Friday, December 10, 2021

Letter to State Treasurer: Please reappoint Yoel Mayerfeld to STRS Board

From Kathie Bracy

December 10, 2021
Subject: Yoel Mayerfeld, STRS Board Member
Sent to Ohio Treasurer Robert Sprague,
Dear Mr. Sprague,
Yoel Mayerfeld, who was appointed to the STRS Ohio Board by the State Treasurer, is nearing the end of his four year term on that Board. I am a retired STRS stakeholder, and can tell you he has been tremendously valuable as a member of that board.
Thousands of Ohio's retired teachers have not been receiving a COLA for years, contrary to the other four pension systems, because of poor management at STRS (though they continue to pay increasingly huge salaries and bonuses to untold numbers of STRS staff and employees). In addition, active teachers are now required to pay much more into the system (more now than their pension is worth) and work more years to qualify for retirement. With inflation skyrocketing as it has been doing in recent weeks, teachers, both active and retired, are hurting, and Yoel Mayerfeld is in a position to help us.
Mr. Mayerfeld's term on the STRS Board ends on January 7, 2022. I fervently hope you will see fit to reappoint him to that position. We need him!
Thank you.
Katherine B. Bracy

My response to four apparently uninformed Facebook members who questioned Yoel Mayerfeld's effectiveness on the STRS Board

Kathie Bracy, December 12, 2021

If you remember correctly, you know that the STRS staff has kept the Board under their control for years, keeping them woefully uninformed about major issues and making it impossible for the Board to make informed decisions as a result. Remember, it took the staff THREE YEARS to tell them we had even lost over half a billion dollars in our Panda Power investment. Edward Siedle has uncovered many other things they have hidden from all of us. Read his forensic audit report and many articles he has written and you will see.
Wade Steen is now in his second term on the STRS Board, having been reappointed earlier this year by the governor. If you'll recall, he was very silent during much of his first term because there was no way he could know what was really going on, either. Finally realizing things weren't adding up, he began to ask questions in the Board meetings, and has been very vocal ever since. He has tried to get the rest of the Board to see what was going on, with limited success, as certain members, falling under the spell of the STRS staff, for whatever reason, either don't understand or (more likely) don't want to know they have been kept in the dark since it's much easier just to go with the flow (the STRS staff) than it is to ask questions and think for themselves, and Do The Right Thing.
If you have been paying close attention, you would be aware that Mr. Mayerfeld, though not as vocal as Wade Steen and Rudy Fichtenbaum, has seen the light and is being highly supportive of their efforts. This is why we need to keep him on the Board. To lose him would be taking a step in the wrong direction. I don't want to see that happen, and I hope you don't, either. We need him and others like him to turn that Board around. You can help, and I hope you will. We have too much to lose if we don't retain the the best people on the Board and work to get more like them.

Cindy's 2021 Christmas Card

Cindy sends a Christmas greeting to her Facebook friends.....

Merry Christmas and Happy New Year!
Cindy Murphy
.....and Bob Buerkle responds:
Do you realize, intentional or not, that your Christmas Tree has 10 Rows and 55 dots? It just so happens, as of this Fiscal Year 2022 we are in now, STRS will have avoided paying all pre-2012 retirees their promised 3% COLA for 10 straight years!
Sooo, if your original COLA was $1,000, you have lost $55,000 so far. If the COLA was restored to 3% in FY 2023, you will continue to lose $10,000 per year, the amount that should have been added to your pension base, every year of your life. 
That's what STRS Management calls a "Premier Pension System."
Not so fast!  It is not quite that bad yet because STRS did pay 3 years of 2% COLAs in the 2014, 2015 and 2016 Fiscal Years. Therefore, if your 3% annual COLA was $1,000, you will not reach the losses above until FY 2024.  
Unfortunately it will be too late for approximately 9,650 retirees who will die before the 2024 FY ends. 
Anyway, Merry Christmas and Happy New Year to everybody except the Grinch that runs the pension system at 275 East Broad Street.
Bob Buerkle

Thursday, December 09, 2021

Dean Dennis: A letter to Ohio's Elected Officials

December 9, 2021

Dear Elected Official,
As a Member of the Ohio Retired Teachers Association (ORTA), founder of the STRS Ohio Watchdogs and Ohio STRS Member Only Forum moderator, there is an urgent matter Ohio Legislators must address. There are approximately 500,000 STRS members being negatively impacted the stagnant Employer Contribution Rate. This can no longer be ignored.
Currently, Representative Brian Baldridge and Cindy Abrams are drafting legislation
proposing the Police and Fire Employer Contribution Rate be raised to 26.5% from their current respective rates of 19.5% and 24%. Ignored in this legislation are Ohio's teachers, both active and retired.
Read what is being said nationally about STRS Ohio, "To be honest, it's hard to even call this a "retirement" system at all. The system is functioning like a debt accumulation tool and a tax on teachers, with retirement benefits on the side." Here is another quote with national exposure, "Another way to say this is that the majority of the worst-performing states are all non-Social Security states. Under Ohio's defined benefit pension plan, for example, teachers are not getting any employer-provided retirement benefits at all."
All of the above is true. Ohio's active teachers are only receiving 76 cents for every dollar they contribute towards their pension. Ohio's retired teachers have gone 6 years without a COLA, after first being reduced by a third. None of the other four pension systems in Ohio have been neglected like STRS. The STRS Ohio Employer Contribution has been frozen at 14% for 38 years. This has contributed to an annual $4 billion cash-flow shortfall problem. To put the neglect of our pension system into perspective, when the Ohio Employer Contribution rate of 14% is compared to peers (other non-Social Security states) the Ohio's Employer Contribution rate is behind by nearly 10%. In other words, our Employer Contribution Rate should be north of 20%. Basically, our Employers contribute the least, while our Employees contribute the most. If Ohio can't strive to be the best funded teacher pension system in the United States, perhaps we can strive for not being the worst.
Now that you know the facts, what will each of you do? Ignore the problem, or take action? Will you sign up to take action to help Ohio's active and retired teachers?
This letter will be posted on the STRS Ohio Watchdogs website until legislative action is taken.
Dean Dennis

Wednesday, December 08, 2021

Damschroder: Pensions. Will the cure be worse than the disease?

Fremont News Messenger

John Damschroder


December 8, 2021

Damschroder: Pensions. Will the cure be worse than the disease? 
Boulders have started rolling down Ohio’s mountain of malfeasance. 
The “rock solid” pensions former governor and Lehman Brothers mortgage backed securities salesman, John Kasich, campaigned on as a reason to elect him president are suddenly making news for their obvious instability. Oblivious Ohio citizens may soon become angry Ohio voters as the pensions position for millions more in taxpayer dollars.
The Ohio Police & Fire Pension Fund is first to move with a couple of clueless lawmakers introducing legislation for massive increases in the employer contribution to the retirement plan for cops and firefighters. But, as I have pointed out in this column before, all of the pensions want more money from Ohio taxpayers because the result of years of pathetic investment performance is upon us
At the State Teachers Retirement System of Ohio, board members Wade Steen and Rudy Fichtenbaum advocate an entirely new investment strategy as an alternative to the current market trailing portfolio and resulting benefit cuts. They propose a partnership between STRS and Columbus startup company QED.
The initial $250 million proof of concept investment was presented as a glide path to reallocating $65 billion, to be loaned to Goldman Sachs, to mark up the cost and lend it to hedge funds and private equity managers who boost returns by using leverage. STRS would earn a significant fee for helping the too big to fail bank conceal the actual risk on its books. The money first, money only professionals call this regulatory arbitrage.
Collecting up front, rather than paying back end
The proposal basically puts STRS in the position of collecting fees at the front of the process rather than paying fees at the back end as they do now through their alternative investment portfolio. It’s how the Healthcare of Ontario Pension Plan-HOOPP achieved thought leader status with 119 percent of the funds needed to pay all retirement benefits.
The hands-on architect of HOOPP’s system to manage this complex strategy is Robert Goobie, who also is the chairman of the board at Global Peer Financing Association, a body composed of pensions with assets over $9 trillion. The Ohio Public Retirement System-OPERS was a founding member.
Goobie’s participation as a partner in QED is the only thing protecting Steen and Fichtenbaum from laughingstock status for the ludicrous proposal to give $65 billion to a two-man company with zero performance history. Goobie is a Hall of Famer while QED principals Jonathan Tremmel and Seth Metcalf have never played the game. 
In a long telephone conversation with Goobie last week he told me he has no intention of leaving HOOPP and is not part of the QED startup. Tremmel and Metcalf “decline the opportunity to comment on QED personnel;” Fichtenbaum and Steen simply say “it’s about the idea not the company.”
In reality, the idea is worthy of consideration with world class investment professionals, but its beanie babies and Coingate crazy with two total rookies running the show
Metcalf does have a record on Ohio pensions. He was a trustee on the OPERS board appointed by former state Treasurer Josh Mandel. As regular readers will recall, OPERS may be the biggest sucker of all American pension systems, paying $223.4 million a year more than the excessive fees paid by peer group pensions
Compounded mismanagement
To compound the mismanagement, when a year’s late fiduciary audit finally revealed the excess payments, nothing was done about it. Metcalf may lack fund management experience but he knows how easy it is to fleece an Ohio pension.
If all the investment staff at all of the pensions was locked out of the building and the funds were simply parked in the $48 trillion market cap Russell 3000 index, the cumulative 10-year return would be 339.27 percent. Since 1995 the index is up nearly tenfold.
If Ohio pensions had simply achieved index returns paying index fees there would be no need for benefit cuts or tax hikes. Economics PHD Fichtenbaum says STRS is in such deep financial trouble indexing alone will not solve the problem, explaining his support for an index plus concept.
Ohio’s pensions are a near perfect reflection of Ohio’s government. A massive bureaucracy, actively destroying value while acquiring substantial personal wealth. The fight STRS presages is whether the cure will be worse than the disease.
John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.

Wade Steen defines the problem with the STRS investment staff: they are threatened by any concepts or ideas that do not originate with them, nor do they even acknowledge that there is a problem

From Wade Steen

December 7, 2021
An open letter to STRS stakeholders
Hello All –
I would like to first clarify that the article is inaccurate in some areas and very skewed or slanted. There was and is no intention to immediately invest $65 billion dollars in anything. [See Laura Bischoff's article 'I wouldn't even invest my own money in this': Ohio teachers' pension pans $65 billion pitch, which was posted on this blog December 1, 2021; the article also appeared in other newspapers around Ohio under different titles.]
The truth is that Rudy, Bob and I were trying to present a concept. The problem is that the concept became a discussion of an entity QED. In my opinion this happened because STRS investment staff have been trying to kill this concept because it is a threat to them. The reality is that this same investment staff don’t even acknowledge that there is a problem.
The current structure of STRS creates a conflict of interest because any new idea not initiated by them is a threat. I do not care where the ideas come from as long as they help us address the problem which is active teachers are paying more in contributions and getting less and our retired teachers are not getting a COLA. 
This is what I think is important and I will continue to speak about.
It was approximately 2 years ago that I began speaking out at Board meetings vigorously concerning the lack of a COLA and I will continue to do that. I will push the investment staff and our investment advisors to come up with ideas and do better. I know that this will agitate some staff and other Board members and I’m OK with that.
STRS needs to make more money. We cannot continue the status quo. We owe it to the teachers of Ohio for all the demanding work they have done and the sacrifices they have made for the children of Ohio.
I am a proud graduate of the public Ohio school system and I owe a debt to those teachers in Fremont who so greatly impacted my life. Thank you for the chance to share my perspective.
Best always
Wade Steen

Tuesday, December 07, 2021

Rudy Fichtenbaum's question for the STRS Board: Which Side Are You On? Are you on the side of members or on the side of those who profit at members’ expense?

Which Side Are You On?

Rudy Fichtenbaum

At the November Board meeting Wade Steen, Bob Stein and I tried to make 

presentation on a proposal that we believe has the potential to provide the funding needed to restore the COLA and other benefits cuts. I use the word “tried” because, for those of you who may not have heard the meeting, our attempt at making a presentation was continually interrupted in what was clearly a well-orchestrated plan executed by the senior staff and their consultants. Thus, although the Board had agreed to hear our presentation, the senior staff and their consultants prevented us from making a coherent presentation.

If you have ever attended a meeting of a public body where a group of protesters comes in and disrupts the presentation by shouting out questions and statements designed to prevent the body from carrying out its function, then you would have recognized what was happening in an instant.

The difference is that the STRS staff are supposed to work for the Board. Board members are fiduciaries, responsible for setting “policies governing the operation of the system and investment of funds…and may authorize its administrative officers… to act for the board in accord with such policies” (ORC 3307.04). Imagine for a moment what would happen if a group of administrative employees employed by a school board were to go to a Board of Education meeting and disrupt the meeting to prevent the Board from discussing a policy. They would be fired the next day!

In hindsight, I would have given a slightly different presentation but fundamentally the presentation was sound. We were trying to present a concept. The problem, which I did not see as clearly then as I see it now, is that the concept that we were trying to present was conflated with QED or individuals associated with QED. Part of that confusion is my fault. That said, all along the senior staff have been trying to kill this concept because it is a threat to them. The truth is they don’t even acknowledge that there is a problem because the current structure of STRS creates a conflict of interest.

This is what I think is most important. STRS has a problem: The problem has two elements.

First, the pension doesn’t have enough money; it takes too much risk; and it can’t beat a real passively investable benchmark.

The problem of not being able to beat a real benchmark is easy to solve. in theory, just index the investments. However, even if everything were indexed, the pension would still not have enough money. Thus far, the only “solutions" the senior staff and their advisors have advocated is taking more risk and cutting benefits. In fact, if they were being honest, they would be telling the Board that the odds are that under the current regime, they will have to make more cuts in the future.

Second, the senior staff think they are partners with members. In fact, they view themselves as the general partners and the members as limited partners. The only thing they really care about is preserving their jobs. The senior staff have done nothing to show that they understand the problems of members and have done nothing to try and solve the problems. In fact, the senior staff can’t even acknowledge that there are problems because they are a major part of the problem.

So, what is important? Even if STRS could beat a benchmark or if the fund were indexed, the net cash outflow is too big--i.e., they don’t have enough money to “invest” their way out of the problem.

I am aware of only two solutions to the problem. One, which I advocated when I was running, and that I still support, would be raising employer contributions. To even begin addressing the problem, employer contributions would probably have to double. I don’t have to tell you how unlikely that is to happen, given the current political situation in Ohio.

The second solution is the concept I tried to present, albeit unsuccessfully, at the last Board meeting. That concept at its core is that STRS, in effect, owns a warehouse (its balance sheet), but the warehouse is empty. Right now, STRS treats the empty warehouse as a real estate investment--i.e., we are waiting for it to appreciate. The solution is to start using the warehouse to store things and charge storage fees and then lend out the inventory to earn additional fees. That is the idea in a nutshell. Whether QED is involved in implementing this idea or not does not matter. The idea is fundamentally sound. 

What is clear to me is that the current senior staff are incapable of implementing this idea, for if they truly were acting in members' interests, they would be looking for a way to implement this idea, with or without QED. The fact is the senior staff have done everything possible to sabotage the consideration of this idea because they see it as a threat to their modus operandi.

Finally, while exploring ideas that can really solve the problem, STRS should at a minimum sell its equity assets, hold Treasurys, and get a total return swap. A total return swap on the Russell 3000 would give STRS the actual returns of the Russell 3000. For example, if they sold all their U.S. equities and did a total return swap on the Russell 3000, at a cost of 50 bps, and held Treasurys earning 1.5%, they would outperform the Russell 3000 by 100 bps.

If there is another solution lurking in the shadows that is better than the idea that I tried to present, I am open to learning about it and advocating for that solution as well.

I have titled this post “Which Side Are You On”, an old union song written in 1931 during the Harlan County Coal War by Florence Reece after the sheriff, hired by the coal companies, entered her house, and terrorized her and her children, looking for her husband, Sam, a union leader. Our pension has a problem and It’s time for the Board to decide, “Which Side Are You On.” Are you on the side of members or on the side of those who profit at members’ expense?

Dr. Rudy Fichtenbaum is Professor Emeritus of Economics at Wright State University. He is an elected member of the STRS Ohio Board, filling a retiree seat since September 2021.

Sunday, December 05, 2021

Ever wonder how much those privileged souls at STRS rake in, in salaries and bonuses in a single year? Take a guess, then check the chart below from 2019 (better sit down first) of the top 300 employees. Not exactly what teachers make, you can be sure!


Think what happened in 2016 in California could ever happen at a place like STRS Ohio? Many stakeholders wonder where their money has been going!


U.S. Attorney’s Office
Northern District of California

Tuesday, May 31, 2016

Former CalPERS CEO Sentenced To 54 Months’ Imprisonment For Role In Corruption Conspiracy

Defendant also ordered to pay $250,000 in fines

SAN FRANCISCO – Fred Buenrostro, the former Chief Executive Officer of the California Public Employee Retirement System (CalPERS) was sentenced today to 54 months in prison for corruption and fraud charges stemming from a conspiracy to trade official acts for cash and benefits, announced U.S. Attorney Brian J. Stretch, Federal Bureau of Investigation (FBI) Special Agent in Charge John F. Bennett, U.S. Postal Inspection Service (USPIS) Inspector in Charge Rafael Nuñez, and U.S. Secret Service (USSS) Special Agent in Charge David Thomas.  The sentence follows Buenrostro’s guilty plea entered July 11, 2014. 

Buenrostro, 67, of Sacramento, is the former Chief Executive Officer (CEO) of CalPERS and admitted that in 2004 he began receiving secret benefits from a placement agent for the purpose of influencing him in the exercise of his powers and duties as CEO. Buenrostro admitted the placement agent gave him approximately $250,000, as well as gifts, domestic and international travel, meals, entertainment, and payment for Buenrostro’s wedding.  Further, Buenrostro admitted he also improperly received employment at ARVCO Capital Research LLC (ARVCO) after he left CalPERS in May of 2008. In exchange, Buenrostro attempted to influence the CalPERS investment staff and Board to the benefit of the placement agent and his clients, and provided the agent with access to CalPERS’ confidential information relating to investments, internal deliberations, and other proprietary matters.

In addition, Buenrostro conspired to create a series of fraudulent investor disclosure letters in a scheme to secure fees from a private equity firm based in New York City and agreed with a co-conspirator to make false misrepresentations to, and concealed information from, the Securities and Exchange Commission (SEC), the USPIS, and the FBI after these agencies opened investigations into the operations of ARVCO and its role as a placement agent in connection with CalPERS' investments. 

Buenrostro was originally charged by indictment on March 14, 2013, but later charged by superseding information on July 11, 2014, with a single count of conspiracy, in violation of Title 18, United States Code, Section 371.  Buenrostro pleaded guilty to the charge in the superseding information.

The sentence was handed down by the Honorable Charles R. Breyer, United States District Judge.  In sentencing Buenrostro, Judge Breyer stated the defendant’s conduct amounted to “a spectacular breach of trust for the most venal of purposes.”  Judge Breyer also remarked that, “without trust, our public institutions cannot function.”  Judge Breyer also imposed a $250,000 fine on the defendant but allowed that fine to be reduced if Buenrostro makes payments in response to certain proceedings brought by the State of California or the SEC. 

Buenrostro currently is in custody and will begin to serve his term immediately. 

Assistant United States Attorneys Timothy J. Lucey and Philip A. Guentert are prosecuting the case with the assistance of Laurie Worthen and Beth Margen. The prosecution is the result of an investigation by the USPIS and the FBI, with substantial assistance from the Los Angeles Regional Office of the SEC as well as the USSS.

Larry KehresMount Union Collge
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