COLUMBUS, Ohio — The Ohio retired teachers' pension fund is, once again, moving to hire a firm that allegedly has a lack of experience and personal ties to the board leaders, according to senior staff.
In an exclusive 45-minute interview with me, State Teachers Retirement System (STRS) Acting Executive Director Lynn Hoover explained her concerns about the board's latest hiring process. Through my records requests, I obtained the documents that back up her allegations.
A (somewhat long) recap
STRS is in chaos. In summary, there has been constant fighting, two board resignations and allegations of both a public corruption scheme and mishandling of funds. As of this week, there has been a dismissal and two senior staff resignations.
We broke the news Thursday that Hoover and CIO Matt Worley resigned after months of controversy.
RELATED: Both acting head and CIO of Ohio retired teachers’ pension fund resign amid controversy
In May, Attorney General Dave Yost filed a lawsuit to remove two members of STRS, stating they are participating in a contract steering "scheme" that could directly benefit them. Yost started the investigation after documents prepared by STRS employees alleged that Wade Steen and Chair Rudy Fichtenbaum have been doing the bidding of investment firm QED.
QED was started by former Deputy Treasurer Seth Metcalf and consultant Jonathan (JD) Tremmel. In 2020, they set their eyes on STRS, according to the 14-page memo Yost received.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them.
They couldn’t impress the board members, mainly because of their lack of experience and also because QED was not registered as a broker-dealer or investment adviser. The men also didn't own the technology to "facilitate the strategy," the documents say.
Steen and Fichtenbaum had allegedly been bidding continuously, pitching QED's direct documents to board members and proclaiming the company's talking points to other staff.
The pair should be removed because they broke their fiduciary duties of care, loyalty and trust when "colluding" with QED, according to Yost's case.
Click here to learn more about the lawsuit.
We have been covering this controversy from the beginning, including more than a dozen recent stories dealing with the latest problems around the alleged corruption plot. Watch and read this story for a more in-depth recap.
RELATED: Chaos-filled day at Ohio teachers’ pension board leading to even more ethical concerns
This fight began from a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less.
In short, "reformers" want to switch to index funding, while "status quo" individuals want to keep actively managing the funds. Recent elections have allowed the "reform-minded" members to have a majority of the board.
Reformers want a cost-of-living adjustment, or COLA. The COLAs were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. They were reinstated, but there has been a suspension of increases, significant for retirees who need this money and are dealing with inflation.
STRS staff have explained that they know the COLA is essential and are working to get it back. They added that the system is functioning well — better than any of the other pension systems in the state. A report done by the Ohio Retirement Study Council found that STRS has a higher return than any of the four other state pension systems.
The reformers also believe that this is a "sham" investigation meant to prevent democratically elected individuals from choosing what they want to do with their pension money.
Steen and Fichtenbaum have repeatedly brought up how quick the turnaround time was between Yost receiving the memo and filing the civil suit. It is unclear the total timeline, but the documents were received by government officials in early May. Yost said he was investigating on May 9, and by May 14, a lawsuit had been filed in Franklin County Court of Common Pleas.
In late Aug., Yost filed a slew of subpoenas against QED and others allegedly involved in this scheme.
The same month, QED spoke out to us for the first time and so did the AG.
Following that interview, Fichtenbaum did an interview to defend himself. In this one-on-one interview, Rudy Fichtenbaum explained his side — and why he is still considering a deal with the investment firm at the center of the scandal.
As of now, Steen has termed off his board seat, and got a tearful goodbye from pensioners in Sept.
DeWine has now appointed attorney Jon Allison to the board, a former top aide for Former Gov. Bob Taft.
Governance, or lack thereof
Back in May, consulting giant Aon pulled out of STRS. They provided board governance advice and services. This was the blow that made STRS staff sound the alarms to state executives about possible corruption.
STRS staff, in the anonymous letter, believed Aon left due to the possible hiring of QED and the instability of the board.
Two months later, McLagan, a data and analytics company that had been providing compensation advice, also quit.
Although the company did not provide any reasoning, it should be noted that they specifically consulted on performance-based incentives (PBIs). In June, the STRS board blocked staff from getting these PBIs, which can be referred to as bonuses. Then, McLagan quit. Two weeks after they quit, the PBIs were restored because the board was informed that they would be breaking the law by not having them.
I asked Hoover if she also thought the consultants left due to the chaos.
"Their termination speaks for itself," she responded. "But that is disheartening to lose a good governance consultant... investment compensation consultant."
This means that for the past four months, there has not been a main consultant advising the board on how to govern. But — the search to find a replacement is near its end.
Several firms applied. The staff selected Segal and Global Governance Advisors (GGA), the two that they believed were most qualified. Fichtenbaum had asked to bring a Hackett Group forward, as well, according to STRS.
Through records requesting, I obtained the due diligence document that vetted each firm.
Both Segal and GGA had strong references for their governance consulting for pensions across the country. Segal estimated they would cost about $163,000 per year, while GGA estimated $110,000 per year.
But Hackett was different.
Hackett
Hackett costs triple, with a flat-year price of $385,000. Of the three references they included, only one responded. The employer was from a decade ago and had only hired them to do an audit, not consulting.
They applied to the Ohio Retirement Study Council (ORSC) for a role to do a fiduciary audit of both STRS and Ohio Police & Fire (OP&R) in 2021, and once again, their references were unreachable or unable to be considered.
Of the five references they provided, four had "bad phone numbers/email addresses," according to the document. Hackett hadn't done work for the fifth reference, so they could not provide feedback.
The ORSC found that their proposals were "lacking in the governance component."
The Council ended up going with a different group but made sure to point out that if they didn't have the winner, they would have solicited more proposals, known as reissuing the RFPs.
Still, Fichtenbaum told me they are the ones he is leaning toward.
"If you really think somebody is a lot better, then paying more can be worth it," Fichtenbaum said.
I asked about the lack of references, and he responded that he wasn't familiar with the process of references in a non-academic setting.
"I don't know how it works in this pension consultant space," he said. "I don't know whether they asked or whether they just put these people down.
So why would the board choose a firm that is significantly more expensive and may have a lack of experience?
"I thought their presentation was impressive," Fichtenbaum said.
But Hoover isn’t convinced. The evaluation also brought up concerns with one of Hackett’s principals — Chris Tobe.
"I would expect professional behavior or a professional consultant that's gonna be on our engagement," Hoover said. "The actions, whether it's things on member forums — even since August's presentation — this individual has done that. I'll be very upfront that that's disturbing to me."
Tobe is one of the most vocal critics online of STRS, accusing staff of “hiding corruption” and “doing anything to protect their excessive compensation,” according to social media posts. He has also blasted state officials and others who don’t agree with him, according to the dozens of screenshots inside the vetting document.
"Comments on social media made by Hackett's Chris Tobe called into question the independence of the firm," according to the ORSC.
The same complaint was made in the STRS analysis.
"Based on public statements by Hackett's Chris Tobe regarding STRS Ohio, there are concerns regarding the objectivity of the firm," the document states.
It goes on to list online posts made about the board, management, stakeholder groups and politicians. Another concern was the close relationship between Tobe and Edward Siedle, who investigates pension funds and is currently in litigation with STRS to release records. The pair co-authored a book together on pension fraud.
"I don't see those as disqualifying," Fichtenbaum said. "I don't have any problem with that."
For the board chair, it could be a fresh view.
"He has some familiarity with the pension and with what's going on and that could turn out, maybe, to be an asset," he told me.
This is now the second firm Fichtenbaum wants to hire that Hoover says doesn’t have the expected knowledge or background to complete the job.
I reached out to Tobe and Toni Hackett Antrum, president of Hackett, but they declined to speak as of now.
A previous records request I did showed that Fichtenbaum did speak with QED continually, so now we are awaiting a new one requesting communication between him, Tobe and Hackett.
"I don't have any personal relationship at all with him," the chair told me.
I found that the pair are friends on social media and engage in the same groups. When asked, Fichtenbaum responded that if the request seems like it might be STRS-related, he “almost always accepts.”
"But hundreds of the people who are Facebook friends are not 'real friends...' Just because someone is a Facebook friend does not mean I have a personal relationship with them," he continued. "Tobe falls into that category."
Could there be ulterior motives for STRS to bring up Tobe? Fichtenbaum thinks it could be possible.
"Obviously, there's a lack of trust," he said. "I understand that consultants have to work with our staff, but ultimately they are our consultants."
STRS staff don't have to want or even like Hackett, but that isn't their problem, he suggested.
"We are hiring them in a sense to get what amounts to a second opinion, another set of ears," the chair said. "I think a lot of [it] is, maybe, to try and influence consultants, they have their own agenda."
Fichtenbaum has asked for the team to contact Hackett to try to get actual references but said that they may not be necessary.
"If we can't get references, then, obviously each board member will have to take that into consideration," he said.
Payments
First, there was QED, and now there is Hackett, Hoover sighed.
But — there are still concerns about the lawsuit payments. Let's backtrack.
Originally appointed by John Kasich, Steen was the outspoken reformer. He was reappointed by DeWine, but the governor asked him to resign in 2023. Steen refused, so DeWine removed him.
Steen filed a motion in Ohio’s 10th District Court of Appeals demanding to be reinstated — and he was. He returned to his job in April 2024.
I first reported that the Ohio Retirement for Teachers Association (ORTA) had put together a fund with Steen in 2023 to pay his legal fees to fight the governor.
"I communicated with Wade," Rayfield said in an interview with me in May. "I said, 'Well, do you wanna fight this?' And he goes, 'Let me think about it because fighting the governor is a tough thing to do...' But nonetheless, we stood with Wade and I said, 'Well, ORTA could potentially help you fight this."
ORTA leader Robin Rayfield told me they ended up raising more than $80,000 for Steen — but they recently started fundraising for Fichtenbaum due to the AG's lawsuit involving him as well as Steen.
Earlier this week, ORTA finally filled out the lobbying expenditures requirement. It showed that, in total, they spent about $115,000 to support the two men. About $87,000 went to Steen and $27,000 went to Fichtenbaum.
"In 23 years of reviewing lobbying expenditures, this is a complete outlier — we've seen nothing comparable," Legislative Inspector General Tony Bledsoe told me.
Bledsoe is the executive director of the Joint Legislative Ethics Committee, which all lobbyists have to register with.
"In 2003, the legislature had to enact reforms because of scandals involving the public pensions, and we created this entire category of retirement system lobbying reporting so the public was aware of what was being spent to influence these systems," Bledsoe continued. "And certainly — we've never seen anything like this as far as amounts."
Rayfield, Steen and Fichtenbaum have all denied that the exchange of this money was inappropriate.
"I'm not concerned about the money because I think ORTA is not an organization that is doing business with STRS," Fichtenbaum answered. "It's no different in my mind than when people are running for the board and various organizations contribute to their campaign. And they, of course, come before the board and advocate for things; they take positions on things... but it's not a business relationship with the board.
"It's the same thing if a member says, 'Hey, if you don't vote for this on the board, I'm not gonna vote for you.'"
What makes the big difference for him is that ORTA is a nonprofit, he said.
Well, that depends on who you ask.
Ohio ethics laws do cover both campaign contributions and lobbying gifts — but they are not the same thing. Campaign contributions are made directly to campaign accounts, not directly to the individual, according to the Ohio Revised Code.
"The official or employee cannot solicit or accept 'anything of value,' such as a gift, travel expenses, employment, substantial meals, or other things of significant value from anyone if the thing of value could improperly influence the official,'" the Ohio Ethics Commission writes.
Improper gifts could be if they are from someone seeking to do business with the public agency, someone regulated by their public agency, or someone interested in matters before the public agency.
Whether the payments are improper or not is for the Ethics Commission to decide.
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