By Bob Plain - in Rhode Island's Future. See more at: http://www.rifuture.org/seidle-report-raimondo-should-be-investigated.html#sthash.nereBGC0.dpuf
Gina Raimondo should
be investigated, according to AFSCME’s much-awaited Ted Seidle report for the
“sinister pall of secrecy regarding fundamental investment information …
orchestrated by state officials and aided by key investment services providers,
punctuated by periodic self-serving misrepresentations regarding such
investment matters to the general public.”
It says: “In our
opinion, based upon our knowledge of pension investment operations, an
investigation by state or federal securities regulators would reveal
intentional withholding of material information and misrepresentations
regarding state pension costs, as opposed to a lack of knowledge about the
exponential growth and magnitude of the fees.”
The absolute
discretion ERSRI has granted to certain managers amounts to a license to steal
from the state pension.
Since the managers may
completely change their investment strategies at any time, there is no way
ERSRI can ensure that the hedge funds are providing any diversification
whatsoever—contrary to representations by the Treasurer. For example, all the
hedge fund managers could invest in a single asset class, say cash, or a single
stock, say Enron, at an inopportune time.
The above outrageous
nondisclosure policies detailed in the hedge fund offering documents cause
these investments to be, at a minimum, inherently impermissible for a public
pension, such as ERSRI, if not illegal.
However, given that
public pension investments in alternative investments have doubled in recent
years (now amounting to 24 percent of portfolios) and billions in public
pension assets across the country are currently at risk from such hedge fund
schemes, the need for an immediate, focused response by securities regulators
and law enforcement is compelling.
And it casts doubt
that the suspended COLA will ever be reconstituted.
In summary, the
likelihood that any meaningful COLA will ever be paid in the future under the
new statutory scheme is remote—a fact which has not been shared with workers
and retirees.
In conclusion, ERSRI’s
total investment expenses may already, or in the near future, amount to a
staggering almost $100 million annually— an amount far in excess of the $5
million cost of conservatively indexing or passively managing the Fund’s
assets.
Bob Plain is the editor/publisher of Rhode Island's
Future. Previously, he's worked as a reporter for several different news
organizations both in Rhode Island and across the country.