National Conference on Teacher Retirement Fuels Secret War on Ohio, Minnesota and Other State Teachers Seeking Pension Reform

For a mere $5,000-$26,000 membership dues/sponsorships, NCTR secretly offers "opposition research" to state pensions to combat investigations into wrongdoing initiated by participants.

While pensions are supposed to be managed for the exclusive benefit of their participants, thanks to NCTR prodding, increasingly state teacher funds view their participants as the enemy.

Over the past few years, the National Conference on Teacher Retirement has been secretly leading, as well as fueling a nationwide battle pitting its dues-paying members—state teacher pensions and their Wall Street allies—against investigations initiated by concerned teachers seeking greater transparency regarding their retirement savings. While pensions are supposed (under applicable law) to be managed for the exclusive benefit of their participants, thanks to NCTR prodding, increasingly public pensions view their participants as the enemy. For example:

• Documents released in connection with a participant review in Minnesota recently revealed the Teacher Retirement Association pension had long been recording member phone calls and keeping files on dissidents—all unbeknownst to them.

• Pensions in Minnesota, Ohio, Rhode Island, and North Carolina have refused to comply with state public records laws and provide participants with fundamental documents, such as prospectuses, related to their retirement savings.

• In Ohio, 76 year old retired teacher John Curry—a longtime critic of mismanagement and excessive staff compensation at the STRS Ohio pension—received via certified mail a Notice of No Trespass prohibiting him from entering or remaining on pension property, including all connecting offices and the parking garage.

If your pension has treated you as an enemy, tell us about it now in a comment.

NCTR’s So-Called “Opposition Research”

In February, 2023, the dirty tricksters at the National Council on Teacher Retirement, secretly posted on their website a Special Report: Ted Siedle and Public Pension “Forensic” Investigations, authored by Leigh Snell. (See entire Report below.)

The purpose of the secret Special Report was to alert NCTR’s 63 pension system members of the serious risks posed by a growing “movement” for independent expert forensic investigations into potential wrongdoing at public pensions—the investigative findings of which were being reported to federal authorities, specifically the SEC and FBI. More recently, NCTR has been secretly providing its Special Report to certain other “friendly” parties—including pension media, supposedly for “background purposes only”—to undermine even proposed forensic investigations by participants.

It seems state pension officials and their allies are panicked that independent investigations brought on behalf of participants (i.e., not controlled by the pensions themselves) might bring to the attention of federal regulators and law enforcement certain corrupt practices of state pensions and their Wall Street money managers which potentially violate federal laws and regulations. (Since state officials, such as Governors, Attorneys General, and State Auditors are typically involved in, or to some degree responsible for, public pension wrongdoing, state pension scammers have little fear of potential state prosecution.)

Snell, as NCTR’s so-called Federal Relations Director, felt compelled to speak out against growing pension participant scrutiny.

NCTR offered Snell’s amateurish “opposition research” to its members to help them combat impending serious “attacks” by national experts (commissioned by participants) that might result in federal regulatory, or law enforcement action against state pensions and their Wall Street allies.

In 2023, Leigh Snell, as NCTR’s so-called Federal Relations Director, felt compelled to speak out against pension participant scrutiny. NCTR offered Snell’s amateurish “opposition research” to its members to help them combat impending serious “attacks” by national experts (commissioned by participants) that might result in federal regulatory, or law enforcement action against state pensions and their Wall Street allies.

NCTR’s NEA Origins

As noted in a previous article, unless you’re a state or local pension board or staff member, you’ve probably never heard of NCTR. NCTR’s website claims the organization began in 1924 and was affiliated with the National Education Association until 1971. NEA is the once-powerful educator union (with dwindling membership) that, decades ago, registered as an investment adviser with the SEC so it could supplement its declining membership revenues with advisory fees from its members’ growing retirement savings.

How NCTR Makes Money Helping Wall Street Sell Investments To Your Pension

If you are a state teacher, most likely tens of thousands of dollars from your pension are squandered annually to pay NCTR membership dues ($5,000 annually) and for your pension’s board and staff members to travel to and attend ($2,500 registration fee) lavish conferences at luxury venues, such as on the famed beaches of Waikiki, promoted by this organization.

In addition to the cash NCTR rakes in from trusting public pensions, it garners far greater dollars from Wall Street money managers who willingly fork over big bucks to join ($4,500) and sponsor (up to $26,000) NCTR conferences—all for the opportunity to pitch their costliest investment products to “the dumbest investors in the room,” i.e., funds overseen by laymen lacking any investment experience. It’s a small price for Wall Street to pay for the opportunity to earn billions from managing a portion of the trillions NCTR boasts on its website its pension system members have to invest.

“Becoming an NCTR event sponsor gives you the opportunity to be in a face-to-face environment where you can network and increase market visibility. Gain the competitive advantage, while making direct connections with high-level decision makers from more than 63 public pension systems from across the nation, with combined assets exceeding $2 trillion in their trust funds. - NCTR Website

If eliminating waste interests you, we suggest you file a public records request with your pension demanding to see all membership dues and other expenses, including, but not limited to board and staff travel, related to NCTR conferences, events and services. The amounts paid by your pension for questionable, conflicted advice may shock you.

If eliminating waste interests you, we suggest you file a public records request with your pension demanding to see all membership dues and other expenses, including, but not limited to board and staff travel, related to NCTR conferences, events and services. The amounts paid by your pension for questionable, conflicted advise may shock you.

In early 2023, only NCTR dues-paying state teacher pension plans and their Wall Street allies foolish enough to pay $5,000 to $26,000 in annual membership dues and sponsorships were allowed to access online the Special Report by Leigh Snell.

Below is the full Report, more recently furnished to certain other “friendly” parties—including pension media, for “background purposes only.” The NCTR document was obtained through a public records request to the Teacher Retirement Association of Minnesota. An identical request to State Teachers Retirement System of Ohio was summarily denied. (For the past 4 years we have been involved in public records litigation with STRS Ohio.)

Caution: The NCTR Special Report is offered without correction of any of its many legal, regulatory and factual errors. Our goal, in publishing the Special Report, is simply to make teachers aware of the secret NCTR effort to oppose participant scrutiny their pensions are funding: Your money is being used against you.

Special Report: Ted Siedle and Public Pension “Forensic” Investigations, by Leigh Snell

Edward “Ted” Siedle calls himself “the nation’s leading expert in forensic investigations of money managers and pensions.” He claims all the investigations he has undertaken conclude that public pensions are significantly underfunded mainly due to “mismanagement of investments,” not funding or benefits. Siedle, who has reviewed a number of state and local pension plans – including the Employees’ Retirement System of Rhode Island (Rhode Island ERS), the State Teachers Retirement System of Ohio (Ohio STRS), and the Teachers’ Retirement System of Illinois (Illinois Teachers) – recently began a crowdfunding effort in January 2023 for a new investigation in Rhode Island to determine if, according to Siedle, mismanagement of the pension cost workers their promised COLA.” What’s going on?

Siedle went to law school at Boston College and graduated in 1983. During law school, he had an internship with the Securities & Exchange Commission (SEC), and when he graduated, took a job there as an asset management lawyer. In the mid-1980s, he was hired by Putnam Investments, Inc. as an in-house counsel, whose responsibilities included monitoring Putnam’s compliance with federal and state securities laws and with the company’s code of ethics.

Siedle left Putnam in October 1988, and in 1990, started his first company, an asset management firm in Providence, Rhode Island, where his chief backer was Henry Kates, chairman of the Mutual Benefit Life Insurance Co., according to the Providence Journal. The newspaper reported that he then moved to Boston and in 1992 was identified as a Massachusetts state broker, “meaning that he was on a list of brokers that the state Investment Commission could use to executive [sic] trades in the state pension fund.”

Siedle founded his current business, Benchmark Financial Services, Inc. (BFS), in January of 1999, where he claims to “have pioneered the field of forensic investigations of retirement plans” and to have “successfully conducted investigations involving well over $1 trillion in plans.” In addition, in 2017, Siedle was awarded the largest SEC whistleblower award in history – $48 million – in connection with helping the SEC secure a $307 million settlement with JPMorgan over the bank’s failure to disclose conflicts of interest to its wealth management clients. In 2018, he was awarded the highest Commodity Futures Trading Commission (CFTC) whistleblower award — $30 million – also in connection with JPMorgan’s 2015 settlement.

Siedle claims his independent expert forensic reviews focus on “conflicts of interest, hidden, excessive and bogus fees, fiduciary breaches and violations of law.” But consider this, in the case of its review of Ohio STRS, the BFS Report clearly states that BFS was: “not hired to detect or investigate fraud, concealment or misrepresentations and did not attempt to do so [emphasis added];” clearly states that BFS was “not hired to, and did not attempt to conduct a formal or legal investigation or otherwise to use judicial processes or evidentiary safeguards in conducting our review [emphasis added];” underscores that “many of the subjects addressed in this report are inherently judgmental and not susceptible to absolute or definitive conclusions;” and does not make any specific allegations of fraud or criminal conduct against Ohio STRS.

Instead, what BFS has provided, at least in the Ohio case, is what the firm describes as “a high-impact, limited preliminary forensic review of the pension.” Its purpose is “to readily identify, at a reduced cost, deficiencies which, in our opinion, if addressed, would significantly improve investment management and performance results.” Siedle nonetheless describes it in Forbes as a “deep-dive into the pension’s investments.”

Thus, by BFS’ own acknowledgement, it would appear these so-called “deficiencies” that are identified do not relate to fraud, concealment, or misrepresentations, as these situations are not investigated. Nor, apparently, do they involve illegalities, as these are not examined. And if questions are raised, they do not appear to necessarily be subject to right or wrong answers.

Nevertheless, the BFS Report states in its title it is a “forensic investigation.” However, Ohio STRS response to Siedle notes that a forensic audit or investigation is an examination of an organization’s financial records to derive evidence which can be used in a court of law or legal proceeding for the purpose of uncovering criminal behavior such as fraud or embezzlement. And the American Institute of CPAs (AICPA) has issued a “Statement on Standards for Forensic Services” effective January 1, 2020, to govern forensic services provided by certified professional accountants (CPAs).

But, as Ohio STRS goes on to point out, Siedle is neither an accountant nor an auditor. As such, he is not bound by the professional standards of the Governmental Accounting Standards Board (GASB), AICPA, or the Actuarial Standards Board. Siedle, however, objects in Forbes to any such characterization that he is not qualified to conduct a forensic investigation by stressing he is “a former SEC attorney, the nation’s leading pension forensics expert who has conducted well over $1 trillion in investigations, and the winner of a record $78 million” award in whistleblower fees from the SEC and CFTC for what he characterizes as his “forensic insights.”

In any case, it would seem to follow that for BFS, a forensic investigation is “successfully conducted” even if no formal or legal investigation was performed; no evidentiary safeguards were used; no fraudulent activity was investigated; and no forensic audit services were provided subject to industry standards.

Nevertheless, in his writings and interviews, Siedle claims his reviews over the years have led him to conclude, without any expressed doubt – and often no exceptions – the following:

1.) Public pensions are “rife” with excessive and hidden investment fees and risks, conflicts of interest, and wrongdoing. But the Ohio State Auditor, for example, in his review of the BFS report on Ohio STRS, found “no evidence of fraud, illegal acts, or data manipulation related to the $90 billion held in trust by STRS for its members.”

Furthermore, the State Auditor said “STRS’ organizational structure, control environment and operations are suitably designed and well-monitored, both internally and by independent experts,” and that these experts “help assure that STRS follows applicable asset and liability measurement, reporting, investing and cash management laws, professional standards, and best practices.” The Auditor underscored that his conclusions are consistent with “the findings of these independent firms.”

Furthermore, the State Auditor noted that with regard to BFS allegations that private equity (PE) managers might be charging the pension fund fees and expenses exceeding contract amounts, while “there are no absolute safeguards that management fee fraud cannot occur,” private equity fund audits and the Ohio STRS’ controls “reduce, if not eliminate, the risk that PE funds are overcharging fees.”

Finally, the Ohio Auditor said the due diligence that PE managers must perform to identify underperforming companies is critical to the success of a PE fund, and limited partners agree to fees on committed but unpaid capital with the understanding that the fund’s success depends, in large part, on successfully identifying acquisition targets before the PE manager draws committed cash from investors. “To claim that a PE fund is ‘doing nothing – no service whatsoever is provided…’ is false,” the Auditor said in response to such BFS assertions regarding these fees.

2.) Public pensions are not fully protected under law or by law enforcement. Siedle insists, “many of the important, substantial protections provided to private sector workers under federal law simply do not apply” to public pensions, and that “no comparable comprehensive pension protections exist under state law.” However, many governmental plans are subject to fiduciary standards based on those imposed by the Employee Retirement Income Security Act (ERISA). For example, the Ohio Revised Code language governing STRS Ohio generally mirrors ERISA and specifically includes the ERISA fiduciary standards, including the duties of prudence, loyalty, exclusive benefit and diversification. Additionally, the Ohio Code closely reflects ERISA’s prohibited transaction provisions, as Ohio STRS pointed out in its response to the Siedle review.

Similarly, the Jacksonville Police and Fire Pension Fund – another subject of a BFS forensic investigation in 2015 – noted that Florida statutes which regulate government plans in Florida state that boards will “comply with the fiduciary standards set forth in [ERISA].” As the Jacksonville plan’s response to the Seidle review points out, “[c]learly, the Fund’s fiduciary duty under Florida law and the fiduciary standard set forth for private industry under ERISA are the same standard.” Ironically, in one of his 2021 opinion pieces in Forbes, Siedle concedes that his forensic investigation of the Jacksonville fund “revealed that while the city pension was not subject to federal (ERISA) pension law, since it had voluntarily adopted the highest ERISA legal standards and then failed to enforce those standards, violators could be subject to personal liability for any ERISA fiduciary breaches.” Siedle admitted that “[i]n short, this non-ERISA government pension voluntarily became ERISA governed.”

Yet that admission still does not stop Siedle from insisting, in that very same 2021 piece, that “since ERISA doesn’t apply” to state and local pensions, “none of the above-mentioned protections [i.e. requiring the disclosure of financial and other information concerning the plan to beneficiaries; establishing standards of conduct for plan fiduciaries; and providing for appropriate legal remedies exist with respect to America’s state and local government pensions [emphasis added].”

3.) Wall Street “cockroaches” – as Siedle generally refers to investment firms — heavily contribute to the political campaigns of elected officials, in hopes of being hired to manage money for the public pensions overseen by elected officials. “It’s called ‘pay-to-play’ and it used to be illegal. Now it’s commonplace,” he asserts. However, as the well-respected law firm of Akin Gump Strauss Hauer & Feld LLP stressed in a September 2022 political law alert to its clients, recent significant penalties are continuing to be imposed in these matters and they “illustrate a majority of SEC commissioners’ commitment to broadly enforcing the pay-to-play rule,” the law firm warned.

In one cited example, a $1,000 contribution to the campaign of a California gubernatorial candidate in 2018 while the covered associate’s employer was managing funds for the Regents of the University of California resulted in a fine of $95,000, even though the employee had attempted to obtain a refund of the contribution. In a similar matter, the SEC imposed a$70,000 penalty for a contribution that barely exceeded the rule’s de minimis exception, involving two covered associates who made contributions of $1,000 and $400 to an unsuccessful candidate for New York City mayor in the 2021 election. The SEC found both contributions to be in violation of the rule because two New York City retirement systems paid the investment adviser for advisory services during the period following the contributions. Akin Gump says these and other examples “highlight the strict liability application of the rule” currently.

4.) Public pension plans suffer annual losses in the billions of dollars due to investment consultant conflicts of interest. Siedle typically bases such assertions on a 2007 Government Accountability Office (GAO) report, which he says found that investment consultant conflicts of interest resulted “in substantial financial harm to [public] plans.”

The BFS report claims, “the GAO took the extraordinary step of quantifying the harm a conflicted adviser to a plan can cause,” and therefore BFS asserted “If the GAO estimates are correct, investment consultant conflicts of interest could cost a $90 billion pension, such as STRS, over $1 billion annually or approximately $20 billion over a ten-year period with compounding.” Siedle concluded “the estimated cost of conflicts nearly equals the unfunded liability, or alternatively stated, ‘but for’ the conflicts the pension would be nearly fully funded.”

However, as Ohio STRS points out, “where there was adequate disclosure of conflicts by plan consultants, the GAO found no negative correlation with plan performance.” Specifically, the GAO stated: “Because many factors can affect returns, and data as well as modeling limitations limit the ability to generalize and interpret the results, this finding should not be considered as proof of causality between consultants and lower rates of return, although it suggests the importance of detecting the presence of conflicts among pension plans. Whether specific financial harm was caused by a conflict of interest is difficult to determine without a detailed audit.”

By its own admissions, BFS apparently did not conduct such a detailed audit. Furthermore, Ohio STRS points out that the Department of Labor’s Employee Benefits Security Administration (EBSA) also commented on this GAO report, noting additional statistical concerns including “the rather skewed data sets (described in the report as ‘the imbalance between the large number of plans associated exclusively with conflicted consultants and the small number of those that were not’), the mixing of ‘conflicted’ and ‘non-conflicted’ consultants in groups labeled ‘non-conflicted,’ and the use of an estimate for the critical variable of investment returns.” Finally, the Ohio State Auditor found that “the legal guidelines, IMA’s [Investment Management Agreements], SEC filings, and overall knowledge of STRS help to mitigate any potential risks relating to conflicts of interest.”

It is also important to note BFS was on notice that this extrapolation was inappropriate and misleading. For example, in the case of its review of the Jacksonville Police and Fire Pension Fund in 2015, BFS said: “If, as the GAO study found, pension consultant conflicts cost plans 1.3percent, then over a 20-year period, with compounding, such conflicts may have cost the Fund almost 30 percent of its value—perhaps $300-$500 million.”

But the Jacksonville plan subsequently pointed out – as did Ohio STRS seven years later — the GAO report explained that the subset of consultants was not a random sample, but specifically chosen by the SEC, which prohibits extrapolation at the outset. Furthermore, Jacksonville noted that the SEC and GAO reports analyzed consultant conflicts in private pension plans, but BFS superimposed SEC and GAO findings on a public pension plan without any acknowledgement of the potential problems in doing so. Finally, although the GAO explained the extensive requirements of performing a forensic audit to document any financial harm would take, BFS failed to request raw data from either the current consultant, the previous consultant or the custodian of the Jacksonville plan in order to do so.

5.) The “most damning information regarding mismanagement” of public pensions is now kept secret from plan participants. Siedle believes “all of the workings of the pension must be open to full public scrutiny, including, but not limited to, investments.” However, he claims state public records laws have been almost “completely gutted, as Wall Street and elected officials have ushered in an era of secrecy.” Furthermore, Ohio STRS has chosen “to collaborate with Wall Street firms to eviscerate Ohio public records laws and avoid accountability to stakeholders,” Siedle stated in Forbes.

As part of his forensic investigation of Ohio STRS, Siedle requested an opportunity to inspect or obtain copies of public records related to Ohio STRS’ investment managers, investment consultants, performance compliance auditor, investment cost monitor, financial auditor, and custodians, as well as board and staff. But BFS claims “the overwhelming majority of the most critical disclosure information we requested was summarily denied.”

Why? First, Ohio STRS found some of the BFS requests to be overly broad. As the plan notes, courts have found a request to be overly broad when it seeks what amounts to a complete duplication of a major category of a public office’s records, for example a duplication of all records having to do with a particular topic, or all records of a particular type. In the case of the BFS requests, forty-three of the forty-five categories of documents listed in its initial Public Records Request included the words “any” and/or “all.” Despite that fact, in the majority of responses STRS Ohio nevertheless provided documents believed to be responsive and asked repeatedly for further clarification about the particular records being requested, which it claims it did not receive.

While Ohio STRS can document sending 812 documents and over 22,000 pages in response to the BFS requests, Siedle insists in his Forbes column that “[i]n response to my public records request, I got none [emphasis added].”

Also, Ohio STRS notes the Ohio Public Records Act contains dozens of exemptions excluding documents as “public record.” For example, under the law in Ohio (and almost every other state, Ohio STRS claims), an entity may assert a claim to preclude trade secret information from disclosure, and a public office cannot release such information without the consent of the entity asserting the protection.

To state that a private entity must compromise and lose the value of its trade secrets in order to do business with any public office is untenable, Ohio STRS argues. “Without these exemptions, information technology or investment firms would not risk doing business with government entities for fear that their valuable trade secrets could be disclosed to competitors,” the plan points out. Accordingly, Ohio STRS declined to provide certain documents to BFS, including prospectuses and offering documents as well as certain compensation information related to certain advisors to the plan.

The Ohio State Auditor agreed that it is important to protect records constituting trade secrets from access by competitors, and he found STRS’ classification of PE performance fees and the other documents as trade secrets to be “plausible.” However, despite the trade secrets law STRS relied on to classify these items as trade secrets, the Auditor does note STRS could elect to negotiate with their investment firms to allow more transparency. “The state legislature could also direct all statewide pension funds to engage only investment managers who do not rely on trade secret laws to withhold/redact documents,” he points out.

NCTR believes close examination – and constructive criticism, where warranted – of public pensions should never be discouraged. Where it exists, eliminating waste, or fraud or other forms of mismanagement, as Siedle wants to do, is always a worthy, necessary cause. However, given the unique features of each governmental pension plan, hyperbole should be avoided. Words such as “all,” “every,” and “none,” usually reflect opinion rather than fact.

Regarding Siedle’s criticisms, unfortunately he paints public pensions with a broad – and often tar-soaked – brush, and in many cases, some of his criticisms do not always appear to be factually based, as the State Auditor of Ohio’s recent review of the BFS report supports. Indeed, as Ohio STRS notes, many of the conclusions in the report on their system “are offered with little support other than the Author’s opinions.”

In fact, the phrase “in our opinion” is used approximately 60 times throughout the BFS Report, according to Ohio STRS.

Everyone is certainly entitled to their opinions, and from the Reason Foundation toTeacherPensions.org, there are plenty of those opinions about public pensions to go around. Usually, however, they are typically offered to public employees and retirees free of charge.

But when something is being paid for, it is often prudent to examine closely what it purports to provide – and what it clearly does not. Well-considered improvements and the correcting of mistakes of something of value can be most worthwhile, but unsupported criticism and canned, warmed-over rhetoric that can serve to undercut important institutions should be very carefully considered.

To learn more about protecting your pension: https://www.amazon.com/Who-Stole-My-Pension-Looting/dp/1612681034