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Ohio Teachers Pension May Be First To Investigate And Recover Funds From Private Equity Firms



Following last week’s election results, at least five members of the Board of the $100 billion State Teachers Retirement System of Ohio are not under the direct influence of any union or the pension’s Wall Street-friendly, overpaid investment staff. Soon the new Board will be free to vote to restore much-needed transparency, complete the independent forensic investigation of the pension’s secretive aka “private” investments commissioned by participants last year, recover monies related to any mismanagement or wrongdoing and restore promised Cost of Living benefits. If so, STRS Ohio will become the first public pension in the nation where stakeholders have reclaimed control from Wall Street.

The results of the election for the Board of the $100 billion State Teachers Retirement System of Ohio were announced on Saturday and a teachers’ union that spent heavily to support its three candidates—the Ohio Education Assocation—isn’t at all happy. Said the OEA:

“Unfortunately, OEA’s recommended candidates Robert McFee, Jeffrey Rhodes, and Rita Walters were not re-elected to the Board… OEA congratulates Julie Sellers, Steve Foreman, and Elizabeth Jones on their victories. Members of the STRS Board play a vital role in providing retirement security for our members. We wish them well.”

Not content to be gracious in the face of a resounding, costly defeat, the OEA went on to say, “This campaign was marred by anonymous emails filled with distortions and attacks on STRS and OEA’s recommended candidates. Going forward, we encourage members to consider the source of information about the pension system…”

As I discuss in my book, Who Stole My Pension?, given the lack of comprehensive regulation and knowledgeable oversight of public pensions, participants are well-advised to always consider the source of information about their retirement fund. Public pensions and their investment staffs, investment and consulting firms hired by these pensions, unions and politicians regularly lie about public pension risks, performance, costs and fees. Further, over the past year, I have witnessed STRS and OEA’s recommended candidates regularly resort to distortions—of both law and fact—and unfounded attacks. More on this later.


By way of background, in early 2021, I was retained to conduct a forensic investigation of the STRS Ohio on behalf of 20,000 members of the Ohio Retired Teachers Association (ORTA).

ORTA members were deeply concerned—for good reason—that slashing of Cost of Living Adjustment (COLA) benefits they had been promised was due, in whole or in part, to mismanagement of their pension’s investments. The retired teachers wanted a “second opinion” by a nationally-recognized expert—one of their own choosing—who had far more experience in pension matters than STRS’s largely lay board of trustees and staff responsible for overseeing and managing the investments.

A deep-dive into the pension’s investments necessitated accessing the relevant investment documentation through a public records request since the information was unavailable on the pension’s website.

A public records request was filed on my behalf, which included critical information regarding the pension’s riskiest “alternative” investments, such as prospectuses, offering memoranda, subscription agreements, limited partnership agreements, sideletters and tax returns.

In response to my public records request, I got none. Not a single document I had requested regarding the riskiest investments was provided to me to review on behalf of retirees.

In June 2o21, after months of stonewalling at STRS regarding the investment documents requested—and with no end to secrecy in sight—I chose to issue a Report of Preliminary Findings entitled The High Cost of Secrecy. The Report noted:

“Alarmingly, our investigation reveals that STRS has long abandoned transparency, choosing instead to collaborate with Wall Street firms to eviscerate Ohio public records laws and avoid accountability to stakeholders. Predictably, billions that could have been used to pay teachers’ retirement benefits have been squandered over time as transparency has ceased to be a priority.”

While two STRS Board members immediately agreed with the preliminary findings in my report, both STRS staff and OEA’s recommended candidates for the Board disputed the findings, as well as publicly suggested I was not qualified to conduct a forensic investigation—despite the fact that I am 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 for my forensic insights from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.

Said OEA candidates McFee and Rhodes: “BFS was hired for $75,000 to look into documents at STRS and perform what they called a “Forensic Investigation”. It is important to realize that the main individual at BFS is Ted Siedle, who is the author of the book “Who stole my pension? How can you stop the looting”. It is also important to note that Mr. Siedle is not an auditor or accountant. I don’t believe this was in any way an unbiased look at STRS. I believe the BFS Report echoes the same claims about other public pension funds that Mr. Siedle makes in his book.“)

Further, STRS ludicrously claimed that hundreds of millions in performance fees paid to Wall Street private equity firms are not investment expenses or costs. Sorry, STRS, the world’s leading securities regulator— the United States Securities and Exchange Commission—disagrees with you. STRS and its paid experts even outrageously claimed that paying Wall Street money managers hundreds of millions in fees on committed, uninvested capital aka “money for nothing” was no different than paying teachers over summer vacation for work done during the school year. Finally, according to STRS, state pensions—like STRS—are subject to the same comprehensive fiduciary standards and safeguards as corporate plans governed by federal law, ERISA. You’d think a $100 billion pension established to provide retirement security for 500,000-plus teachers, adminstrators and university faculty would do its homework before spewing such nonsense.

On the other hand, Ohio State Auditor Keith Faber, after receiving numerous complaints about the pension, agreed that the forensic report provided a “reasonable basis for a Special Audit” by his office—the findings of which are due this summer, I have been told by his office.

Now that the composition of the STRS Board has changed, the opportunity exists to vote to restore transparency—disclose the “top secret” Wall Street investment documents withheld from public scrutiny over the past eighteen months—and allow a forensic investigation into whether there has been any mismanagement or wrongdoing. Any parties responsible for losses to the pension should be held accountable. Any funds recovered can be used to restore the promised Cost of Living benefits.

The will of pension members is clear following the Board election: Trust in STRS Ohio has been eroded over the years and full transparency, coupled with public accountability, is the only way to restore it.


Teacher, Police And Firefighter Pensions Are Being Secretly Looted By Wall Street



America’s severely underfunded public pensions are allocating ever-greater assets to the highest cost, highest risk, most secretive investments ever devised by Wall Street, such private equity, hedge funds, real estate, and commodities—all in a desperate search for higher net returns that, not surprisingly (given the outlandish fees and risks), fail to materialize. Transparency—public scrutiny and accountability—has been abandoned, as pensions agree to Wall Street secrecy schemes that eviscerate public records laws.

Our nation’s state and federal securities laws are premised upon full disclosure of all material risks and fees to investors: “Read the prospectus before you invest,” is the oft-cited warning by securities regulators. Nevertheless, teachers, police, firefighters and other government workers today are not allowed to see how their retirement savings are managed or, more likely, mismanaged by Wall Street.

For nearly a decade, the United States Securities and Exchange Commision has warned investors that malfeasance and bogus fees are commonplace in so-called “alternative” investments and, more recently, Chairman Gary Gensler has called for greater transparency to increase competition and lower fees.

Gensler has asked the agency’s staff to consider recommendations on ways to bring greater transparency to fee arrangements in private markets. “More competition and transparency could potentially bring greater efficiencies to this important part of the capital markets,” he said. “This could help lower the cost of capital for businesses raising money. This could raise the returns for the pensions and endowments behind the limited partner investors. This ultimately could help workers preparing for retirement and families paying for their college educations.”

Gensler has stated he would like to see a reduction in the fees these investments charge and has also commented on industry abuses such as ”side letters” which permit private funds to secretly give preferences to certain investors—preferences which harm public pensions.


But that’s not good enough to protect public pension stakeholders.

No one—including the pensions themselves—seems to care that the government workers whose retirement security is at risk are being kept in the dark.

The SEC needs to do more—actually alert public pensioners as to those abuses the Commission knows full well are rampant, at a minumum. Advise them, Chairman Gensler, to demand to see and read prospectuses and other offering documents related to their hard-earned savings.

Does the SEC think it’s kosher for Wall Street to conspire with public pension officials to withhold this information from investors—any investors?

Since my 2013 forensic investigation of the Rhode Island state pension exposing gross mismanagement by then General Treasurer Gina Raimondo which I accurately predicted would cost workers dearly; my 2014 North Carolina state pension investigation exposing that $30 billion in assets had been moved into secretive, offshore accounts and, most recently, my investigation of the State Teachers Retirement System of Ohio, I have provided my expert findings to the SEC staff for their review. Each and every public pension forensic investigation I have undertaken has extensively discussed Wall Street secrecy schemes that enable looting. In my book, How To Steal A Lot Money—Legally, I quote disclosures from SEC filings that detail industry abuses.

Join me, Chairman Gensler, in giving government workers a clue, a glimpse, a peek, at the alternative investment abusive industry practices that are carefully guarded by Wall Street and being hidden from them.

Teachers, police and firefighters deserve a fighting chance to protect their retirement savings.

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It Is Time To Buy Bonds



US 10-year note prices are likely to rise through August. The monthly histogram below shows that July and August have been the two strongest months for the note price.

Monthly Return- US 10-Year Notes

Blue: Average Percentage Change

Red: Probability of a rise on that day

Green: Expected Return (Product of the first 2)

These numbers are static in the sense that they change little over the years. This is only one cycle, the one-year cycle, whereas there are many cycles operative at any one time. In order to get a reading on such other rhythms, a scan is run to identify other profitable price cycles. The graph below reveals the most valuable cycles that are operative at any one time.

10-Year Note Monthly Cycle


These cycles reinforce the seasonal tendency for notes to rise. Prices have risen in 60% to 65% of the time in these summer months. With the dynamic cycle also in ascent, the probabilities rise to about 65% to over 70%. There are similar and supportive developments in the Japanese and German fixed income markets.

The cycle projection must be confirmed by market activity. The daily graph reveals that price broke through a downtrend line.

10-Year Notes Broke Through Resistance

Here is a helpful sentiment indicator that supports the bullish view. The cover page of this week’s Barron’s points to much higher rates. Applying contrary opinion, this suggests lower rates and higher note and bond prices. The first objective is 123.0.

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Will There Be War Over Taiwan – The Next Spy Thriller



I usually go through a rhythm of reading one or two serious books, followed by a few works of fiction and with summer on the way I wanted to highlight a few of both. In that regard I have just finished Laurence Durrell’s ‘White Eagles in Serbia’, an old-fashioned espionage thriller where the hero Colonel Methuen is dropped behind enemy lines in post war Serbia (he speaks excellent Serbo-Croat) and becomes embroiled in a violent plot to overthrow Tito.

The book is a warm-up to reading Durrell’s ‘The Alexandria Quartet’, a work that nearly won him the Nobel Prize. Durrell was part of an interesting Anglo-Irish family, who largely considered themselves Indian – his brother Gerald, the naturalist and writer, touches on this in ‘My Family and Other Animals’.


Though I am not an expert on these matters, I found ‘White Eagles’ a more realistic account of espionage than much of what we see in the media today (Mick Herron’s ‘Slow Horses’ is good), and overall it is a tale of derring-do that is more in keeping with the work of the founding fathers of the genre – Eric Ambler, John Buchan, Erskine Childers and Ted Allebury for example.

It also made opportune reading given what seems to be an epidemic of espionage – with reports of the Chinese hacking group APT40 using graduates to infiltrate Western corporates and notably the admission by the head of Switzerland’s intelligence that Russian espionage is rife in that country (notably in Geneva – for which readers should consult Somerset Maugham’s ‘Ashenden’ as background material).

These and other trends – such as the outbreak of a heavy cyber battle last week (against Lithuania and Norway for instance) and the increasingly public ‘clandestine’ war between Israel and Iran (they have just sacked their spy chief) point to a world that is ever more contested and complex.


Secret World

One of the new trends in the space is cyber espionage – both in the sense of stealing state and industrial/corporate secrets, influencing actors (such as the manipulation of the 2016 US Presidential election) and outright acts of hostility such as the hacking of public databases and utilities (i.e. healthcare systems). Here, if readers are looking for some serious literature I can recommend two excellent books – Nicole Perlroth’s ‘This is how they tell me the world ends’ and ‘Secret World’ by Christopher Andrew.

I am personally more intrigued by the difference between a spy and a strategist. A spy’s work could well be described as the pursuit of information about someone who is acting with a specific intent, as well as a sense of their reaction function. There are plenty of examples – from Christine Joncourt (‘La Putain de la Republique’) to Richard Sorge (see Owen Matthews’ ‘An Impeccable Spy’).

In contrast a strategist may try to plot trends and the opportunities, spillovers and damage they may cause. The US National Intelligence department is good in this regard, becoming the first major intelligence agency to publish detailed warnings on the side effects of climate damage.

Spies and strategists might work together, but history is full of examples (LC Moyzisch’s ‘Operation Cicero’) where intelligence fails to make it through the strategic process or is simply ignored for political reasons (might the early warnings on the invasion of Ukraine be an example).

Asia next?

In the spirit of the Durrells and Flemings of the world, what issues might be of interest in terms of digging into unknown knowns and unknown unknowns. Here are a few ideas, most of which are Asia focused (we might see an uptick in Asia focused thrillers).

On the diplomatic front, an interesting recent development was the visit of Indonesian president Joko Widodo to Ukraine, and then Moscow. It was a rare visit to Ukraine by an Asian leader and potentially marks the emergence or at least aspiration of Indonesia (population 273 million) as an emerging world diplomatic player. What has intrigued me so far is that there has been little coordination by the populous emerging (largely Muslim) nations (Nigeria, Indonesia, Pakistan) in the face of high energy and food prices, and that potentially Widodo could play a unifying role here.

Then, still in Asia, but on a more deadly footing, if the Western commentariat is to be believed, China is preparing an assault on Taiwan, and looking to learn from Russia’s military errors in this regard. Other countries are reacting, and I suspect that there will be much intrigue around Taiwan’s ability to acquire sufficiently powerful ballistic missiles that could strike the coastal cities of China, and relatedly how long might it take Japan to produce nuclear missiles (my sources say they could very ambitiously do it in five months!).

So, whilst the espionage literature of the 20th century has tended to be focused on Geneva, Berlin and London in the 21st century we may find ourselves reading about ‘behind the lines’ exploits in Jakarta and Tanegashima.

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