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NEW: Forbes’ Siedle Releases Latest Investigation into RI Pension System

Saturday, June 06, 2015

 

Edward Siedle

In his second investigation into the Rhode Island pension system, Forbes' columnist and former SEC attorney Edward Siedle has released his latest report, Double Trouble: Wall Street Secrecy Conceals Preventable Pension Losses in Rhode Island.

"The executive summary says it all," said Siedle on Friday. "Even the first page says basically what it comes down to.  It says it [pension reform] was supposed to save $4 billion in 20 years, but it lost $2 billion in the first four years.  The other big point is this was all preventable. These were wrong decisions, they were wrong from the inception.  It's not 20/20 hindsight."

Read the Report HERE

Previously, Siedle had release his first report of the Rhode Island pension system, License to Steal, in the fall of 2013.  Siedle announced this past spring that he would be crowdsourcing his second investigation, by ultimately raising over $20,000 in anonymous, online donations.

"This is also a crowfunding success story," said Siedle.  "People want answers, they want transparency."

Fees Uncovered, Real Estate Findings

"This report is a lot about bringing Rhode Islanders up to speed on what's going on, when SEC has said half of private equity managers are breaking the law," said Siedle.

Siedle said in his investigation he uncovered fees to be higher than previously reported

"I found the [pension fund] fees in Rhode Island may be as high as $161 million. [Rhode Island General Treasurer Seth] Magaziner said it's $74 million.  Remember, former Treasurer Gina Raimondo said they were $11 million, then by the end she admitted it was $70 million.  Well, now it's well over $100 million.  Nationally,  it's been reported that private equity is being underreported, and here is a prime example."

Siedle noted that the performance of the state's real estate investments was a significant portion of his second investigation. 

"The fact that that Rhode Island has the worst real estate performance in the country, there should be a full investigation," said Siedle.  "How did it lose more money in real estate than any other fund in the country?  Real estate isn't governed by the SEC, but someone should be held accountable. It's hard to be the worst in the country.  When you have this performance, people deserve an explanation." 

 

Related Slideshow: RI Public Pension Reform: Wall Street’s License To Steal

See the key findings from Forbes' columnist Edward Siedle, who unveiled his investigative report into the RI pension system, "License to Steal," in October 2013.  

"The Employee Retirement System of Rhode Island has secretly agreed to permit hedge fund managers to keep the state pension in the dark regarding how its assets are being invested; to grant mystery hedge fund investors a license to steal, or profit at its expense using inside information; and to engage in potentially illegal nondisclosure practices," said Siedle.  

Prev Next

Treasurer’s Lack of Transparency

 
"There has been a sinister pall of secrecy regarding fundamental investment information orchestrated by state officials and aided by key investment services providers. "
Prev Next

So-Called Pension Reform Scheme Permanently Reduces Benefits To Retirees

"Whether retirees receive any COLA will depend upon both ERSRI’s funding level and the Fund’s actual investment returns—both of which are volatile, unpredictable and subject to manipulation by elected officials and others. The manipulation of both of these key goalposts has already begun. "

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SEC Should Investigate ERSRI’s Failure to Disclose Skyrocketing Investment Expenses 

 
"The Treasurer has intentionally withheld information about soaring investment fees which is material in assessing both whether ERSRI should invest in costly alternative investments and whether benefit cuts are necessary to improve pension funding."
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Lose-Lose: Alternative Investments Both Reduce Returns and Increase Risk 

 
"The Treasurer’s representations regarding the level of risk related to ERSRI’s hedge fund investments are wholly inconsistent with the hedge fund managers’own words."
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ERSRI Agrees To Be Kept In The Dark, Grants Mystery Investors Licenses to Steal and Consents To Potential Nondisclosure Illegalities 

 
"The outrageous nondisclosure policies detailed in the hedge fund offering documents cause these investments to be, at a minimum, inherently impermissible for a public pension, such as ERSRI, if not illegal."
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Heightened Risks Related To Hedge Fund Offshore Regulation And Custody

 
"There is no evidence the State Investment Commission was aware of, or ever considered, the unique risks related to foreign regulation of hedge funds."
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SEC Should Investigate Questions Surrounding ERSRI’s Point Judith Venture Investment

 
"The Treasurer has made numerous public statements regarding the performance of the Point Judith II fund she formerly managed and sold to ERSRI, as well as released summary performance figures which are strikingly divergent. [...] In order to prevent any possible confusion or misleading of investors, the SEC should investigate Point Judith II performance claims."
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Rhode Island Ethics Commission Opinion And “Blind Trust” Fail to Address Conflicts Regarding Point Judith Investment

 
"The Treasurer notably failed to mention in her letter to the Ethics Commission that the state was a limited partner in the Point Judith fund and may have broad rights in the fund that conflict with hers. Further, she may have special rights that permit her to profit at the state’s expense."
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SEC Should Investigate ERSRI Investment Consultant Conflicts, Payments From Money Managers

 
"The investment consultant retained to provide objective advice regarding alternatives, Cliffwater LLC, has disclosed in its SEC filings that it receives compensation from investment managers it recommends or selects for its clients, including Brown Brothers Harriman which manages $272 million for ERSRI."
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“Pay To Play” Placement Agent Abuses at ERSRI

 
"Rather than undertake an independent investigation in response to an SEC inquiry, ERSRI relied upon its then investment consultant, PCG, for objective advice regarding controversial placement agent fees—at a time when PCG itself was embroiled in a national pay-to-play scandal."
 
 

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