Holding Gina Raimondo Responsible For Robbing America's State and Local Government Workers of Promised Retirement Benefits

Starting in Rhode Island and then nationally, Raimondo championed using government workers' retirement savings to enrich her Wall Street backers and further her own political ambitions.

No American politician—Republican or Democrat—has done more to undermine the retirement security of America’s workers than Secretary of Commerce Gina Raimondo.

In 2013, I recommended a forensic investigation of the Employee Retirement System of Rhode Island because it was glaringly apparent to me—even from a distance—that the integrity of the state pension’s investment program was on the verge of being compromised.

As a result of a series of articles I wrote in Forbes detailing my concerns at that time, my firm was retained by Rhode Island Council 94 of the American Federation of State, County and Municipal Employees, AFL-CIO, to review the pension’s investments. I was further asked to examine whether General Treasurer Gina Raimondo’s recent decision to gamble heavily on hedge funds was actually enhancing the security and sustainability of the state pension, as well as determine the true costs and risks of the sweeping changes she had implemented. In short, state workers in Rhode Island shared my expressed concerns about the huge hedge fund gamble their pension was about to take.

At that time, Raimondo had emerged as the leading national advocate of a disingenuous form of public pension “reform” which involved slashing worker’s benefits and severely restricting public access to information regarding the riskiest of pension investments while, in secret, dramatically increasing the risks to retirement plans and the fees these plans paid to her Wall Street backers.

Raimondo had emerged as the leading national advocate of a disingenuous form of public pension “reform” which involved slashing worker’s benefits while, in secret, dramatically increasing the risks to retirement plans and the fees these plans paid to her Wall Street backers.

Secrecy—eviscerating Rhode Island public records laws— was critical to Raimondo’s financial sleight of hand. Transparency would have exposed to pensioners that they were about to become victims of an outrageous wealth transfer scheme, i.e., their hard-earned retirement savings transfered to Wall Street billionaires.

This would be a decades-long wealth transfer from which state workers would never recover.

A report she and her backers produced in 2011 titled “Truth in Numbers: The Security and Sustainability of Rhode Island’s Retirement System” made a stark case for the pension overhaul and benefits cuts she envisioned, while notably omitting details regarding the greater costs and risks related to her plans for restructuring the state pension’s investment portfolio.

It was abundantly clear to me in 2013—even before the looting began—that Raimondo’s so-called pension reform would cost pensioners dearly and was intended to solely benefit Raimondo and her Wall Street backers. A graduate of Yale Law School, Raimondo was well-aware that she, as the chief fiduciary of the pension was required under applicable law to manage the plan for the exclusive benefit of participants. Apparently, given the choice between her political ambitions and state workers’ retirement security, the decision was an easy one for her.

As I wrote in my 2013 report:

Two years ago, Rhode Island's state pension fund fell victim to a Wall Street coup. It happened when Gina Raimondo, a venture capital manager with an uncertain investment track record of only a few years—a principal in a firm that had been hired by the state to manage a paltry $5 million in pension assets—got herself elected as the General Treasurer of the State of Rhode Island with the financial backing of out-of-state hedge fund managers. Raimondo’s new role endowed her with responsibility for overseeing the state’s entire $7 billion in pension assets.

In short, the foxes (money managers) had taken over management of the henhouse (the pension).

For Raimondo, a 42 year-old Rhode Island native, serving as state treasurer represents a major career boost. It also has presented her with an opportunity to enrich herself and her hedge fund backers at the expense of the state's pension fund, the public workers who are counting on it to finance their retirements and the taxpayers who could be stuck for millions, or billions, of dollars if it's mismanaged.

With respect to Raimondo’s unprecedented sweeping pension secrecy scheme, I noted:

Transparency and accountability have suffered as the pension has increased its allocation to hedge, venture capital and private equity funds to almost $2 billion or 25 percent and the Treasurer has withheld most information about these high-risk, high-cost investments from both the State Investment Commission, a 10-member volunteer body that is chaired by the General Treasurer and oversees the investments of the state pension, and the general public. Ironically, in Rhode Island, limitations on public access to records have grown in the Information Age.

But Raimondo and her Wall Street backers were not content to merely feast upon the exponentially greater fees they could secretly skim from the Rhode Island state pension under the guise of “pension reform.” They took their show on the road—from sea to shining sea.

Rhode Island's pension reform plan will "solve the problem once and for all,” ending decades of unfunded pension plans leading up to the current crisis, said Raimondo. Rhode Island municipalities and state and local pensions around the nation should follow her lead, she said in a YouTube video.

And follow Raimondo’s disastrous lead they did.

Today, state and local pensions across the nation are heavily invested (many over 50%) in the highest cost, highest risk “alternative” investments ever devised by Wall Street. These retirement funds are severely underfunded, largely as a result of Raimondo-style investment mismanagement, i.e., reckless gambling.

Public pension secrecy—once unprecedented—is now the norm. Pension stakeholders, including taxpayers and active and retired government workers in every state, county and municipality across the nation, are not allowed to scrutinize the investments their pensions make. Access to pension investment records is routinely denied, as Wall Street claims “trade secret” exemptions from state public records laws. Today, prospectuses and other investment offering documents distributed to millions of wealthy investors globally, are somehow allowed to be withheld from public scrutiny.

Perversely, state workers including teachers, police, and firefighters—who, unlike wealthy investors cannot afford to gamble—are not permitted to “read the prospectus before investing” their retirement savings.

Today, more than ever, public pensions are run for the exclusive benefit of politicians and their Wall Street backers—pensioners be damned.

Did “pension reform” Gina Raimondo style, “solve the problem one and for all”? Hardly. Raimondo and her Wall Street backers have done just fine. But participants in America’s state and local pensions will never—in their lifetimes—recover from the damage she has done.