Minnesota Governor Walz Warned Of "Many Serious Risks" Facing State Pensions Under His Watch

Records Reveal Walz, Legislators, AG, Auditor, Were Warned About Risks Posed By Proposed Forensic Investigation Into State Pension Mismanagement. Has Someone Been "Cooking The Books?"

Multiple ominous “red flags” are now swirling around Minnesota’s state pension system under Walz’s watch. Has someone been “cooking the books?”

In some states, including Minnesota, public records laws require that state agencies provide individuals seeking data about themselves, the data within days. Absent such a specific legal requirement, state and local pensions stonewall requests for data for months, years, or simply ignore them. Noncompliance with state public records laws is commonplace, as officials increasingly seek to thwart public scrutiny. The following is the first of a series of documents we obtained through an individual public records request from the Minnesota Teacher Retirement Association. (TRA did not—despite repeated reminders—respond within the statutory period of 10 days.) As alarming as the documents provided are, other documents—presumably more damning—are still being withheld supposedly pursuant to the attorney-client privilege.

On March 11, 2024, Jay Stoffel, the Executive Director of the Teacher Retirement Association of Minnesota—a state pension with $28 billion in assets—blasted out an email entitled “An Important Matter” to all trustees of the TRA Board and staff. This same alarming email would, within days, be sent by him to state legislators and officials, including the offices of Governor Walz, Attorney General and Legislative Auditor. (Walz, as Governor has long been chairman of the pension board and the Attorney General is also a board member.)

A “situation” posing “many serious risks to the agency and pension fund” had arisen which they “should be aware of and concerned about,” Stoffel wrote.

The seriously risky situation Stoffel was warning Governor Walz and others about was a proposed forensic investigation into potential mismanagement or wrongdoing at the pension, conducted by a nationally-recognized expert and commissioned by educators who were participants in the pension.

That’s right, the impending “grave danger” was: State workers and retirees who contributed their hard-earned savings to the pension and whose retirement security was potentially at risk—the very same individuals for whose exclusive benefit the plan (under applicable law) is supposed to be managed—were fundraising to get a “second opinion.”

Worse still, the opinion they were seeking was that of a seasoned forensic investigator of their own choosing.

The impending “grave danger” was that state workers and retirees who contributed their hard-earned savings to the pension and whose retirement security was at risk were fundraising to get a “second opinion” from a seasoned forensic investigator of their own choosing.

While pensioners had a lot to gain from this proposed independent expert review of their retirement plan, Stoffel, Walz and other state officials apparently agreed persons responsible for management of the pension over the years might have a lot to lose.

Teacher pension Executive Director Stoffel began:

“I want to update you on the recent crowdsourcing effort of a group of teachers to raise $75,000 to pay Edward Siedle, a Florida lawyer, to do the following, according to the teacher group’s GoFundMe page:

PROBLEM:

Teacher Retirement Association (TRA) has failed to adhere to their four Guiding Principles (Shared Commitment, Intergenerational Equity, Long-Term Financial Goals, and Maintain Recruitment Value of Pensions), has perpetuated inequity for Tier II members, has presented members and the public with misinformation, and has demonstrated lack of transparency.

SOLUTION:

We believe accountability can be achieved by performing a forensic audit, an in-depth, outside examination of an organization’s financial records and transactions to identify potential fraud, misconduct, or other irregularities.

There are very few attorneys willing to investigate state-level pensions, but we have been in conversations with Edward “Ted” Siedle who has agreed to serve Minnesota teachers in completing a forensic audit of TRA.

Mr. Siedle has worked for the Securities and Exchange Commission and is the nation’s leading expert in forensic investigations of money managers and pensions, focusing upon excessive and hidden investment fees and risks, conflicts of interest, and wrongdoing. He has investigated well over $1 trillion in retirement plans. Ted recently investigated and found mismanagement in Ohio’s teacher pension program as well as other state pension programs in North Carolina and Rhode Island and in cities such as Nashville, Chattanooga, and Jacksonville.

We are incredibly fortunate Mr. Siedle has agreed to lead us in investigating TRA’s pension system.

GOAL:

In order to retain his expertise, we need to crowdsource $75,000. We agree this sounds overwhelming at first, but if Ohio teachers can do it, Minnesota educators can do it too! And given the number of hours involved, the fee doesn’t come close to what private counsel would charge. In fact, if just 3,750 of the nearly 20,000 members on this page were to give $20.00 (or more!), we will have met our goal! If we don’t, your donation (minus any transaction fees) will be returned.

Thanks in advance for your support!

Relationship to recipient: We are a grassroots organization of educators from Minnesota who wishes to determine if our pension fund is being properly managed. We are raising funds to hire an expert attorney, Ted Siedle, who investigates pension management, nationally.

Plan for disbursement: Funds will be directly transferred to Ted Siedle once the goal is met. If the goal is not met funds will be refunded to donors (minus transaction fees).

At this point in time, the group has raised $57,259,” warned a nervous Stoffel.

“As trustees of the TRA Board, it is important for you to be aware of and concerned about risks to the agency and the fund, and this situation poses many serious risks. Specifically, TRA’s reputation as a trusted government agency is going to be questioned.”

Stoffel went on to explain the serious systemic risks he foresaw from an independent expert review:

“As a Minnesota state agency, TRA is subject to multiple oversight controls.

TRA is audited by two outside auditors, the Office of the Legislative Auditor and CliftonLarsonAllen (CLA). TRA has an internal audit department. MMB reviews TRA’s budget and expenditures and TRA staff are subject to MMB policies and collective bargaining agreements. The Legislative Commission on Pensions and Retirement, comprised of 7 Senators and 7 Representatives, exists to oversee and review pension related legislation. TRA is governed by a board of trustees who are fiduciaries, and is required to comply with statutes, which contain all plan provisions, including benefits and contribution rates. The TRA Board retains an actuarial firm to annually evaluate the financial condition of the pension plan and the adequacy of contribution rates. Finally, TRA and the TRA Board receive legal guidance from the Attorney General’s Office on a multitude of issues, including the Open Meeting Law and Data Practices.

Further, the risks are not just to TRA, but the State Board of Investment (SBI).”

“In researching Mr. Siedle,” reasoned Stoffel, “the reports he has issued on other pension plans are focused on the investments of the plan. As TRA does not manage its investments, Mr. Siedle’s inquiries likely will be focused on SBI. SBI invests assets for not just TRA, but the Minnesota State Retirement System (MSRS), the Public Employees Retirement Association (PERA), volunteer fire relief plans, state cash accounts of over 400 state agencies, and the non-retirement program that provides investment options to state trust funds and various public sector entities. Therefore, all of those groups, entities, and entities’ boards will be impacted by this movement.”

In short, any potential mismanagement or wrongdoing uncovered through the participant-led investigation could have broad implications for Minnesota state government—including Governor Walz and other pension board members, legislators, the Attorney General, actuaries and auditors, in Stoffel’s opinion.

As a pension participant-led transparency “movement” is emerging and gaining traction, state officials nationally and their industry allies are fearful.

Stoffel went on to enlist others in private industry—outside of Minnesota—to support his dire warnings:

“Leigh Snell, the Federal Relations Director from the National Council on Teachers Retirement (NCTR), wrote the attached article. The article focuses on Mr. Siedle’s background and provides feedback on Mr. Siedle’s report on the State Teachers Retirement System of Ohio (Ohio STRS), which is mentioned in the above GoFundMe description. Please note the serious issues Mr. Snell highlights with regards to Mr. Siedle’s report of Ohio STRS...”

(Note: TRA also provided a full copy of Snell’s “article” written and distributed by the National Council on Teachers Retirement to its members, allies and media nationally.)

Again, Stoffel wasn’t just warning his own Board and staff about this dangerous participant “movement” for pension transparency and accountability. In his first email, he went on to say:

“We have met and spoken with legislative leadership, SBI staff, and others in leadership roles who could be affected by this movement. Please let us know if you have questions.”

Other emails reveal Stoffel discussed his concerns about the proposed investigation and strategies with Jill Schurtz, Executive Director and Chief Investment Officer of SBI.

Stoffel was trumpeting his beliefs about the risks related to this proposed (still unfunded) participant-led investigation to seemingly anyone who had any responsibility for public pensions nationally (as well as industry organizations outside the state) in an effort to undermine the reputation of the investigator and credibility of the report—before the first word of any report had even been written.

Stoffel was trumpeting his views about the risks related to this proposed (still unfunded) participant investigation to seemingly anyone who had any responsibility for public pensions in an effort to undermine the reputation of the investigator and credibility of the report—before the first word of any report had even been written.

Stoffel later sent this same disturbing email to Simone Frierson in Governor Walz’s office; Patty Hand, Chief Operating Officer at the Minnesota Department of Education; Thomas Carr, Executive Budget Officer at the State of Minnesota, as well as Joseph Weiner, Division Manager Office of Minnesota Attorney General and Legislative Auditor Judy Randall. This time, Stoffel added to his email:

“We think it would be helpful and appropriate for Education Minnesota to publicly support TRA and the SBIs’ integrity. This effort poses a true reputational risk and will only distract from efforts to strengthen the TRA pension fund and member benefits.”

Asking Education Minnesota, an organization made up of 477 local unions and 84,000 members, including active and retired teachers, “to publicly support TRA and the SBIs’ integrity” before a proposed investigation even began surely sounds desperate.

When Minnesota state officials preemptively, aggressively target those who pursue transparency—including teachers who participate in the pension—the public should be very, very concerned.

Today, conspiracy theories abound and, thankfully, most are more imagined than real. Nevertheless, there are instances when state officials, including the Governor, public pension boards and staff, representatives of State or Legislative Auditors, Attorneys General and legislators join together to target individuals or firms that are working to ensure public scrutiny of public monies—to undermine their reputations and investigations. These schemes are rarely exposed but when they are (as in Minnesota), the public should ask:

• Why did Stoffel and his colleagues in government responsible for overseeing pensions in the past decade-plus (including Walz) immediately assume an independent, expert review would uncover anything seriously wrong, e.g., mismanagement or wrongdoing?

• What did they know about the state’s pensions that so worried them they were prepared to preemptively strike out?

• How long has any pension mismanagement or wrongdoing—known to them—been going on?

• How much has any mismanagement or wrongdoing cost stakeholders, including participants and Minnesota taxpayers, over the decades?

• Who stands to lose if the facts are exposed?

Numerous ominous “reg flags” are now swirling around Minnesota’s public pension system under Walz’s watch. When Minnesota state officials preemptively, aggressively attack those who pursue transparency—including teachers who participate in the pension—the public should be very, very concerned.

Last week, Ohio’s Toledo Blade in an Editorial wrote:

A cursory look at the Minnesota Teachers Retirement Association leads to the conclusion they’re either a world class pension or they’re cooking the books. Minnesota reported investment fees on the $26.7 billion teacher pension fund of $24.1 million. The teachers fund has a $6.6 billion private equity portfolio that would be expected to pay at least $132 million a year to fund managers. Moreover, a comprehensive study of 54 public pensions from 2008 to 2023 conducted by investment expert Richard Ennis shows fees average 1 percent of assets under management. By that metric Minnesota Teachers Retirement Association would be expected to pay over a quarter billion dollars a year to fund managers.

The national response from public pension advocacy agencies reflects the crisis these incredibly noteworthy numbers create. Either Minnesota has a special deal with Wall Street paying fees 90 percent under the going rate or an investment board made up of the governor, attorney general, secretary of state, and auditor, has massively massaged the truth.

A long term look at Minnesota’s pension math is just as perplexing. The teachers retirement fund purports to beat a composite index they created by 0.2 percent measured over 1, 5, 10, 20, and 30 years. The odds of that level of consistency over each measure of time are infinitesimal.

Governor Walz is reportedly under consideration as a Democratic Vice Presidential candidate yet he is almost completely unvetted by state media. Despite “red flags” and questions whether someone is “cooking the books” at the state’s massive pensions under Walz’s watch, only Ohio media has reported on the controversy. Minnesota media is mum.