuse, under the law. Try telling that to the State Auditor, or the SEC, or the FBI.
Board members are every bit as culpable, because you knew and said NOTHING.
If you sat here, month after month, and said nothing when they eliminated the COLA, you should be ashamed.
If you sat here and said nothing when they approved raises on these bloated salaries, you should be ashamed.
If you allowed the Health and Benefits Director to quadruple premiums and slash medical benefits, you should be ashamed.
If you heard the manipulated figures from the consulting firms and did not question them, you 
should be ashamed.
If you allowed the investment team to continue to utilize hedge funds and risky alternative investments, you should be ashamed.
If you approved exorbitant bonuses, while the teachers you represent were scrambling to pay their bills, you should be ashamed.
And now, you’re about to be publicly shamed. Perhaps more than that. 
Find your conscience. Quickly.

Wednesday, October 20, 2021

State auditor to conduct special audit into STRS pension fund

Special audit planned into Ohio teachers' pension fund

The Statehouse News Bureau | By Karen Kasler

Photo (Karen Kasler): Retired teachers hang a banner during a meeting of the State Teachers Retirement Fund board in September. The teachers hired Ted Siedle to do an audit of the fund, and his report has been cited as a reason for the special audit.
The state auditor is planning a review of the pension fund for Ohio’s teachers. This comes as the board for the State Teachers Retirement System gets together for its monthly meeting Thursday.
A letter obtained by the Statehouse News Bureau says the auditor’s office is considering a special audit based on a report by Ted Siedle, who was hired by retired teachers questioning STRS’ stated fund performance and management fees.

Siedle, a former SEC asset management lawyer and head of a firm called Benchmark Financial Services, wrote a report that blasts STRS for lack of transparency and legislative oversight and mismanagement of billions he says could restore a cost of living adjustment suspended in 2017.

“One of the key problems that STRS has that they've lost the trust of their participants. Schoolteachers don't trust them anymore," Siedle said.

STRS blasted Siedle’s report as baseless and said it’s handed over 22,000 pages of documents, and has also said the pension fund has outperformed the market over the past decade.

STRS has confirmed the special audit and said it's cooperating with the auditor's office.

STRS gets a letter from the state auditor


Kathie Bracy: Letter to State Auditor Keith Faber, June 2021

Looking back at this one, I can see one or two slight inaccuracies, but I think most of this still stands. I did borrow some wording from another source (a much greater mind than mine out there somewhere, though I don't remember where). I felt it was necessary in order to give a broader view about what has been going on at STRS. Today I would add even more. KBB

June 27, 2021

Mr. Keith Faber,

Auditor of State

88 East Broad Street, 5th Floor

Columbus, OH 43215

Re: Problems at STRS

Dear Mr. Faber,

I wish to call your attention to “the elephant in the room”; specifically, the elephant that has taken up residence at STRS Ohio. The pension system is in deep trouble; a fact that is well known at STRS, yet nearly everyone has been ignoring it. This may possibly include many who meet regularly at the Ohio Statehouse.

Here’s what’s going on that you need to know:

1. STRS is required by the state to be audited every ten years, yet the last audit took place fifteen years ago, in 2006. Where has the ORSC (Ohio Retirement Study Council) been all these years? They should have put the brakes on STRS at least five years ago, if not before. And where was our State Auditor while all this has been (and still is) going on?

Earlier this month a forensic audit was completed by Edward Siedle, foremost pension expert in this country. He revealed that STRS is not being transparent to the stakeholders, even to its own Board, and that STRS has continued to withhold critical public documents necessary for a complete audit. By now you should have received a copy of Siedle’s report, The High Cost of Secrecy, which came out June 7, 2021. If you do not have a copy, you can find it at:


or simply at

2. Over the years STRS has steadily cut benefits to members while using its own performance as a benchmark for paying increasingly exorbitant salaries and bonuses to its own staff.

3. Active teachers are currently paying 14% into the pension with a matching 14% from employers. What’s to stop them now from investing their money in low cost passively managed funds instead of sinking it into STRS? Active Ohio teachers are the only group in the country that is paying more into their pension system than it’s worth.

4. STRS puts money into high-risk alternative investments with the reasoning that this will lead to increased returns. Instead, the higher costs, management fees, transaction fees and lack of transparency have led to significant underperformance, compared to a simple total market index fund. Some investments have gone to zero and lost half a billion dollars, something STRS never even disclosed to its stakeholders for almost four years!

5. Right now I am extremely concerned that the STRS pension fund will not be sustainable for the long term. When the fund fails, it will not be the fault of teachers. Since Ohio’s teachers do not pay into Social Security, most will not receive SS when this happens. Either the taxpayers of Ohio will have to foot the bill or teachers are going to be screwed. Which will it be?

If it is within your power, I ask you to call for a state audit immediately. Please bring pressure and light to this situation. And last, but not least, please work to reinstate legislative oversight of STRS, as was the case before SB5 was defeated and the legislature cut off its oversight, essentially leaving our livelihood to the whim of STRS. That was a huge mistake that has since cost the STRS stakeholders billions and flatlined our pensions, rendering us no longer able to keep up with the rising cost of living without the badly needed COLA that was taken away from us. That oversight needs to be reinstated before it’s too late.

Thank you for whatever help you can give to the current and future retired teachers of Ohio. If you can’t help us, please tell us who can. We are counting on you.


Katherine B. Bracy

STRS Beneficiary

Tuesday, October 19, 2021

Chris Tobe: Ohio STRS Salaries & Bonus Structure

By Chris Tobe, CFA, CAIA

October 19, 2021
Ohio State Teachers Retirement Systems have some of the highest compensation in the nation among public pension employees despite a lower cost of living and private salary competition in the Columbus Ohio area.
On top of the highest salaries in the nation is a bonus program, that these overpaid public employees actual help set and control, with little oversight or transparency. With the high return of FY ending June 30, 2021, these bonuses could hit outrageous levels.
It is crucial that the setting of bonuses for FY 2021 be a transparent process with extensive trustee oversight by the complete board.
The latest Ohio Checkbook website maintained by the Ohio State Treasurer and Budget office, only shows STRS salaries for 2019. Other Ohio plans have disclosed 2020 salaries. This is a major violation of Transparency that should not be tolerated. The Ohio Retirement Study Council (ORSC) which is supposed to provide legislative oversight has not in this case, but this general lack of accountability is not unusual and is broadly documented in the ORTA Forensic Audit of June 2021.
For 2019 for total compensation STRS had 7 investment officers making over $500,000 a year. Another 7 made between $400-$500,000 a year. 16 making between $300-$400k a year. 35 make between $200k-$300k a year. STRS has 65 people making over $200 thousand a year which is at the top of US public pensions compensation. In adjoining states - Michigan has only 5 investment officers making over $200 thousand a year. Indiana and Kentucky have only 2 (CIO & ExDir) over $200 thousand.
STRS 2019 base salaries are much lower but still way above national averages. The Chief Investment Officer (CIO or Dep.Ex.Dir Investments) base salary was $381,390. 5 others make over $300k in base. 9 more make -$250-$300, in base, 17 from $200-$250. This means over 30 staff making over $200,000 a year in base salary. While the CIO base (most have no bonus) is not out of line the next level of high salaries is extremely unusual.
There are few national public salary databases, but a group called Pension360 collected them in 2014. They found a lot of Chief Investment Officers making in the $200--$250 like Illinois Municipal, Illinois State, Louisiana State, Los Angeles Fire & Police, Maryland Public, Texas Municipal. Georgia Teachers CIO made $144 thousand a year. South Carolina CIO made $178 thousand a year, Iowa $159 thousand, Arizona $189 thousand. And of course, lower-level investment staff almost all made under $200,000.
Another academic study released in 2021 looked at Chief Investment Officer salaries at the top 100 public plans in the U.S. Their mean total compensation salary plus bonus is $263,043, with mean salary is $237,207. Given STRS size the 75th percentile could be found appropriate given Columbus cost of living. So total compensation for the 75th percentile was $318,362 with salary being $300,132 for CIO. 90th percentile which I believed should be large coastal plans with mean total compensation of $504,854 the mean salary was $408,983
There are no indications that STRS staff are any more qualified than average in public plans. Many are CFA charter holders but few if any seem to have any national stature or publications in the investment industry, or any indication that they are sought after by the private sector. In fact, private sector investment salaries in Columbus area seem to be much lower than those at STRS as indicated by staff moving from JP Morgan and Nationwide. STRS with over 65 people making over $200 thousand a year in total compensation may make it clearly the highest paid (with possible exception of much larger mega CA plans).
The amount of highly compensated employees is also unique. OPERS who is near the top in compensation can only look better by comparing itself to STRS in the 2020 OPERS investment plan. OPERS justifies its 62 investment employees given there $100 billion in total assets, only looks reasonable when compared to STRS 91 high paid investment employees with less assets of $78billion.
In my opinion a salary cap of $300,000 for top 2 STRS employees with a $200,000 cap for rest of employees would be a market rate for the region.
The majority of public pensions do not pay a bonus because of a general aversion to public employees getting a bonus and the potential conflicts of interest. Even fewer pensions pay a bonus to investment officers below the CIO.
The bonus structure of STRS is unique in its size and lack of transparency. STRS has still not reported to the Ohio Checkbook for the 2020 bonus.
The prior academic study released in 2021 looked only at Chief Investment Officer bonuses. In the 75th percentile in plans the mean bonus was $18,230 or 6% of salary. In the 90th percentile in plans the mean bonus was $95,871 or 23% of salary. These bonuses are way out of line with national norms for public pensions.
In 2019 the last year STRS provided data one officer William Shurman got a $280,847 bonus at 97% of his salary. STRS had 8 officers making over $200,000 in bonus. Another 24 made a bonus between $100-$200 thousand most around 75% of salary.
The conflicts of interest given the power of staff over their own bonuses are extremely disturbing. How much is subjective by the CIO based on his perceived worth which may include areas like personal loyalty. How much is supposedly objective on investment performance.
The 2021 Forensic Audit strongly suggests that both investment performance and benchmarks were manipulated by staff. The staff has a strong incentive to manipulate performance numbers to enhance their own bonus. Their ability to create bonus of 4 times the other top public plans is especially troubling.
Alternative investments especially Private Equity and private debt are valued by their managers with little or limited outside independent valuations. These alternatives many with performance-based fees means managers have a vested interest in higher performance to enhance their own bonus. The Ohio STRS commented that they have advisory seats on most of these alternative partnerships. Therefore, both Private Equity staff and Ohio STRS staff share an interest in showing higher performance numbers to increase their own compensation.
These extreme conflicts of interest combined with the Siedle Forensic Audit may attract some attention from the SEC and/or FBI if not immediately addressed.
My recommendation would be to go with national norms, close the potential conflicts and eliminate the bonus. At least it should be capped at $75,000 a year or 25% whichever is less.
Ohio STRS compensation is too high in almost every measure. Ohio educators are not paid in the top 1% and see this overcompensation of the people entrusted to manage their retirement as an inappropriate expense.
My recommendation which would still put them in top quartile of compensation would be a cap of $300,000 a year in salary on top 2 and $200,000 on other employees. On bonus I would recommend they be suspended immediately, and perhaps permanently. If decided to be reinstated it should be a board driven transparent model with a limit of 25%.
_ _ _
Chris Tobe, CFA, CAIA, author of “Kentucky Fried Pensions” currently serves as the Chief Investment Officer of the Hackett Group which consults to Public Pension plans where in 2016, he completed a major investment audit for the $40 billion Maryland System in 2015 he completed an investment performance review of the $26 billion Utah Retirement Systems. From 2008-2012 he served as a Trustee and on the Investment Committee for the $13 billion Kentucky Retirement Systems. From 2008-2009 he was a Sr. Consultant with NEPC and worked with a number of public pension plans in OK, MO, MI, DC. From 1997-1999 he worked with KY Auditor Ed Hatchett and published a report on the investments of both KRS & TRS Systems. He earned an MBA in Finance and Accounting from Indiana University Bloomington and his undergraduate degree in Economics from Tulane University. He has the taught the MBA investment course at the University of Louisville and has served as President of the CFA Society of Louisville. As a public pension trustee in 2010, he completed the Program for Advanced Trustee Studies at Harvard Law School and in 2011, the Fiduciary College at Stanford University.
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