Riley: RI Treasurer’s Race Part 4: Public Fund Summit 2014

Tuesday, July 29, 2014

Michael G. Riley, GoLocalProv MINDSETTER™

 

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As of this writing, Seth Magaziner and his campaign have not yet responded to our clarification requests. I have accused Mr. Magaziner of fabricating his investment credentials, track record, and resume. This should be easy to refute, if they had any evidence at all that his claims were true. His claims of superior track record and performance can be easily viewed on WPRI treasury debate. Maybe this last weekend’s visit by close family friend Hillary Clinton provided him with word parsing advice. You know, the definition of “is.” In any event, we’ll give him another week. I also sent a series of difficult questions to Ernie Almonte. Mr. Almonte is probably the most well-know and qualified accountant in the State. He was Auditor General, President of Americas CPA’s , a certified fraud examiner, etc. In short, he is an authority on accounting and he is running for Treasurer. Mr. Almonte, in the same debate Seth Magaziner invented his own resume, honed in on a huge topic. The unfunded cities and towns. Almonte warned that this was a huge and worsening issue. This brings up some interesting question for the candidate with so much accounting background who most definitely is running on ethics and integrity.

Mr.  Almonte, on January 31, 2014, Segal &Co in their audit said Providence should end its practice of declaring next year’s pension contribution an “asset” in the Providence Pension Plan- for last year that was $57.3 million dollars. I have studied hundreds of CAFR’s and valuation audits across the country and never saw this anywhere, which is why I flagged it. Providence officials refused to respond until they were forced to disclose this issue when they went to borrow in June. That disclosure confirmed that Providence was using faulty accounting. So no other city than Providence, Rhode Island did this. My conjecture is that this treatment is dishonest and deceitful and non-GAAP and non-GASB…

So here are my questions:

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  • Is this accounting in Providence acceptable?
  • Does this accounting conform to SEC disclosure rules?
  • When will that $57 million appear in pension assets again, if ever?
  • Am I right that that pension asset was not legitimate and never really existed?

 

These questions have been sent to Mr. Almonte as have clarification of track records request to Mr. Magaziner. We await their responses for next week’s edition.

Public Funds East Summit 2014: “Navigate the future”

Last week I attended the Opal Public funds Conference for the 8th consecutive year in Newport, Rhode Island. This conference is a very big deal in the publicly managed funds world and is well attended each year. There is an older conference that has been held in Scottsdale, Arizona annually since 1998. These are essentially the only conferences of their type East and West. All the key figures in this $20 Trillion dollar pension management world were there, including a half dozen State Treasurers to dozens of municipalities and Wall Street asset managers. This was the 4th time I attended, having presented my Hedge Fund in 2007 and 2008.

Rhode Island was represented chiefly by CIO Anne Marie Fink in Gina Raimondo’s Treasury Office. There were other RI appearances by treasury staff and SIC members. Several Towns in Rhode Island were represented.

The usually sedate and boring meeting turned raucous early, as by the 4th panel on day one of this 3-day event there was a palpable anger setting in among those who were fighting against pension reform and efforts to end Defined Benefit Plans Nationwide. There was yelling and cussing probably never seen before at a conference like this, and I was unwittingly drawn in as one of maybe 5 out of 200 in the room who thought DB plans were dangerous and unnecessary. I am used to the whole me against the world thing but I was unprepared for this reaction and taken aback and by the end of the conference my ideas and opinion had shifted a bit.

“Kill the Hedge Fund Guys”

The Marriot Hotel that day had turned into what seemed like a union rally that I was attempting to bust. Moderator Ed Friend, author of a unique pension solution called “Double D” asked the audience a question. Does anyone think we need to move away from Defined Benefit plans in public fund management? I eagerly raised my hand anticipation a 50/50 participation and found I was the only one with my hand up out of 200 attendees. He called me to the Microphone and asked me to explain. I said “I am taxpayer here in Rhode Island, we have a crisis in our cities and towns. They are all Defined Benefit plans. A number of those towns are less than 40% funded and I don’t think taxpayers should have to make up the difference? I want to close that door and put funding and investment risk back on either everyone or no one. Not just the taxpayer.” I returned to my seat amidst not so muted grumbling and hisses. You see, this panel was here to vilify anyone who wanted to end defined benefit plans. There were consultants, who of course make a living advising DB plans and Plan Managers like New Haven Police. There were raucous audience members including the Chicago teacher’s fund snarling and spitting out the names of the Arnold Foundation. Tea party, Koch Brothers, Pew, etc. these evil folks were all trying to steal  money from pension funds so that hedge fund managers and Big Wall Street Banks would divvy up the management fees and salaries the folks in this conference felt entitled to. As a result, 401k’s threatened the hard earned occupations of managing and consulting on Defined Benefit plans. It seemed to me a few were beneficiaries of the plans themselves, in fact, most were not. It got so heated and crazy that at one point I was so scared, considering I was the only heretic in the room, that I developed an escape plan. But after that panel concluded, roughly 25% of the audience emptied into the hallway giving each other fist bumps and high fives. Where the hell was I? This movement and very present vibe lessened over the 3 days but bubbled up a few times more.

It was going to be very interesting to see how Rhode Island and its hybrid plan would fly when RI Treasury CIO Anne Marie Fink took the stage.

To be continued…

Next week: Magaziner, Almonte responses, and ideas from summit.

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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.

 

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