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State Pension System to be Investigated by Siedle

Wednesday, June 05, 2013

 

High profile Forbes columnist Ted Siedle will be retained by AFSCME to investigate the state pension system, GoLocal learned from AFSCME Council 94 Executive Director Ken DeLorenzo late Tuesday afternoon, marking a major attack on General Treasurer Gina Raimondo's effort to diversify Rhode Island's pension fund into alternative investments - hedge funds.

"We're engaged in discussions to retain Ted Siedle," said DeLorenzo.

Notably, Siedle has extensive experience scrutinizing pension funds.  "My firm, Benchmark Financial Services, Inc, and I have pioneered over $1 trillion in forensic investigations of the money management industry," Siedle writes on his Forbes homepage, adding that he is a founder of the Whistleblower Forensic Opportunity Trust.

Raimondo Responds

Raimondo spokeswoman Joy Fox issued the following comment on Tuesday in response. "The Treasurer's top priority continues to be retirement security and today's news does nothing to make her stop fighting for public employees, retirees and taxpayers," said Fox. "She remains proud of the work the General Assembly, the State Investment Commission and her team has done to move our state pension system onto a secure and sustainable path."

Siedle's Investigations - Shelby County Tennessee Looks Like Rhode Island

In 2012, Siedle wrote an article entitled, "Louisiana Pensions should Have Thought Twice About Calling Hedge Fund Their "Best Deal", noting that his investigations into municipal and firefighter pensions in Shelby County, Tennessee in 2006 showed that the same investment consultant placing Louisiana in trouble had been fined by the SEC for not providing relevant information.

Siedle's experience in investigating Shelby County Tennessee could be analogous to the situation now developing in Rhode Island -- the Forbes columnist has told GoLocalProv in the past that the hedge fund brokerage system creates inherent conflicts.

As Siedle wrote in 2012 in his Forbes column, "The pension relied upon an investment consultant who was subject to myriad conflicts of interest for objective advice regarding management of its assets. As a result of the recommendation of the investment consultant, the pension fund had $135 million or approximately 15% of its assets invested with over 120 largely unregulated high-risk money managers scattered throughout the world whose identities, securities holdings, trading costs and custodians were unknown."

Ultimately, Siedle's aggressive and consistent review of hedge fund-driven public pension strategies creates a perfect partner for the Rhode Island public unions looking to reverse course against Raimondo's widely heralded pension reform legislation.

Siedle, a high profile Forbes columnist levels the playing field against Raimondo the Rhodes Scholar reformer.

In the past six weeks, Siedle in his Forbes column and in interviews with GoLocalProv and appearances on Buddy Cianci's shows has ripped Raimondo for her "alternative investment strategies" and their insider Wall Street linkage and high fee structure.

In the report Siedle authored for Shelby County, "Fiduciary Review of the Shelby County Retirement System," the report found the following:

"The Board of the Fund has been relying upon an investment consultant subject to myriad conflicts of interest for objective advice regarding management of pension assets. These conflicts of interest, as well as the compensation derived by the investment consultant from money managers the consultant is responsible for evaluating for the Fund, have not been adequately disclosed to the Board. The review uncovered that the consultant has undisclosed brokerage arrangements with many of the Fund’s managers and earns $4 million to $5 million a year in brokerage commissions."

AFSCME Blocked by Treasurer's Office

In early 2013, AFSCME had requested information from Raimondo's office on ERSRI (Employees' Retirement System of Rhode Island) money management fees as part of an Access to Public Records request. AFSCME asked for ERSRI Investment Performance Reports, and fees paid both in dollars - and basis points -- to investment managers.

Raimondo's office responded to the first two requests in a letter found here; however, regarding "basis points", Deputy Treasurer and General Counsel Mark Dingley had said that the office would "need to perform substantial research and analysis in order to comply with [AFSCME's] request to produce all documents showing management fees in basis points," and would have to charge AFSCME $15.00 an hour for approximately 100 hours.

Siedle had commented at the time, " "In my experience, hedge funds -- and their managers -- know exactly what they're charging, and what their management fees are in basis points. These numbers should be readily available," said Siedle. "For a public office to ask that kind of money for public records, while legal, is pretty much unheard of."

He continues, "AFSCME's clearly got a valid ask here. They represent to the tune of 12,000 retirees in Rhode Island, yes? They are entitled, and expected, to tell their participants where that money -- their money -- is going. I don't understand how you can run a $7 billion pension fund and not have an idea of what's being spent on its management."

 

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