The entrance to the Ohio State Teachers Retirement System headquarters in Columbus. (Photo by Marty Schladen, Ohio Capital Journal.)
A chaos-filled Friday at the retired teachers’ pension board has left two people without jobs and plenty more concerns about violation of ethics laws.
It was the expected final day for the State Teachers Retirement System (STRS) board member Wade Steen, but it also came with the unexpected dismissal of Executive Director Bill Neville. The day also included an attempt to silence and condemn STRS staff, which failed. As if that wasn’t enough — a document obtained by OCJ/WEWS has led to renewed calls for a state investigation into possible ethical violations.
A (somewhat long) recap
The State Teachers Retirement System (STRS) is in chaos. In summary, there has been constant fighting, two board resignations and allegations of both a public corruption scheme and mishandling of funds.
In May, Ohio Attorney General Dave Yost filed a lawsuit to remove two members of STRS, stating they are participating in a contract steering “scheme” that could directly benefit them. Yost started the investigation after documents prepared by STRS employees alleged that Wade Steen and Chair Rudy Fichtenbaum have been doing the bidding of investment firm QED.
OCJ/WEWS has been covering this controversy from the beginning, including a dozen recent stories dealing with the latest problems around the alleged corruption plot. To get a larger overview of the situation, there’s also a Q&A with viewers and readers.
QED was started by former Deputy Treasurer Seth Metcalf and consultant Jonathan (JD) Tremmel. In 2020, they set their eyes on STRS, according to the main 14-page memo.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them.
They couldn’t impress the board members, mainly because of their lack of experience and also because QED was not registered as a broker-dealer or investment adviser. The men also didn’t own the technology to “facilitate the strategy,” the documents say.
Steen and Fichtenbaum had allegedly been bidding continuously, pitching QED’s direct documents to board members and proclaiming the company’s talking points to other staff.
The pair should be removed because they broke their fiduciary duties of care, loyalty and trust when “colluding” with QED, according to Yost’s case.
This fight began with a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less.
In short, “reformers” want to switch to index funding, while “status quo” individuals want to keep actively managing the funds. Recent elections have allowed the “reform-minded” members to have a majority of the board.
Reformers want a cost-of-living adjustment, or COLA. The COLAs were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. They were reinstated, but there has been a suspension of increases, significant for retirees who need this money and are dealing with inflation.