Magaziner Should Return $10K to Retired Teachers for Withholding Key Documents, Says Siedle

Wednesday, May 25, 2016


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Ted Siedle

Forbes’ contributor and former SEC lawyer Edward Siedle has told Rhode Island General Treasurer Seth Magaziner’s office that it should return the $10,000 it received from the Rhode Island Retired Teachers Association, for not providing the necessary documents pursuant to a public records request to conduct an investigation into the state pension fund’s real estate investments.

Siedle had announced in December he would be doing a new crowdfunded investigation into the state’s underperforming real estate investments; when told his request for information would cost $10,000, the Rhode Island Retired Teachers Association (RIRTA) voted to foot the bill to get answers.

On Tuesday, Siedle said the 60 email response from the state did not contain the necessary investment prospectuses to do the investigation, and that the state should return the money to the retired teachers. 

“Since the marketing and other information you have provided regarding ERSRI's real estate investments is potentially misleading to investors/stakeholders when unaccompanied by the Prospectuses or Offering Memoranda, I request that you refund to the Rhode Island Retired Teachers Association the full amount they have paid to date,” wrote Siedle to Magaziner's office on Monday. 

Parsing the Latest on Transparency

Siedle had set out to investigate the origins of the real estate class investments. 

"In our first-ever crowdfunded investigation, Double Trouble: Wall Street Secrecy Conceals Preventable Losses in Rhode Island issued in June 2015, we revealed that real estate is the Rhode Island state pension's worst performing asset class by far. Real estate investment performance has been nothing short of horrific over the past 10 years—2 percent versus the Fund’s benchmark return of 9.6 percent. Real estate underperformance has cost the pension approximately $638 million over the past decade," wrote Siedle on his Kickstarter in December

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Seth Magaziner

After the responsive documents were returned, Siedle took the Treasurer’s office to task this week. 

“After paying ten thousand dollars, all Magaziner has given RIRTA is the advertising, promotional brochures regarding the real estate investments. The legally-definitive prospectuses and offering documents are being been withheld. These are the key documents that detail investments, costs and risks. Regulators like the SEC warn investors that ‘investors should read and understand the prospectus before deciding whether or not to invest in the fund,” said Siedle. “To provide the fluff marketing materials without the key legal documents, is to run the risk of misleading stakeholders."

"For a fund manager to deny access to prospectuses and offering memoranda prior to any investment decision, and merely provide promotional material to investors, is potentially misleading and may violate general antifraud provisions of the federal and state securities laws," said Siedle. "Yet withholding such critical information from stakeholders is precisely the policy of the Treasurer’s office."

The Treasurer’s office defended their decision. "This is not a matter of choice. We are contractually prevented from making the prospectuses public, and doing so would give sensitive strategic information to competitors of the funds that we invest in, which would hurt our performance," said David Ortiz, spokeperson for Magaziner. "The proprietary nature of these documents is not unique to Rhode Island. Our office is a national leader in investment transparency, and has consistently pushed for greater disclosure—but we can't violate our contractual obligations or intentionally undermine the investment performance of the pension fund."


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