Ohio Pension Lies, Threats and Misinformation Harm Investors Globally

"Hostile takeover" of state teacher pension by reform-minded teachers? Hardly. There is nothing funny about the damage to investors globally caused by Ohio pension lies.

There is nothing funny about the damage to investors globally caused by Ohio and other state pension officials' lies.

In May, 2024 I wrote a humorous article about absurd misinformation disseminated to the general public by officials at the $90 billion State Teachers Retirement System of Ohio. The article, entitled Did Ohio Teachers State Pension Really Just Say That? began:

When lips move at the State Teachers Retirement System of Ohio, the public is about to be misled about investing. Count on it.

• Short List of Lies

In the article, I listed 5 outrageously wrong statements regarding investment fundamentals and pension law which STRS officials had broadcast to pension stakeholders, including taxpayers. They were:

1. Index funds do not provide diversification.

2. Performance fees paid by investors are not fees.

3. Paying Wall Street money managers millions in fees for doing nothing (fees on committed, uninvested capital) is no worse than paying teacher salaries over the summer months when they’re not in the classroom.

4. Investment firms will not risk doing business with government pensions if they have to submit to public scrutiny and accountability by complying with state public records laws.

5. The state fiduciary standards STRS Ohio is subject to under Ohio law mirror ERISA federal standards.

To be clear, the above was not intended to be an exhaustive list of Ohio state pension officials’ lies.

• Long COVID Excuse

Another doosy was when the Ohio Retirement Study Council, established by the legislature to oversee all of Ohio’s five state pensions, used the excuse (after I exposed the failure) it had somehow neglected to perform a statutorily-mandated audit of the teacher pension for over 16 years due to COVID. That whopper was deserving of an article of its own.

One might expect that after being publicly humiliated repeatedly, Ohio state officials would be more careful in their statements about federal securities laws and fiduciary standards, as well as state audit requirements. Sadly, that has not been the case. State officials still apparently believe they can continue to misinform the public about pension and investment matters.

Worse still, state officials have taken their lying to new levels, adding intimidation and threats directed at their critics.

• Hostile Takeover of Teacher Pension by ….. Teachers?

A year ago, after reform-minded teachers won—for the second time—control of the pension board, state officials, including Governor DeWine and Attorney General Yost, incredulously claimed the pension had been the subject of a “hostile takeover.” Suddenly, the duly-elected board members—voted in by teachers who had long had grave concerns regarding management of their pension (for good reason)—became targets of state-funded litigation, with no right to independent counsel paid for by the pension they had a fiduciary duty to defend. State officials have joined together and continue to use unlimited state resources to crush the reformers who have no access to state funding for their defense.

Contrary to DeWine and Yost’s wild assertions, in reality the reform-minded STRS Ohio board was poised to end a longstanding and notorious hostile takeover of the pension by elected officials who have for decades hijacked state pension assets for their own benefit—contrary to applicable law. In Ohio, state officials have long steered pension contracts to Wall Streeters who contribute to their political campaigns.

Who can ever forget the Beanie Baby fund the Ohio Bureau of Workers Compensation invested in for political reasons.

It’s no secret that, in Ohio, decisions about pension investments controlled by elected officials have nothing to do with what’s right for pensioners, i.e., investment merits.

… the reform-minded board was poised to end a longstanding and notorious hostile takeover of the pension by elected officials who have for decades hijacked state pension assets for their own benefit—contrary to applicable law. In Ohio, state officials have long steered pension contracts to Wall Streeters who contribute to their political campaigns.

• State Officials Thwart Teachers From Following Warren Buffet’s Sagely Advice

By indexing all or most of pension assets (as the reformers proposed and Warren Buffett has advised public pensions), for the first time ever the assets would be invested in low-cost, fully transparent funds for the benefit of its participants and beneficiaries—precisely what the law requires. No longer would the pension be managed for the benefit of politicians, overpaid investment staff and their Wall Street pals.

It was a make-or-break moment for Ohio politicians and they weren’t about to allow teachers to derail their gravy train by following the advice of the Oracle of Omaha.

• State Investment Lies Endanger Investors Globally

There’s nothing funny about state pension officials, including politicians, lying to the public and investors globally about fundamental investment matters. If investors throughout Ohio and beyond are misinformed as to risks, investment fees, audit requirements and legal fiduciary protections, there will be financial consequences. How bad can those consequences be?

At this moment, over a dozen states (including Ohio), are proposing to invest up to 10% of their assets in cryptocurrencies. State officials—who may or may not be personally invested in crypto—are outrageously advising the public that investing in crypto is “low-risk.” On the other hand, the crypto industry is telling investors that impending pension investment is an endorsement of their worthless schemes. Investors globally are watching to see if governments embrace crypto and will follow their lead.

• Pump-and-Dump Schemes Often Collapse Overnight

Politicians are well aware that pension mismanagement for which they may be responsible usually takes years, or even decades, to surface. They count on being long gone before the damage surfaces. Pump-and-dump schemes often collapse overnight—a fact which politicians evidently don’t appreciate. This won’t be a slow-moving trainwreck—it will happen suddenly. Crypto investors may lose their entire savings and that’s not funny.