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  • STRS Ohio Watchdogs

Blade Editorial Board: STRS reformers targeted

Gov. Mike DeWine sees a “red flag” in the resignation of fiduciary governance adviser Aon at the State Teachers Retirement System of Ohio.

The more accurate term, though Mr. DeWine might not agree, is “red herring.”

The governor, aided by Attorney General Dave Yost, is trying to undo the takeover of the board of the State Teachers Retirement System by reform-minded members who want to curtail the pension system’s investments in obscure Wall Street funds that pay high fees to the fund managers but haven’t generated the revenue that the pension for retired teachers depends on.

Those fees guarantee enormous profits for Wall Street firms who share the wealth through campaign contributions to political action committees for both parties. Only the teachers who were denied a cost of living increase from 2017 to 2022 were victimized by overpayment and underperformance.

Aon’s recent resignation as fiduciary governance adviser to STRS should, indeed, be a red flag or a warning signal to the governor and the General Assembly.

We don’t bewail the departure of Aon. Based on a Securities and Exchange Commission finding and settlement in January on their flawed work for the Pennsylvania teachers pension system they should not have been let in the door in the first place.

The governor is attempting to weaponize the Aon controversy into an attack on STRS Board member Wade Steen. Mr. Steen represents reformers on the board, who now have a majority. Mr. DeWine appointed Mr. Steen, but later removed him, citing his attendance record and his involvement with a questionable proposed investment strategy in 2022. But a state appeals court ordered Mr. Steen to be reinstated, ruling that the governor did not have the power to remove him.

Now Governor DeWine says the reform board members at STRS are facilitating a “hostile takeover.” Attorney General Dave Yost has opened an investigation to remove members under a state law covering breach of fiduciary duty. (“Yost intervenes with state teachers pension fund,” Friday)

The investigation is driven by an investment debate at STRS that occurred in the summer and fall of 2022.

Reform board members Steen and Rudy Fichtenbaum proposed a $65 billion investment in a startup firm that planned to generate profits through short-term loans to Goldman Sachs.

STRS funds would have allowed the Wall Street giant to evade Federal Reserve restrictions limiting their investment leverage. The scheme was not a good idea and was resoundingly defeated by the STRS board.

But now the implication that Mr. Steen and Mr. Fichtenbaum crossed the line legally in dealings with principals in the firm they supported for the project is being used to keep STRS reformers from taking majority control of the board.

Though the investment was ill-advised, there has been no formal allegation made that either Mr. Steen or Mr. Fichtenbaum violated ethical or criminal codes.

State government is racing to take action now to get Mr. Steen back off the board because the STRS reform majority has pledged full transparency on investments.

Disclosure of the terms and conditions of the one-sided contracts STRS and Ohio’s other pensions have entered into will show the interests of pension beneficiaries have taken a backseat to the advantage of pension staff and state politicians.

If STRS reformers hold their majority and make good on promised transparency, Wall Street profits will be threatened across the country and Ohio political fundraising hurt as a result.

The investigation of STRS is not to prevent a hostile takeover but rather to protect the hostile takeover by Wall Street that has already happened.

The Blade Editorial Board May 11, 2024

The STRS Ohio Watchdogs would like to correct the misinformation that Rudy Fichtenbaum proposed a $65 billion dollar investment.

"The opportunity for STRS Ohio to partner with QED to form a partnership known as Ohio AI was introduced. STRS Ohio would contribute inventory and QED would contribute technology and a catalog of structural arbitrage strategies. Dr. Fichtenbaum suggested STRS Ohio start with a $250 million investment. Mr. Stein suggested a performance guarantee be built into any agreement." - STRS Ohio Board Minutes, November 18, 2021



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