Riley: Wainwright Issues Cash Flow Report That Points to Providence Asset Fraud
Tuesday, April 12, 2016
A very interesting addendum was include in The Providence Pension Investment Commission report for the meeting on March 24, 2016.
The addendum was an accounting of the cash flows to the fund advisor Wainwright Investment Counsel LLC dating back to when Wainwright was selected by current Mayor Jorge Elorza, the Chair of the Investment Commission, where Wainwright has been the advisor since 1995. The advisor to the Pension Plan is not a permanent position so presumably Commission Chairs Taveras (2011-2015) and Cicilline (2003-2011) also selected Wainwright Counsel LLC prior to the recent appointment by Elorza.
Each of these Commissions and Chairmen as Fiduciaries are responsible for verifying the assets in the Pension Fund and investing those assets. Each year they report the status of the pension fund as a public document to municipal bondholders and this report is included every year in section D-1 in the Comprehensive Annual Financial Report of the City. Federal Securities law requires these numbers to be accurate so as not to mislead investors. These numbers also inform taxpayers and Pension Beneficiaries. Inflating assets or lying about the liabilities is Fraud and a violation of State and Federal law.
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Clearly Wainwright anticipates a regulatory investigation because the city reports returns on assets improperly and my article of a few months back questions the claimed return on “reported assets” that Taveras widely touted in 2014. The returns were wildly overstated because the return on actual assets is well below that which Wainwright claims on the assets they manage. Hence the reason for this report by Wainwright. A review of meetings minutes going back decades shows commission member frustration with making great returns on assets but never making headway with accumulated assets.
The important finding for readers is that Providence is either inflating the dollar amount of assets in the Pension Plan or it is earning zero return on $100 million of unexplained assets that aren’t managed by anyone.
Why doesn’t the Auditor General look into this?
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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