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Toledo Blade Editorial: STRS suit weak

Despite histrionic language asserting that State Teachers Retirement System board members Wade Steen and Rudy Fichtenbaum have violated their fiduciary duty, possibly for personal financial benefit, there’s no evidence in Attorney General Dave Yost’s lawsuit seeking to remove Mr. Steen and Mr. Fichtenbaum from the STRS board. (“Yost files suit to take 2 off STRS panel,” Thursday)

Mr. Yost claims he must act “to protect teachers against private interests attempting to hijack their retirement accounts.” The AG, following an anonymous document prepared by STRS staff and sent to him by Gov. Mike DeWine, claims Mr. Steen and Mr. Fichtenbaum have an unethical plan to steer $65 billion to a Columbus company called QED.

The AG has dusted off a 2021 controversy to keep reform elements from taking over the [pension] board, and it’s not a good look for the 2026 gubernatorial hopeful.

In 2021, Mr. Steen and Mr. Fichtenbaum proposed an investment in the startup investment firm known as QED. It was summarily defeated by the STRS board and relegated to the dustbin of history until Governor DeWine revived the controversy in recent weeks following his crushing court defeat in a bid to fire Mr. Steen as his appointed investment expert.

Mr. Steen proved Governor DeWine acted outside his legal power.

Now, together with Mr. Fichtenbaum and an STRS board majority devoted to full transparency on the terms and conditions of the pension’s investment contracts, fundamental change at STRS is guaranteed.

The Blade Editorial Board believes Mr. Steen and Mr. Fichtenbaum are under legal assault because the Ohio political establishment does not want that change and will be embarrassed by public awareness of the imprudent contracts covering billions of dollars STRS has approved.

The STRS Board’s reform majority gave Mr. Yost’s evidence-free legal filing the respect it deserves, voting to make Mr. Fichtenbaum the new board chairman, replacing Toledo Public School teacher Dale Price.

Mr. Steen and Mr. Fichtenbaum lead a majority faction of STRS board members who are pledged to transition from high cost hedge funds, private equity and commercial real estate investments, to low cost index funds that mirror the overall market or specific economic sectors.

Investment expert Richard Ennis reported in an exclusive Toledo Blade column that an indexed portfolio strategy applied over the last 13 years instead of the current alternative investment heavy holdings would have provided STRS with $12.5 billion more than they earned.

The $91 billion fund is the only retirement fund for more than 500,000 Ohio teachers.

Ohio is one of only seven states that do not pay into the Social Security system, leaving all retirement security responsibility with a state government more notable for epic scandal than high achievement.

The DeWine Administration’s quick action on an illusionary scandal at STRS is in sharp contrast to passive inaction since 2020 on the racketeering arrests and then convictions for a $61 million bribery conspiracy turned into a billion-dollar bailout.

The Columbus-based QED may have been a dubious potential investment, but a quick perusal of the STRS portfolio shows money managed by a Jeffery Epstein client, a convicted tax evader, multiple participants in state pension pay-to-play scandals, and other funds where the principals turned their wealth into the power of elected political office.

The rest of Ohio’s public pensions are filled with investments that are just as financially questionable. State oversight has been an eternal weakness. But the STRS reform board members would change that in an instant by revealing their alternative investment contracts.

Governor DeWine and Attorney General Yost are fighting to block that needed reform, with tactics that stretch the boundaries of legal ethics.

The Blade Editorial May 18, 2024 9:00 PM ET

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