COLUMBUS, Ohio — Ohio Attorney General Dave Yost has launched an investigation into teachers’ pension funds following allegations that a “hostile takeover” has put educators’ funds at risk.
The Ohio State Teachers Retirement System (STRS) is a $90 billion pension fund that has been embroiled in controversy for years.
reformers
Educators have had a tough time in recent years.
“I’m burnt out,” Parma schoolteacher Terry Caskey said.
But the most difficult thing about Caskey’s job isn’t actually happening at work.
“I’m about five or six years away from retiring,” she said. “I’m worried about STRS.”
STRS suffered a loss of $5.3 billion in 2022 alone. In 2023, he lost $27 million invested in a failed Silicon Valley bank. In addition, more than 150,000 retired teachers in Ohio had their cost-of-living adjustment (COLA) payments suspended for five years starting in 2017. In 2012, the retirement eligibility was changed from 30 years to 35 years. Last year, this changed to 34.
STRS Executive Director Bill Neville is currently on leave while Yost investigates allegations of violence and sexually explicit material.
This has led to a group of pensioners calling themselves “reformers” fighting for change. Caskey is one of them.
“If teachers are not happy, if teachers are struggling, that’s a call to STRS,” she said. “But that’s crickets. They’re not acting in the best interests of the teachers.”
She became even more furious when the board approved $10 million in bonuses for staff.
“There are a lot of teachers in Ohio living in poverty, but there are also investors and employees who are getting big salaries and $10 million in bonuses,” she said.
Recently, he said, reformers have grown in power through the electoral process and have gained more access to the board.
The Board of Directors consists of 11 members. He has five contributing teachers and two retired teachers. The governor can appoint one of his investment experts. The Speaker of the House and the President of the Senate may jointly appoint experts. Both the Treasurer and the Director of the Department of Education and Workforce may appoint experts.
While there is a dispute between teachers and the school board, STRS consulting firm Aon just severed ties with the teachers and the board.
“When there’s smoke, there’s often fire behind it,” said Eric Chaffee, a business law professor at Case Western Reserve.
Reformers have asked for an investigation into STRS, and they finally got one. But not in the way they want.
suspicion
The concerns arose from an anonymous letter sent to Gov. Mike DeWine’s office. Dan Tierney, a spokesman for the governor, told me he believes they were created by multiple STRS staff members. I obtained dozens of documents through public records requests.
The documents allege that several STRS directors were making a bid for private investment group QED Systematic Solutions.
“Members of pension boards are required by law to act in the best interests of the teachers in whom they invest their funds,” Yost said Thursday. “We will take all necessary steps to protect teachers from private interests seeking to take over their retirement accounts.”
DeWine said in a statement late Wednesday that the separation from Aon was concerning.
“This is a huge red flag and calls into question how STRS is being run and providing oversight. The implicit implication is that governance issues at STRS are of great concern and that Aon is in good faith.” “STRS may not be currently in compliance,” including some of the audit recommendations resulting from Aon’s termination of the contract. ”
Mr. Tierney elaborated, explaining that it was “implied” that STRS was either in such disarray or had such poor board governance that it could not continue.
Aon declined to comment.
QED
QED was founded by former Deputy Treasury Secretary Seth Metcalf and Jonathan (JD) Tremmel. Metcalf worked for Josh Mandel in multiple capacities, including general counsel. They turned their attention to STRS in 2020, according to a 14-page key memo.
Despite having no customers or track record, they convinced STRS members to provide $65 billion, which they said would restore annual COLAs and reduce the amount pensioners had to pay into the plan, according to the documents. has been done.
They failed to impress board members. The main reasons were their lack of experience and the fact that QED was not registered as a broker-dealer or investment adviser. They also did not possess the technology to “facilitate the strategy,” the document said.
QED was then evaluated by Mr Cliffwater, an external consultant to the Board. The company strongly recommended not following or using their projects.
The document focuses on then-board members Bob Stein and Yael Meyerfeld, as well as current members Wade Steen and later Rudy Fichtenbaum. They each supported QED.
The document accuses members of working directly with QED and using its documents in QED’s proposals. Other members also privately expressed concerns.
“You should be careful about having that kind of interaction with any type of company that you have a relationship with,” Chaffee said. “Would it be permissible in certain cases? Maybe if everything was perfectly fair, it would be permissible. But at the same time, it raises a very big red flag about what’s going on. ”
QED, which once faced major obstacles, is said to have changed its strategy. “Board members and staff will be replaced with individuals who support the proposal,” the document states.
“QED pitched (and appears to have pitched) its proposal to Mr. Fichtenbaum while he was a candidate for director,” the document said.
The company worked with the Ohio Teacher Retirement Association (ORTA) to help select candidates who want to reform STRS.
They accuse STRS of being corrupt, which is not an unusual claim made against pension funds. Caskey says change is needed because the current board continues to harm pensioners. Board members who support QED agree.
“While Mr. Steen and Mr. Fichtenbaum are quick to accuse their staff of being too contradictory to evaluate QED (arguing that their investment solutions will eliminate investment staff jobs), they do not believe that QED is “Using STRS also creates conflicts,” the document states.
Reformers may have a super-majority after this year’s elections, meaning they may choose to invest in QED.
corruption allegations
Mr. Caskey has no confidence in Mr. DeWine and believes the entire investigation into STRS board members’ ties to QED is a “ruse.”
“I also think the governor is going to do everything in his power to make sure he takes care of the STRS fund because I think it’s a cash cow,” she said.
Wade Steen, originally appointed by John Kasich, is an outspoken reformer. He was reappointed by DeWine, but the governor asked him to resign last year. Steen refused, so DeWine removed him. Mr. DeWine cited Mr. Steen’s allegedly poor attendance at board meetings as the reason.
Steen filed a petition for reinstatement with the 10th District Court of Appeals of Ohio and was reinstated. He returned to work in April.
He agreed to an interview with me soon.
“We were concerned that Mr. Steen would be seen as championing a very specific investment company, as if he were a member of the trustee board, but that did not seem to be the case. ” Tierney said. “It was almost as if Mr. Steen was trying to favor this particular company that didn’t agree with the administration.”
Caskey believes this was the governor’s way of silencing Steen’s efforts to implement reforms, and that it was also a way to increase transparency and prevent kickbacks from the administration. We found no evidence of any administrative kickbacks.
“There are so many tentacles to this and it just leads to money, corruption and lack of transparency for members,” she said.
She cites the House Bill 6 scandal as the reason.
Related: Governor DeWine and Lt. Governor Husted will not comment on Randazzo’s death during the largest corruption trial in Ohio history.
In March 2023, a jury found former House Speaker Larry Householder and former Republican leader Matt Borges guilty beyond a reasonable doubt of participating in an extortion scheme that left four people guilty and one person dead by suicide. It was recognized that it did. Two other men are currently undergoing court proceedings, and a third died in April, whose death is also suspected to be suicide.
In February, DeWine faced a criminal complaint alleging that he knew millions of jobs were going to late former PUCO Chairman Sam Randazzo before he was appointed governor. He defended his top advisor.
Former Chief of Staff Laurel Dawson helped examine Randazzo, a military veteran, because the family had already received a $10,000 loan from Randazzo. The governor’s team claims they had no knowledge that the millions of dollars were bribe payments.
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Allegations that DeWine is involved in any of these matters are “absolutely ridiculous,” Tierney said.
“There’s no truth to that at all,” he added. “The governor’s only concern here is making sure that the pension funds that are held in trust for retirees are properly managed.”
Tierney said the biggest issue for retired teachers is that they are entitled to cost-of-living adjustments, and DeWine agrees.
“The allegations are complete and utter nonsense and should not be amused,” he said.
Meanwhile, some members of Congress have expressed concerns about the similarities between QED and FirstEnergy, which help individuals achieve their goals.
When Mr Metcalfe left the Treasurer’s Office to set up QED, he contacted Mr Neville, the Executive Director.
“Neville had a brief interaction with Metcalfe when Metcalfe was in the Treasurer’s Office and Neville was the Chief Legal Officer of STRS,” the document states. “Mr Neville responded that QED would need to follow STRS’s standard process for vetting investment proposals.”
I contacted the accounting firm and requested his personnel file.
I asked whether the office was aware of, or had records of, Mr. Metcalfe’s collaboration with STRS and other pension committees during his tenure with the Treasurer’s Office, and asked whether he He mentioned that he was said to have been in the Treasurer’s office. He previously served as a trustee for the Ohio Public Employees Retirement System and the Ohio Deferred Compensation Plan, according to his biography.
We also asked whether the STRS and deputy treasurer or advisor roles might intersect.
Communications director Sam Rossi directed us to ask questions about Metcalfe’s “activities and interactions” while in office, since it was a different administration.
However, Finance Minister Sprague is concerned about the STRS allegations.
Mr. Sprague issued the following statement:
“Transparency and sound management are hallmarks of safeguarding our public funds. But recent allegations detailing a growing story of turmoil and behind-the-scenes efforts to overtake the STRS Board. , are not only contrary to these principles, but also deeply alarming. After all, pension committee members should be committed to protecting and preserving funds for retirees. I share many of the concerns expressed by Governor DeWine on this matter and support a closer look into the recent allegations.”
Advance
For pensioners who just want money, this whole situation is disgusting.
Caskey said both QED and STRS may be corrupt.
“I was shocked by this, trying to understand who was holding the soccer ball,” she added.
STRS Board Chair Dale Price issued the following statement:
“Recent audits show that STRS Ohio is well-managed and the pension fund is in a sound financial position. The issues raised relate to board governance. Classroom Teachers and retired educators should know that their pensions are safe. STRS Ohio will continue to protect the stability and health of our organization and review our pension system. We will fully cooperate with all offices.”
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