FOR IMMEDIATE RELEASE
September 26, 2022
WALL STREET JOURNAL REPORTING INCREASES EVIDENCE THAT STRS RUSHED $10 MILLION BONUSES BECAUSE LOOMING PRIVATE EQUITY LOSSES WOULD ERASE THEM
COLUMBUS, OH – On Saturday September 24, the Wall Street Journal seemingly confirmed why the State Teachers Retirement System of Ohio (STRS) rushed to award $10 million in staff bonuses despite requests from board members to delay the decision. As highlighted by WSJ, private-equity assets like the ones owned by STRS have sold previously at a -14% loss and “things are likely to get uglier” in the coming weeks.
“STRS rushed its decision to pay $10 million in bonuses for only losing $3 billion last year despite requests from board members to delay the August vote,” Robin Rayfield, Executive Director of the Ohio Retired Teachers Association said. “It looks more and more likely that STRS actually lost closer to $6 billion last year and rushed to approve the bonuses before its actual performance was known.”
Despite previously approving annual bonus payments in September or later, the STRS board approved nearly $10 million in bonuses this year on August 18, 2022. The vote, taken despite calls to delay it, was 9-2 as board members had only the questionable performance data provided by STRS leadership and staff.
The possibility that STRS board members rushed a vote to ensure lavish bonuses were paid comes shortly after Auditor of State Keith Faber warned that his office had already identified concerns with STRS finances as part of an unprecedented special audit he ordered last year.
“STRS needs to immediately disclose what the $10 million in bonuses it paid would have been if honest accounting and a nearly $6 billion loss last year were considered. If STRS rushed the bonuses to avoid the true size of its losses, those bonuses should be returned,” Rayfield concluded.
September 13, 2022, Release on this topic included below for reference
FOR IMMEDIATE RELEASE
September 13, 2022
OHIO RETIRED TEACHERS ASSOCIATION CALLS ON AUDITOR KEITH FABER TO DETERMINE WHETHER STRS COOKED THE BOOKS TO ENSURE $10 MILLION IN BONUSES WERE PAID
COLUMBUS, OH – Last month, the State Teachers Retirement System of Ohio (STRS) awarded $10 million in staff bonuses despite reported investment losses of $3 billion last year. STRS justified the bonuses by saying that investment losses could have been billions of dollars worse.
But a new look at STRS records and market performance show that STRS did not report any material loss in the value of its billions of dollars of private equity holdings from January 2022 through June 2022. This glaring omission likely dramatically understated STRS’ losses because public equity stocks lost a quarter of their value during that same time period. As shown in the chart below, market data suggests that STRS may ultimately book a staggering $5.5 billion loss – completely erasing the STRS justification for the bonuses and raising serious questions as to whether private equity losses were intentionally misreported in order to guarantee employee bonuses.
As discussed in The Toledo Blade, STRS’ justification for its “gravity-defying” private equity valuations is an accounting gimmick that conveniently delays losses, seemingly until after the current board could vote to award nearly $10 million in employee bonuses. In stark contrast, the chart above shows that STRS was quick to book gains as public equity markets rose in fiscal year 2021. STRS’ “magic” valuations also appear to conflict with market data from other large public pensions that reported at least a 10% loss on its private equity positions. For example, in July 2022, California Public Employees Retirement System (CalPERS) sold $6 billion of its private equity portfolio at a 10% loss.. Somehow, STRS claims that its private equity portfolio never saw any real reduction in value during the same time period.
“It looks more and more likely that STRS cooked their books and used accounting tricks to ensure they could pay employees their $10 million in bonuses, ” Robin Rayfield, Executive Director of the Ohio Retired Teachers Association said. “On behalf of all retired teachers, we’re calling on State Auditor Keith Faber to get the real numbers STRS won’t show the public and hold STRS accountable.”
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