Riley: Mancini, Wainwright and Taveras Part 2

Tuesday, August 12, 2014

Michael G. Riley, GoLocalProv MINDSETTER™

 

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A few weeks ago, I checked out the website of Providence investment advisor Wainwright Investment Counsel, LLC, and I was confused. It looked very much like an amateur, fake website that offered little to no information at all. No management team with photos, no bios, no portfolio managers. No testimonials. No Eric Bertonazzi. It really is an awful website. I then compared that to some of their competitors in Massachusetts like: NEPC, Callan Associates, Segal Consulting and Meketa Investment Group.

While a crappy website, lousy receptionist, connections to Bernie Madoff, and losing multiple contracts in Massachusetts are not necessarily fraudulent - or even illegal - they are certainly enough for a prudent manager of public pension funds to ask questions of Wainwright. As with the case of the $57 million missing from pension plans, Taveras owes a fiduciary duty to carefully safeguard the funds entrusted to him. He has completely ignored these responsibilities. So I questioned his finance director.

Communication with Mancini’s Office

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On August 4, I asked the Director of the Finance Department for the city, Lawrence J. Mancini, a few questions about Wainwright Investment Counsel, LLC, the city of Providence’s investment advisor for the last 20 years.

Below is the content of the second email I sent to Mancini’s office. The first email was sent on August 4 and, in an immediate reply, I was told that Ms. Sara Merrit would respond by that afternoon of August 4 or the morning of August 5.

The second email was sent to Sara the afternoon of the August 6. It read:

I was wondering if you have responses to the questions I posed on Monday

How long has the Board of Investment Commissioners existed in Providence? Who is the current investment adviser to the commission? How long have they been advisor? What moneys have they been paid from Providence 2010 -2014? When was the last RFP for advisor conducted?  
mgriley

These are not difficult questions to answer, and I had more, but I figured they could answer these first. I received nothing. As I understand the Access to Public Records Act (APRA), the clock is ticking now because it is not necessary to fill out official forms to start the process. Mr. Mancini, therefore has another five days or so to respond and also has the right to file a request for a 20-day extension in regards my request.

An "Eerie" Place

Having heard nothing from Finance Director Mancini or Mayor Taveras from the list of questions I gave them, I embarked upon some further investigation of Wainwright Investment Counsel. I have a long career in the industry and know several people who live and work in Boston.  I wanted to see what Wainwright’s offices look like. They describe themselves as a multi-billion dollar asset manager and their address is rather exclusive: 1 Boston Place, a 41 story, high-class, high-service building. Wainwright is on the top floor, a bit of information gathered from SEC filings, not from their website.

Several friends and acquaintances work nearby or in that building. It is a high security building and not every floor has unfettered access. You need a pass to move around the building. Many of the floors have multiple businesses and some have a whole floor with around 200 people working on it. The building has 18 passenger elevators. The 41st floor is where Wainwright Investment Counsel, LLC exists, at least a few friends got as far as that floor and they all described it the same way, “eerie.”  There was only one set of glass doors with a sign on or near it saying “Wainwright Investment Counsel, LLC.” There was no intercom or buzz lock.

Only two of my friends actually entered and they felt “creeped out.” Inside the door, there was a small hallway and, at the end and on the right, an elderly woman was sitting at a very sparse old desk with an old computer. There was no name on the desk. There was no literature or brochures of any type. The name “Wainwright Investment Counsel, LLC” was not posted anywhere. There was no place for anyone to sit.

Another door was behind the person at the desk. She looked startled to have anyone walk in. When questioned as to whether it was Wainwright Investment Counsel, LLC, she said ‘yes.’ When asked about whether they ever had interns, she said ‘no,’ there was no sign of activity. There was, possibly, a hallway behind the door and to the left of the person at the desk.

These creepy reports brought me back to reading the minutes of the meetings of the Providence Board of Investment Commissioners. From there, I was able to garner that Wainwright was hired in 1995 by Buddy Cianci. What “hired” means I still do not know since Taveras and Mancini have not yet responded to my questions. Wainwright Investment Counsel, LLC, appears to have been born out of HC Wainwright, an old line Boston Investment Firm that fell on hard times in the 1990s. Survivors of its downfall included a broker dealer “wfs,” 75 percent owned by Wainwright Investment Counsel LLC and a boutique, asset manager: Wainwright Investment Counsel LLC.

Fiduciary Responsibility

It’s pretty clear that Eric Bertonazzi is a knowledgeable advisor representing Wainwright, but it is not at all clear how he gets paid. Is there directed order flow to Wainwright? Do they collect an advisor fee from Providence? Do they get placement fees from managers that are selected? Wainwright lost a significant amount of business following the revelations that they had invested client money in Bernard Madoff feeder funds. After that, their presence in Massachusetts public pension consulting shrank dramatically, possibly down to zero.

If I had been elected Mayor of Providence in 2010, and I looked at my role as Chairman of the Board of Investment Commissioners, I certainly would have dug into this relationship and put out a request for proposals. Taveras’ lack of intellectual rigor and due diligence is, once again, mind-boggling. It is as if he has no financial background what so ever. He does not question anything and when asked about accounting and finance, he does not answer anything.

I am asking these questions because Providence’s finances are critical to the future of the State of Rhode Island. No one should be hiding information about how investments are managed and how much an advisor of 20 years is being paid.

The state’s investment advisor on the alternative side is Cliffwater. I have actually visited Cliffwater in New York City. It is in an office setting that you might expect. It was fully equipped with conference rooms, receptionists, telephones and people. State of the art display and conference call features abounded. The waiting room was large, with plenty of seating as well as investment brochures. They are paid a single fee of $450,000 annually by Rhode Island and no placement fees are allowed at the state level. Several reports appear on the state website showing the fees paid to each manager. It is one of the most comprehensive websites in the country and very detailed. The Providence site has gotten better and, with the exception of the investment adviser Wainwright Investment Counsel LLC, much of the necessary information is available. There does not appear to be anyone actually auditing Wainwrights reports to the board, in the links below, and Wainwright uses a lot of data from State Street. Wainwrights’ claims of superior performance to the state’s audited reports are somewhat unconvincing.

I have said repeatedly, Mr. Mancini and Mr. Taveras need to take their fiduciary responsibilities seriously and stop all the obfuscating and double talk. The next step is an APRA filing with the Attorney General.

https://data.providenceri.gov/Retirement/Comparison-of-City-of-Providence-ERS-to-State-of-R/6gws-wa64

https://data.providenceri.gov/Retirement/Hedge-Fund-Statistical-Analysis/qwcy-tfd6

https://data.providenceri.gov/Retirement/Asset-Allocation-Of-Similar-Retirement-Plans/43n7-3xxs

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Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC news, Yahoo TV, and CNBC.

 

Related Slideshow: 10 Questions Taveras Has to Answer When Running for Gov of RI

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#10 Fundraising

Can Taveras Keep Up with the Big Boys and Girls in Fundraising?

In America today, one issue that is a factor in nearly every election is fundraising. To date, Taveras has yet to demonstrate any consistent ability to keep up with the leading fundraisers in RI.

Taveras will have to compete with General Treasuer Gina Raimondo, who has $2 plus million on hand and a likely run from Clay Pell (grandson of US Senator Claiborne Pell and whose wife is Olympic skater Michelle Kwan).

Raimondo is on pace to raise $5m and Taveras presently has just $692,000 on hand and would be on pace to raise less than $2 mliion. 

Pell's family has access to nearly limitless dollars - back in the 1990's Pell's grandfather was ranked as one of the wealthiest members of Congress.

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#9 Curse

Can Taveras Break the Providence Mayor's Curse?

For more than 60 years, no Providence Mayor has been successful running for Governor of Rhode Island. You have to go back to the 1950 election when Dennis Roberts was elected Governor.

Since Roberts, a number of Providence Mayors have taken their shot at running for Governor and each has failed mightily.

Most notably, Buddy Cianci's run against J. Joseph Garrahy - Cianci got less than 30% of the statewide vote.

Joe Paolino was expected to win the Democratic primary in 1990, but was beaten badly by Bruce Sundlun and then Warwick Mayor Frank Flaherty.

Sundlun went on to win the general election and Flaherty was later named to the state Supreme Court.

Taveras will have to break a very long curse.

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#8 Hire or Fire

Can Teachers Trust Taveras - and Will Voters Trust His Relationship with the Teachers Unions?

In the midst of the city's political meltdown, Taveras just into his first few months in office fired all the teachers in Providence.

Taveras received strong public support, but within months he capitulated to pressure from the teachers' unions.

Three years later, he is emerging as the candidate of the teachers' union leadership. Will teachers trust him in a statewide race and will voters trust him if he is perceived as too close to union bosses?

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#7 Hispanics

Will Hispanics Vote as a Block in the Primary for Taveras? Are They Influential Enough in the General?

Conventional wisdom is that Angel Taveras will get a big boost from the Hispanic voting block in the primary, but more recently Council members Luis Aponte, Danian Sanchez and Sabina Matos have all openly battled with the mayor on his tax increases and efforts to close pools in low income wards around the city.

While Taveras can rebound and the impact may be large in the primary, the percentage of voters who are Hispanic in the general election is just 7% according to Pew Research:

  • Rhode Island’s population is 12% Hispanic, the 13th largest Hispanic population share nationally.
  • There are 54,000 Hispanic eligible voters in Rhode Island—which ranks 35th in Hispanic eligible voter population nationally. California ranks first with 5.9 million.
  • Some 7% of Rhode Island eligible voters are Hispanic, the 13th largest Hispanic eligible voter population share nationally. New Mexico ranks first with 39%.
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#6 Temperament

Can Taveras Handle the Campaign Pressure and the Office Pressure of Governor?

Taveras had no experience as a chief executive in business or government before taking office in 2011 in Providence. He has increasingly gotten into some very non-productive scrapes.

In 2012, his law office delivered a document to GoLocalProv as part of a FOIA request and those documents included the social security number of every retiree of the City. Instead of taking responsibility he sent his lawyers to court to try to block GoLocal from writing about the mishandling of social security numbers. The judge ruled against Taveras.

In 2013, Taveras has tried to demolish a commuity swimming pool in South Providence because, according to Councilman Danian Sanchez, Sanchez would not vote for Taveras' tax increase.

Will Taveras be able to prove to voters he has the right stuff?

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#5 Base outside Prov

Can Angel Taveras Build a Political Base Outside of Providence?

While Taveras has a strong political base in Providence, it is unclear if he can build a strong political network in critical Democratic strongholds like Woonsocket, Pawtucket, East Providence, Johnston and North Providence.

It is well known that both Democratic Mayors in North Providence and Johnston have had a strained relationship with Taveras.

This strain has played out over critical matters like mutual emergency aid and in 2012, North Providence, Johnston and East Providence all cancelled emergency aid compacts with Providence.

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#4 Women Voters

Can Taveras Compete for Women Voters?

When Taveras ran for Mayor he won the critical block of East Side Democratic women. Part of his success with this critical block of voters was the support he enjoyed from Democratic power Myrth York. 

The two-time Democratic nominee for Governor went all in for Taveras in 2010, but she no longer is active in the inner circle and reportedly would have supported Governor Lincoln Chafee in the primary.

Taveras will need to compete with Raimondo who has already signed former EMILY's list bigwig Kate Coyne-McCoy.

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#3 Star Power

Can Taveras Keep Up with Clay Pell's Star Power?

In 2010, Taveras ran under the motto of "from Head Start to Harvard."  His claim on the American dream proved a successful juxtaposition to two Democrats who had the same political base - Federal Hill (Steven Costantino and John Lombardi).

Now, Taveras may face the fresh-faced Clay Pell. His bio exceeds Taveras as he can claim the legacy of his grandfather's work and hit the circuit with his superstar wife, Olympian Michelle Kwan.

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#2 Issues and Vision

Can Angel Taveras Articulate a Vision for Rhode Island?

Taveras earned good scores for managing the City of Providence's financial crises, but never seemed to develop major policies for economic development, schools, parking, crime, reducing the cost of government or improving the efficiency.
 
The Superman building's closure happened on his watch, technology company Dassault Systèmes is moving out of Providence, and no major employers were recruited into the city other than the scrap yard on Allens Avenue.
 
Taveras will need to define a forward looking vision for Rhode Island.
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#1 Crime and Education

Can Taveras Explain His Record on Crime and Education?

The biggest problem for Taveras is his record in Providence.
 
Most people care about the basics - their jobs, education for their children, how safe their neighborhood is.  These vary questions could be Taveras' Achilles' heel.
 
According to GoLocal's study of the FBI crime data, Providence is ranked #2 for violent crime per capita in Rhode Island.
 
The condition of Providence's schools may be worse. Of the 24 schools ranked as poor (de facto failing) in Rhode Island by the Department of Education, 6 of them were Providence Schools and in the rankings of the best high schools in the state, most of Providence's schools consistently litter the bottom of the rankings.
 
Taveras lead the city to win the $5 million Bloomberg award. But in a Governor's race one of Taveras' opponents is sure to ask, "Mr. Mayor, are you going to bring the same policies you used on crime and education in Providence to the rest of the state?"
 

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