RI’s Investment in TIAA Needs Review Says Top NY Times Financial Reporter, NY AG Launches Probe

Saturday, November 11, 2017


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NYTimes Financial Reporter Gretchen Morgenson

Gretchen Morgenson, a top financial writer for the New York Times, joined GoLocal LIVE on Thursday just hours after her newspaper published her investigative piece that unveiled that claims that financial giant TIAA was involved in improper financial practices took on new momentum.

Rhode Island’s Treasurer Seth Magaziner has nearly $700 million invested with TIAA.

Morgenson was first to report that, “New York’s attorney general has subpoenaed TIAA, the giant insurance company, and investment firm, seeking documents and information relating to its sales practices…”

In October, she wrote a sweeping investigative piece that raised questions about TIAA’s selling strategies. “The subpoena to TIAA, which handles retirement accounts for over four million workers at 15,000 nonprofit institutions across the country, followed an article last month in The New York Times that raised questions about the firm’s selling techniques,” wrote Morgenson.

On GoLocal LIVE, Morgenson told News Editor Kate Nagle in a Skype interview, “I think clients in all states should be worried -- Mr. [Seth] Magaziner should do a little more investigation into this to assure himself and the people in Rhode Island in these plans - that what TIAA is [telling them] is correct.”

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RI Treasurer Seth Magaziner

Earlier this month, Magaziner defended TIAA, “Treasurer Magaziner is committed to ensuring that members of the retirement system have access to high-quality, low-cost investment options. When the New York Times article came out, the Treasurer directed his staff to reach out to TIAA, who stated that their employees who work on the Rhode Island plans are not compensated based on cross-selling TIAA products, and therefore the situation mentioned in the article does not apply to Rhode Island’s relationship with TIAA,” said Evan England, spokesperson for Magaziner.

But, after disclosure of the New York Attorney General and Morgenson’s article, Magazine’s office was more concerned about the TIAA investigation. “Despite TIAA’s assurances, the Treasurer finds reports about sales tactics from TIAA programs that do not directly serve the Rhode Island plan alarming, and will be monitoring closely to ensure that RI plan member’s interests are protected,” said England on Thursday afternoon.

Morgenson said Thursday, “[What I'm told] is it's a high-pressure sales organization...[if I were Magaziner] I'd be wary of what I've been told.”

Forbes columnist and former SEC investigator Ted Siedle slammed Magaziner on Thursday. He told GoLocal, "Young Magaziner must be scared to death. With no pension experience, he's always surprised by, and reacting to, allegations of wrongdoing involving the state pension's money managers. I prefer to investigate and anticipate developments, as opposed to responding to New York Times articles."

Siedle is the President Benchmark Financial Services and recently received the largest whistleblower reward in SEC history.

Improper Sales Practices

“The sales practices in question [by the New York Attorney General] would be the same kinds things you would see on Wall Street - pushing clients into in-house products that generate more money for brokers and [the] firm -- and instead of taking account of what the client really needs,” said Morgenson.

The Pulitzer-Prize winning financial writer told GoLocal LIVE, “It [would be] a discrepancy between the TIAA reputation of being a nonprofit heritage company that always has its clients' best interests at heart -- or just like any other Wall Street firm.”

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Then-Treasurer Gina Raimondo selected TIAA

Raimondo Selected TIAA

The selection of TIAA (then TIAA-CREF) started in 2012. GoLocal reported on February 27, 2012:

General Treasurer Gina M. Raimondo today announced that the State Investment Commission unanimously voted to select TIAA-CREF as the vendor to administer Rhode Island's new defined contribution program. TIAA-CREF was chosen after final presentations were made to the State Investment Commission earlier today.

"After evaluating the two finalists in the core areas defined in the RFP, I am confident that TIAA-CREF offers the best options, fees, and level of service for Rhode Island," Raimondo said. "Treasury looks forward to working with TIAA-CREF as we begin the process of implementing this new and important program for many of Rhode Island's public employees."


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