2nd Ohio group jumps in with effort to review its state retirement system

Jul. 18—COLUMBUS — Even as an outside-funded, deep dive into the Ohio teachers' retirement system continues, an effort is under way to do the same with the pension fund for most other government employees.

"There are certain uniquely positive features — including strong participant organizations and board members willing to break from the pack and speak out —with these funds that lead me to believe that these investigations could have very positive outcomes, outcomes that have not happened anywhere else in the United States," said Ted Siedle.

The former Securities and Exchange Commission attorney, financial forensics investigator, and co-author of the book Who Stole My Pension? has already been hired by a group of about 1,000 retired teachers who've challenged decisions made by the State Teachers Retirement System.

Now a Kickstarter campaign is being launched to raise funds for a similar forensics audit of the Public Employees Retirement System.

Together, the two funds have assets of about $200 billion.

Like the STRS effort, in which retired teachers raised an estimated $75,000 to pay for the audit, a Facebook discussion group, Save Ohio Pensions, for members of all five state employee funds hopes to raise a similar amount for a PERS review.

"I think there's enough known about the STRS audit now," said Paul Guyton, 55, a retired state Department of Rehabilitation and Correction employee from South Charleston near Springfield and a Save Ohio Pensions leader.

"It is clear they're uncovering some things that give good cause for them to call for further action," he said. "For the two to happen in the same time frame is very valuable. We need things to happen. We need the legislature to take note."

PERS spokesman Mike Pramik said the fund has not been contacted by anyone seeking to perform an audit.

Mr. Siedle recently issued what is expected to be the first of a series of preliminary reports examining STRS investment policies.

The report criticizes STRS for a lack of transparency when it comes to earnings and fees associated with alternative investments like those with hedge funds and equity firms. It chastises the legislative Ohio Retirement Study Council for shirking its statutory responsibility to commission an independent audit every 10 years.

Of most interest to its active and retired members, the preliminary report contends that STRS's alternative investments have "massively underperformed" compared to other types of investments.

The report suggests that better earnings from a passive investment strategy and savings from excessive fees and performance-based bonuses to inside staff would have been more than enough to restore retired teachers' annual cost-of-living adjustments that were eliminated in the name of improving the fund's long-term solvency.

The report was part of the reason that STRS board member Wade Steen, an investment expert first appointed by Gov. John Kasich in 2016 and reappointed by Gov. Mike DeWine last year, asked Ohio Attorney General Dave Yost last week to appoint "transparency counsel" for him as he questions what the board has been told.

He urged board leadership in a letter to call a special meeting so that he and incoming board member Rudy Fichtenbaum may pursue discussion of reducing investment costs, restoring the cost-of-living adjustment, and reducing the contribution rate for active teachers.

Mr. Fichtenbaum, an economics professor at Wright State University in Dayton, was recently elected to the board to represent retirees and will take his seat on Sept. 1.

"Is there fraud?" Mr. Steen asked in his July 14 letter. "That is a question for others to answer. But based on my analysis, there seems to be questions considering the state used incorrect investment costs which overstated the total fund return, which resulted (in) $7.8 million in performance-based incentives."

In a letter to Mr. Steen dated June 22 and in response to a previous Steen letter, STRS board Chairman Rita Waters, Vice Chairman Robert McFee, and Vice Chairman-elect Carol Correthers challenged any suggestion of fraud.

"As the leadership team of this Board, we want the best retirement for our membership, both actives and retirees," they wrote. "But we need to provide sustainable benefits and ensure that future generations can enjoy their retirement as well. Maintaining a direct and open dialogue amongst staff, board members, our members and constituents is critical to the success of this system."

STRS spokesman Nick Trenoff said there has not been a substantive change over the last 20 years in how the fund calculates investment performance on which inside investment staff's performance bonuses are based.

Mr. Siedle sued in Ohio Supreme Court to force STRS to release certain investment information. He said STRS agreed during a court-ordered mediation session last week to release some of the documents, but the dispute over other documents continues.

The pension fund also agreed to pay $5,000 for legal fees for Mr. Siedle, who is being represented by former Ohio Attorney General Marc Dann.

STRS, with assets of more than $90 billion, serves about 500,000 active, inactive, and retired members.

PERS, the largest public pension fund in Ohio and the 12th largest in the nation, has assets of more than $100 billion and counts among its membership of more than 1 million state and local public employees who are not teachers, other school employees, law enforcement, and firefighters covered by the four other public retirement systems.

Mr. Guyton said he is optimistic that the Kickstarter campaign can raise the $75,000.

"The pool of folks who are retired and are still working in the PERS system is a lot bigger than STRS," he said. "We have reason to be optimistic. The time line with Kickstarter gives us a sense of urgency. There's the simple fact that it has ultimately transparency. In the event the necessary funds are not raised, they are ultimately returned to those who donated them."

Mr. Siedle said he thinks there will be some similarities in both policies and investment players between the STRS and PERS audit findings.

First Published July 17, 2021, 12:00pm