There is trouble in the board room at the State Teachers Retirement System of Ohio, a pension fund that oversees $94.5 billion invested for 500,000 Ohioans.
A faction led by board member Wade Steen is arguing that STRS investment staff miscalculated their performance bonus pay and that information is being withheld from board members.
The back-and-forth between factions is playing out in a series of terse letters and blog postings.
"As with your allegations of fraud, we remind you that allegations of staff misconduct are a serious matter and should not be made lightly," three board members wrote to Steen in June.
Steen also says that he knows of a way that STRS can reduce its investment fees, dramatically drop the required contribution rates, allow teachers to retire at younger ages and bring back the cost of living allowance.
Steen, who is the former Franklin County treasurer, and incoming board member Rudy Fichtenbaum, a retired economic professor at Wright State University, asked STRS to hold a special meeting so they can detail "how STRS Ohio can utilize its balance sheet along with technology" to accomplish these dramatic improvements.
The other faction told Steen to show his work: "Please describe this proposed solution and any members of staff with whom you have shared it."
Aristotle Hutras, who directed the Ohio Retirement Study Council for more than two decades, said Steen's list represents "magical thinking."
"I don't see how one of those things could happen, let alone a laundry list of things," Hutras said.
'The board is not functioning very well'
In a posting to STRSOhioWatchdogs.com, Fichtenbaum accused STRS staff of withholding info from board members who raise questions. "The staff have a tremendous information advantage and they have been unwilling to share that information. They also present misinformation and misrepresent certain facts," he wrote.
Both men point to an investment approach used by the Healthcare of Ontario Pension Plan. Steen and Fichtenbaum also said they've listened to a pitch made by Jonathan Tremmel and Seth Metcalf, a former top aide in the state treasurer's office under Republican Josh Mandel.
STRS spokesman Nick Treneff said pension investment staff have met with Tremmel.
"I think right now the board is not functioning very well as a board. That's my observation from the outside," said Fichtenbaum, who joins the board in September to represent the interests of retirees. "It is very tightly controlled by the chair and the senior investment staff. There is not an opportunity for a board member like Wade Steen — when he asks questions, he gets shut down."
STRS Ohio's 11-member board is a combination of elected and appointed trustees. They are not compensated. STRS Board Chairwoman Rita Walters and STRS Executive Director William Neville were not made available to comment for this story.
STRS Ohio eliminated its COLA in April 2017 in a cost-cutting move designed to shore up the pension fund. A 2012 law allows the board to change the COLA, rather than relying on state lawmakers to make such changes.
Retirees conduct third-party audit
Those changes haven't gone over well with retirees, some of whom raised $75,000 to hire Edward Siedle to conduct an audit of STRS Ohio. Siedle is a former Securities and Exchange Commission attorney and co-author of "Who Stole My Pension?"
Siedle released his report, "The High Cost of Secrecy," in June. It suggested that STRS suffers from a lack of transparency, underperforming investment returns and bloated investment fees — some of the same criticisms launched by Steen and Fichtenbaum.
The report criticized the pension fund for not disclosing the fees and costs associated with alternative investments STRS holds, which the systems says are exempt from disclosure under Ohio law.
"Again, pension fiduciaries have a legal duty to monitor all investment and other costs for reasonableness — not merely guess, or estimate, what those costs might be," the report said.
STRS executives said the system's 10-year returns beat 88% of its peer funds and its total investment costs are among the lowest in its peer group. The pension system said it provided more than 22,000 pages to Siedle.
STRS also said Siedle way underestimated the cost of reinstating a 2% cost of living allowance. Actuaries estimate it would cost $12.8 billion. STRS' written response said: "Many of the conclusions in the report are offered with little support other than the author's opinion."
Laura Bischoff is a reporter for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.
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