The survey of the Rhode Island Retired Teachers’ Association was sent to 603 members and 247 members responded. This cohort was from age 58 to 96 and had 36 respondents living out of state.
6 questions were asked. We have eliminated question 2 and 3 as they were poorly worded.
Question 4 asked how they keep current with local and state news (Newspaper, Radio, Television)
Two remaining questions were:
Are you in favor of more open information from the RI State Treasurer about pension investments and fees? Yes or No
All 247 responded yes
Has the loss of the yearly COLA had a negative impact on your standard of living? Yes or No
230 responded yes
Is it important the RIRTA continue to investigate the RI Public Pension Fund for possible criminal mismanagement? Yes or No
Again, all 247 responded yes
Finally we asked “In a few sentences, please tell us how the new pension law (loss of COLA) has impacted your life.” Following are some of the comments:
Believed the COLA/pension was a guarantee-thought it would be wisely invested.
A sad ending (COLA loss) to a job I loved.
Rent goes up! Healthcare goes up! Check does not.
I am chipping at my savings to keep pace with rising taxes, insurance, goods, fees etc.
I have no hope that my pension alone (no COLA) will keep me financially viable.
Mentally for sure. Am I going to have enough money till the end? How long will I be able to stay in my house? All the same concerns I heard from my Mothers’ generation.
It is like living in Limbo and the future is scary.
I cannot be a consumer anymore. The bottom line is there is no expendable income to support out local businesses, charities and nothing for political contributions.
Have discussed with my wife the advantage of moving out of RI to a state that will not tax my pension.
I made my decision to retire based on the 3% COLA…..I don’t have the funds I thought I could count on.
The comfort level we anticipated for us through our elder years has been stolen from us.
There are over 20,000 of us suffering our own recession.
]]>Prominent public figures are appearing on taxpayer-funded television to shape the discourse about the pension heist after the media has been flooded with information from reputable sources that question the need for Raimondo’s intervention. It’s no surprise that Michael Riley and Brown University’s Wendy Schiller, along with Edward Achorn, are defending these efforts, they are neo-liberals, but Democratic Party Chair Joseph McNamara should be seriously interrogated for this: he is supporting the impoverishment of senior citizens while the Governor seemingly profits off the shady and not-so-blind trust that the pension is invested in.
Riley does provide some useful commentary. He emphasizes that the pension is invested in a bunch of junk commodities that are going to cause trouble down the road. What he does not mention is that the pension will not return to viability in the future because of the outrageous fees being billed to the pension fund by the hedge fund managers.
]]>The annual Cost of Living Adjustment (COLA) is one of the most vital elements of living on a fixed income. If things are moving smoothly, the recipient of benefits, be it their retirement plan or Social Security disability insurance, is given a COLA that compensates for inflation or the rise of costs for things like heating fuel and food.
But imagine if, after putting in years of hard work at an honest job, the administrators of your retirement plan told you to go blow, that you were a selfish leech who should have known better than take a public sector job, and that there would be no more COLAs for you?
Welcome to the plight of the retired public sector worker in Rhode Island!
The Rhode Island Retirement Security Act of 2011, a law loaded with more hyperbole than honesty, forbade any future COLAs from being given to retired teachers, janitors, and thousands more people who had done an honest day’s work for decades only to be screwed over by a legislature full of ne’er do well legislators and a Treasurer, now Governor, who used confusing polysyllabic verbiage to occlude the building of a pipeline from the Rhode Island pension fund into the coffers of former Enron traders and a host of other dubious figures on Wall Street who have never done a day’s honest work.
It is time to talk seriously not just about the case of the missing COLAs but what is going to happen when people cannot dip into their savings anymore to make up the difference in their monthly budgets.
Are we supposed to be mum when droves of retired public employees are lining up at the Food Stamps office? Should we be impressed when the Baby Boomers are spending their final years in destitution? Is part of Raimondo’s plan having these seniors taking out loans from her friends on Wall Street that they might not be able to pay back?
The systemic ripple effect caused by this 2011 law is going to impact this state in a negative fashion for years to come and we will all be paying for it.
Perhaps one of the doors to begin asking questions at would be that of Rep. Joe McNamara, the Chair of the Democratic Party. McNamara spent his career in the Pawtucket school system and yet we hear nothing yet from him about restoring the COLAs that would be going to his mailbox. Why is beyond me, but I do know that Mao Zedong would call that a contradiction.
Regardless of one’s political orientation, repealing this law should be made an election year issue. If you are a self-described fiscal conservative, it makes perfect sense to want to reduce the need for social safety net public benefits. If you are a liberal, it is about restoring the social contract and upholding the state’s side of a bargain it made with honest working class people. If you are someone who is opposed to corruption, it would clean the clocks of several dirty politicians that might be benefiting from the pension heist. The only person who might not benefit is myself, who would have less muck to rake, and Gina Raimondo, who might see her dubious blind trust stop sending her fat checks every month.
]]>For years, Gina Raimondo has engineered a deceptive image for herself as a working-class Rhode Islander who broke out of the blue collar and got lucky while staying loyal to her proletarian roots. In one of her campaign ads, she goes for the heart by wandering around the factory her retired father worked at, pulling the heartstrings as if this were Frank Capra’s dream production. All she needed to make it complete was having one of the kids chime in at the end something about how teacher says every time you hear a bell ring an angel gets its wings.
What a farce.
This sham image has been one element in one of the biggest heists in Rhode Island history, a scheme that every tax payer is financing while she potentially profits! Without this Capra-esque smoke and mirrors charade, Raimondo would not just have lower public appeal, she would not be able to function as what she really is, a confidence artist for Wall Street.
Ted Siedle, the forensic auditor who has just completed the crowdfunding of a third investigation that will look into the real estate portfolio of the pension fund, was kind enough to share his thoughts on his investigations, including the lack of action by Seth Magaziner to address these problems.
How did this happen?
There were some pensions in America after the 2008 economic crash made vulnerable by the collapse of Bear Stearns, Lehman Brothers, and the other firms that Raimondo had ties to. So what she did as Treasurer was use the very real instance of pension instability in other states to claim the Rhode Island pension fund was in deep trouble. Of course, considering that the public sector is one of the largest employers in Rhode Island and thousands upon thousands of people per week are paying into the pension when they accept a paycheck, no one thought to ask how that logic is supposed to work. In any event, Raimondo used some fancy Wall Street lingo to make things seem dire while confusing union leaders who never were in the advanced graduate school math classes she was. And, since she was the Treasurer, she was supposed to be looking out for the best interests of the pension and was smart enough to understand what she said were the sophisticated elements of the public pension fund.
Or so we all thought, especially since Gina is such a working class hero.
But Siedle says it was not so. He writes in his first audit: [F]or the chief fiduciary to a pension to agree to permit investment managers to not provide material information [upon request from the public] regarding investment strategies and portfolio holdings related to ERSRI assets they have been entrusted with constitutes a complete abrogation of the duty to safeguard pension assets… [I]f the managers are truly unwilling to submit to public scrutiny, i.e., comply with applicable public disclosure laws, they should not be entrusted with the management of public assets. [Emphasis added] In another article, he writes in italicized bold letter the following:
The real robbery is not the initial hit that the pension fund took when it was “reformed”, as the Treasurer told us. Instead, it is a weekly sum total of exorbitant and uncalled for service fees, significantly higher than industry standards, that prevents the pension from rebounding in a timely fashion. Every day that a teacher, firefighter, policeman, or other public sector employee who pays into the pension fund gets their check, they see a deduction made for the pension on the pay stub.
And every deduction should be read as a literal sweetheart card sent directly to Wall Street, sealed with a kiss by Gina Raimondo. To add insult to injury, the potential returns from Raimondo’s not-so-blind trust that she got the state to invest the pension into under not-totally-honest pretenses is contributing regularly to her personal wealth. Siedle writes “a significant portion of the [then-]Treasurer’s wealth and income relates to shares she owns in two illiquid, opaque venture capital partnerships she formerly managed at Point Judith Capital—one of which she convinced the state to invest in on different, less favorable terms.”
This has resulted in the cost of living adjustment (COLA) payments for retirees to be stopped by the Rhode Island Retirement Security Act of 2011 while Wall Street is boasting about a recovery that is funded by public money! The 2011 law said that the COLAs would return after the pension returns to 80% viability. But with all these fees, the only person being given an adjustment here may be Gina Raimondo!
And since it is obvious the Magaziner is not doing anything about this, nor the Attorney General, the operative question then becomes who else is in on the scheme? How many Democratic and Republican Party members who boast about this heist as Theresa Paiva Weed did in a recent story by Steve Ahlquist are actually collecting checks from the firms profiting off the pension? Is it just ironic that the recent Brookings Institute report on Rhode Island names as potential key success industries economic sectors known to be financed by firms like Point Judith Capital and the Tudor Investment Corporation that turned Raimondo’s firm from a bit player into a respectable enough outfit to make a bid for the pension?
]]>The website NOLO.com, a free resource for legal information, says the following of the federal Racketeer Influenced and Corrupt Organizations Act:
It allows prosecution and civil penalties for racketeering activity performed as part of an ongoing criminal enterprise. Such activity may include illegal gambling, bribery, kidnapping, murder, money laundering, counterfeiting, embezzlement, drug trafficking, slavery, and a host of other unsavory business practices. To convict a defendant under RICO, the government must prove that the defendant engaged in two or more instances of racketeering activity and that the defendant directly invested in, maintained an interest in, or participated in a criminal enterprise affecting interstate or foreign commerce.
(1) racketeering activity means
(A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), which is chargeable under State law and punishable by imprisonment for more than one year;
(B) any act which is indictable under any of the following provisions of title 18, United States Code: Section 201 (relating to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to counterfeiting), section 659 (relating to theft from interstate shipment) if the act indictable under section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds), sections 891894 (relating to extortionate credit transactions), section 1028 (relating to fraud and related activity in connection with identification documents), section 1029 (relating to fraud and related activity in connection with access devices), section 1084 (relating to the transmission of gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section 1344 (relating to financial institution fraud), section 1425 (relating to the procurement of citizenship or nationalization unlawfully), section 1426 (relating to the reproduction of naturalization or citizenship papers), section 1427 (relating to the sale of naturalization or citizenship papers), sections 14611465 (relating to obscene matter), section 1503 (relating to obstruction of justice), section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the obstruction of State or local law enforcement), section 1512 (relating to tampering with a witness, victim, or an informant), section 1513 (relating to retaliating against a witness, victim, or an informant), section 1542 (relating to false statement in application and use of passport), section 1543 (relating to forgery or false use of passport), section 1544 (relating to misuse of passport), section 1546 (relating to fraud and misuse of visas, permits, and other documents), sections 15811592 (relating to peonage, slavery, and trafficking in persons).,[1] section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund payments), section 1955 (relating to the prohibition of illegal gambling businesses), section 1956 (relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity), section 1958 (relating to use of interstate commerce facilities in the commission of murder-for-hire), section 1960 (relating to illegal money transmitters), sections 2251, 2251A, 2252, and 2260 (relating to sexual exploitation of children), sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation of stolen property), section 2318 (relating to trafficking in counterfeit labels for phonorecords, computer programs or computer program documentation or packaging and copies of motion pictures or other audiovisual works), section 2319 (relating to criminal infringement of a copyright), section 2319A (relating to unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances), section 2320 (relating to trafficking in goods or services bearing counterfeit marks), section 2321 (relating to trafficking in certain motor vehicles or motor vehicle parts), sections 23412346 (relating to trafficking in contraband cigarettes), sections 242124 (relating to white slave traffic), sections 175178 (relating to biological weapons), sections 229229F (relating to chemical weapons), section 831 (relating to nuclear materials),
(C) any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments and loans to labor organizations) or section 501 (c) (relating to embezzlement from union funds),
(D) any offense involving fraud connected with a case under title 11 (except a case under section 157 of this title), fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), punishable under any law of the United States,
(E) any act which is indictable under the Currency and Foreign Transactions Reporting Act,
(F) any act which is indictable under the Immigration and Nationality Act, section 274 (relating to bringing in and harboring certain aliens), section 277 (relating to aiding or assisting certain aliens to enter the United States), or section 278 (relating to importation of alien for immoral purpose) if the act indictable under such section of such Act was committed for the purpose of financial gain, or
(G) any act that is indictable under any provision listed in section 2332b (g)(5)(B) [Emphasis added]
So the question then becomes whether Raimondo and her associates have engaged in this behavior. And there are plenty of reasons to suspect so.
The first document to consult is one commissioned by the American Federation of Teachers, the Roosevelt Institute, the Refund America Project, and the Haas Institute titled All That Glitters is Not Gold: An Analysis of US Public Pension Investments in Hedge Funds. While the document does not specifically study Rhode Island, the lessons are applicable here and it says the following:
Key Findings: Hedge funds were responsible for an estimated $8 billion in lost investment revenue
Our findings suggest that these 11 pension funds’ hedge fund investments failed to deliver any significant benefits to the pension funds studied. Specifically, we found that:
- Hedge fund net return rates lagged behind the total fund for nearly three-quarters of the total years reviewed, costing the group of pension funds an estimated $8 billion in lost investment revenue.
Despite lagging performance, hedge fund managers collected an estimated $7.1 billion in fees from the same pension funds over the period reviewed; on average, our estimates suggest that these pension funds paid 57 cents in fees to hedge fund managers for every dollar of net return to the pension fund.- Whereas hedge fund managers promise uncorrelated returns and downside protection, all of the 11 pension funds reviewed demonstrated significant correlation between hedge fund and total fund performance.
Recommendations:
Considering the implications of these findings for pension fund trustees, participants and consultants, we recommend that public pension funds currently invested in hedge funds immediately take the following steps:
– Conduct an asset allocation review to examine less costly and more effective diversification approaches. The review should include a complete analysis of past net performance of their hedge fund investments, as well as a comparison with low-fee alternatives.
– Require full and public disclosure from hedge fund managers and consultants, including complete disclosure of historical investment management and incentive (carry or profit-sharing) fees captured by hedge fund managers for the duration of their fund’s investments. Pension funds should also consider developing legislative policies requiring this level of disclosure. [Emphasis in original]
Before moving forward, it is worthwhile to recall here that the Governor has previously invoked a host of proprietary information reasons for not providing full disclosure of matters regarding the pension fund. In this sense, this document not only flies in the face of that logic, it is recommending things under the auspices of full disclosure laws that the Governor has said do not apply in this situation. As such, Attorney General Kilmartin could investigate further on this issue and hold people liable for failing to obey public disclosure laws.
Also notable is that, while the report does not deal specifically with the Rhode Island pension plan, it does discuss shortcomings of Daniel Loeb’s Third Point Capital, one of the firms the Rhode Island pension plan was invested in.
Here are further findings of this paper:
Indeed, our findings suggest that all 11 pension funds included in our analysis would have performed better having never invested in hedge funds in the first place. This has important implications not only for pension fund trustees, who have a fiduciary duty to prudently seek investments that provide the highest long-term returns for the lowest cost to the pension fund, but also for public employees, public employee unions, retirees and taxpayers, all of whom should be concerned about this overall negative impact that hedge funds are exerting on public pension funds. [Emphasis in original]
With that in mind, consider for a moment this information from Ted Seidle’s first audit of the pension, Rhode Island Public Pension Reform: Wall Street’s License to Steal:
[A] significant portion of the Treasurer’s wealth and income relates to shares she owns in two illiquid, opaque venture capital partnerships she formerly managed at Point Judith Capital—one of which she convinced the state to invest in on different, less favorable terms. Unlike the state which paid millions for its shares in one of the Point Judith funds, the Treasurer was granted shares in both of the venture capital funds for free… In a letter to the Rhode Island Ethics Commission requesting an advisory opinion concerning whether she had taken sufficient steps to avoid conflicts of interest relative to her ties to a venture capital fund in which the state had made an investment, the Treasurer represented that in 2007 the State Investment Commission entered into a ten-year contract with Point Judith in which the State agreed to invest $5 million dollars in the Point Judith II fund. She also represented that the State’s investment in the fund was passive, meaning that after signing the contract with Point Judith and making its investment commitment, the State Investment Commission had no say in the fund’s ongoing management or investment decisions.
The Treasurer notably failed to mention in her letter to the Ethics Commission that the state had not merely entered into a ten-year contract with Point Judith. Rather, the state was a limited partner in a fund managed by Point Judith as General Partner and, as a limited partner the state may have broad rights in the fund’s ongoing management, or investment decisions, the exercise of which may conflict with her rights and interests.
Further, as a Point Judith insider, she, or other investors, may have been granted special rights more favorable than those granted to the state, including special withdrawal rights; rights to receive reports from the partnership on a more frequent basis or that include information not provided to other limited partners; rights to receive reduced rates of the incentive allocation and management fee; rights to receive a share of the incentive allocation, management fee or other amounts earned by the general partner or its affiliates. If true, the Treasurer may literally be profiting at the expense of the state…Regardless, the characterization of the investment in the Point Judith II Fund as merely a ten-year contract in a passive investment as to which the state had no say is neither complete nor accurate.
In order to create further separation from her investment in the Point Judith funds, the Treasurer represented that prior to assuming office she placed all her right, title and interest in both funds into a blind trust designated as the Raimondo Blind Trust. While a blind trust may be of value in certain circumstances, where, as here, the sole assets of the trust, i.e. the shares in the two Point Judith funds, are illiquid, i.e. cannot be sold for a decade, no protection is afforded. The purpose of the blind trust is to keep the beneficiary unaware of the specific assets of the trust, so as to avoid a conflict of interest between the beneficiary and the investments.
In this case, the Treasurer knows precisely the assets held in the Blind Trust during her entire term as Treasurer and continues to enjoy cash distributions related to the Point Judith funds—payments exponentially greater than her state salary in the past year— and payments related to shares she was granted for free.
Rather than provide protection against conflicts, here the blind trust serves to enable the conflict of interest involving ERSRI to persist throughout her term.
Most important, in connection with granting the Advisory Opinion, the Treasurer did not indicate, and Ethics Commission did not consider, that the Treasurer would subsequently refuse to disclose to the public information regarding ERSRI’s investment in Point Judith II.
Ironically, the Blind Trust scheme she proposed to the Ethics Commission coupled with her nondisclosure policy regarding the Point Judith II fund, has resulted in only the public being “blind” as to the Point Judith II fund.
In short, in our opinion, this arrangement constitutes a misuse of the blind trust device. [Emphasis added]
This presents a host of not just interest conflicts but potential illegal market manipulation committed in totality on the state level. If Raimondo manipulated the public in portraying the investments of the pension in a fashion to personally benefit her, that would constitute a serious malfeasance for investigation by the Attorney General. Furthermore, as this matter has involved court proceedings in a variety of cases, there could be potential perjury charges brought.
We will continue to explore these documents and bring highlights in further reporting.
EDITORIAL NOTE: Following this report, it was indicated by readers that the aforementioned RICO Act is the federal as opposed the Rhode Island definition of the law. It is worth noting that, due to the interstate and international nature of the pension fund investments, the federal definition is still applicable and relevant. That law, Rhode Island General Laws Title 7 Chapter 15, says the following:
§ 7-15-1 Definitions. – (a) “Enterprise” includes any sole proprietorship, partnership, corporation, association, or other legal entity, and any union or group of individuals associated for a particular purpose although not a legal entity.
(b) “Person” includes any individual or entity capable of holding a legal or beneficial interest in property.
(c) “Racketeering activity” means any act or threat involving murder, kidnapping, gambling, arson in the first, second, or third degree, robbery, bribery, extortion, larceny or prostitution, or any dealing in narcotic or dangerous drugs which is chargeable as a crime under state law and punishable by imprisonment for more than one year, or child exploitations for commercial or immoral purposes in violation of § 11-9-1(b) or (c) or § 11-9-1.1.
(d) “Unlawful debt” means a debt incurred or contracted in an illegal gambling activity or business or which is unenforceable under state law in whole or in part as to principal or interest because of the law relating to usury.
§ 7-15-2 Prohibited activities. – (a) It is unlawful for any person who has knowingly received any income derived directly or indirectly from a racketeering activity or through collection of an unlawful debt, to directly or indirectly use or invest any part of that income, or the proceeds of that income in the acquisition of an interest in, or the establishment or operation of any enterprise.
(b) It is unlawful for any person through a racketeering activity or through collection of an unlawful debt to directly or indirectly acquire or maintain any interest in or control of any enterprise.
(c) It is unlawful for any person employed by or associated with any enterprise to conduct or participate in the conduct of the affairs of the enterprise through racketeering activity or collection of an unlawful debt.
(d) Provided, that a purchase of securities on the open market for purposes of investment and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, is not unlawful under this section if the securities of the issuer held by the purchaser, the members of his immediate family, and his or her or their accomplices in a racketeering activity or the collection of an unlawful debt after the purchase do not amount in the aggregate to one percent (1%) of the outstanding securities of any one class, and do not, either in law or in fact, confer the power to elect one or more directors of the issuer.
…
§ 7-15-7 Investigative demands. – (a) Issuance. Whenever the attorney general has reasonable cause to believe that any person or enterprise has knowledge or is in possession, custody, or control of any documentary material pertinent to an investigation of a possible violation of this chapter, he or she may, prior to and/or following the institution of a civil or criminal proceeding on the violation, issue in writing and cause to be served upon the person or enterprise a civil investigatory demand by which he or she may:
(1) Compel the attendance of the person and require him or her to submit to examination and give testimony under oath; and/or
(2) Require the production of documentary material pertinent to the investigation for inspection and/or copying; and/or
(3) Require answers under oath to written interrogatories.
(b) Power to issue. The power to issue investigative demands does not abate or terminate by reason of the bringing of any action or proceeding under this chapter. The attorney general may issue successive investigatory demands to the same person in order to obtain additional information pertinent to an ongoing investigation.
(c) Confidentiality. In the event the attorney general initiates a civil investigatory demand prior to a criminal indictment for violation of this chapter, then the commencement, contents, and results of the civil investigatory demand is held in the strictest confidence by the attorney general and shall remain so until the time that a civil action is commenced, indictment for violation of this chapter returned, or removal of the confidentiality is ordered by a justice of the superior court.
(d) Contents of investigative demand. Each investigatory demand shall:
(1) State the nature of the conduct constituting the alleged racketeering violation of this chapter which is under investigation and the provisions of law applicable to the conduct;
(2) Prescribe a reasonable return date no less than twenty (20) days from the date of the investigative demand, provided that an earlier date may be prescribed under compelling circumstances;
(3) Specify the time and place at which the person is to appear and give testimony, produce documentary material, and furnish answers to interrogatories, or do any or a combination of the above;
(4) Identify the custodian to whom any documentary material is to be made available;
(5) Describe by class any documentary material to be produced with such definiteness and certainty as to permit the material to be fairly identified;
(6) Contain any interrogatories to which written answers under oath are required; and
(7) Advise in writing the person upon whom the demand is served that the material or statements may constitute a basis for prosecution against the person.
(e) Prohibition against unreasonable demand. No investigatory demand shall:
(1) Contain any requirement which would be unreasonable or improper if contained in a subpoena or a subpoena duces tecum issued by a court of this state; or
(2) Require the disclosure of any material which would be privileged from disclosure if demanded by a subpoena or a subpoena duces tecum issued by a court of this state.
(f) Service of investigative demand.
(1) An investigative demand may be served by:
(i) Delivering an executed copy to the person to be served, or if the person is not a natural person, to any partner, executive officer, managing agent, general agent, or to any agent of the person authorized by appointment or by law to receive service of process on behalf of the person;
(ii) Delivering an executed copy to the principal office or place of business of the person to be served; or
(iii) Mailing by certified mail, return receipt requested, an executed copy addressed to the person to be served, or if the person is not a natural person, addressed to its principal office or place of business in this state, or if it has none in this state, to its principal office or place of business.
(2) A verified return by the individual serving any demand or petition setting forth the manner of service is prima facie proof of service. In the case of service by certified mail, the return shall be accompanied by the return post office receipt of delivery of the demand.
(g) Authorization to examine. The examination of all persons pursuant to this section shall be conducted by the attorney general or a representative designated in writing by him or her, before an officer authorized to administer oaths in this state. The statements made shall be taken down stenographically or by a sound recording device and shall be transcribed.
(h) Rights of persons served with investigative demands. Any person required to attend and give testimony or to submit documentary material pursuant to this section is entitled to retain, or, on payment of lawfully prescribed cost, to procure, a copy of any document he or she produces and of his or her own statements as transcribed. Any person compelled to appear under a demand for oral testimony pursuant to this section may be accompanied, represented, and advised by counsel. Counsel may advise the person in confidence, either upon the request of the person or upon counsel’s own initiative, with respect to any question asked of the person. The person or counsel may object on the record to any question, in whole or in part, and shall briefly state for the record the reason for the objection. An objection may properly be made, received, and entered upon the record when it is claimed that the person is entitled to refuse to answer the question on grounds of any constitutional or other legal right or privilege, including the privilege against self incrimination. The person shall not otherwise object to or refuse to answer any question, and shall not by him or herself or through counsel interrupt the oral examination. If the person refuses to answer any question, the attorney general may petition the superior court for an order compelling the person to answer the question. The information and materials supplied to the attorney general pursuant to an investigative demand are not permitted to become public or be disclosed by the attorney general or his or her employees beyond the extent necessary for legitimate law enforcement purposes pursuant to this chapter.
(i) Witness expenses. All persons served with an investigative demand, other than those persons whose conduct or practices are being investigated or any officer, director, or person in the employment of the person under investigation, are paid the same fees and mileage as paid witnesses in the courts of this state. No person is excused from attending the inquiry pursuant to the mandate of an investigative demand or from giving testimony, or from producing documentary material or from being required to answer questions on the ground of failure to tender or pay a witness fee or mileage, unless demand for the witness fee or mileage is made at the time testimony is about to be taken and unless payment of the witness fee or mileage is not made.
(j) Custody of documents. (1) The attorney general shall designate, from within the department of attorney general, an investigator to serve as racketeer document custodian and any racketeering investigators that he or she determines are necessary to serve as deputies to that officer.
(2) Any person on whom any demand issued under this section has been served shall make the material available for inspection and copying or reproduction to the custodian designated in the demand at the principal place of business of the person, or at any other place that the custodian and the person subsequently agree and prescribe in writing or as the court may direct, pursuant to this section on the return date specified in the demand, or on any later date that the custodian may prescribe in writing. The person may, upon written agreement between the person and the custodian, substitute copies of all or any part of the material for originals of the materials.
(3) The custodian to whom any documentary material is delivered shall take physical possession of it, and is responsible for its use and for its return pursuant to this chapter. The custodian may cause the preparation of any copies of the documentary material that are required for official use under regulations which are promulgated by the attorney general. While in the possession of the custodian, no material produced shall be available for examination, without the consent of the person who produced the material, other than for legitimate law enforcement purposes pursuant to this chapter. Under any reasonable terms and conditions that the attorney general prescribes, documentary material while in the possession of the custodian shall be available for examination by the person who produced the material or any authorized representatives of the person.
(4) Whenever any attorney has been designated to appear on behalf of the state before any court or grand jury in any case or proceeding involving any alleged violation of this chapter, the custodian may deliver to the attorney any documentary material in the possession of the custodian that the attorney determines to be required for use in the presentation of the case or proceeding on behalf of the state. Upon the conclusion of any case or proceeding, the attorney shall return to the custodian any documentary material withdrawn which has not passed into the control of the court or grand jury through its introduction into the record of the case or proceeding.
(5) Upon the completion of the investigation for which any documentary material was produced under this chapter, and any case or proceeding arising from the investigation, the custodian shall return to the person who produced the material all the material, other than copies of it made by the custodian pursuant to this section, which has not passed into the control of any court or grand jury through its introduction into the record of the case or proceeding.
(6)(i) When any documentary material has been produced by any person under this chapter, and no case or proceeding arising from it has been instituted within a reasonable time after completion of the examination and analysis of all evidence assembled in the course of the investigation, the person is entitled, upon written demand made upon the custodian, to the return of all documentary material. Provided, that no documentary material shall be tendered, delivered, or made available to any other state, federal, or municipal agency.
(ii) Anyone who knowingly and willfully violates the provision of this subdivision shall, in addition to any civil liability, be punished by a fine of not more than five hundred dollars ($500) and/or imprisonment for no longer than one year.
(7) In the event of the death, disability, or separation from service of the custodian of any documentary material produced under any demand issued under this chapter or the official relief of the custodian from responsibility for the custody and control of the material, the attorney general shall promptly designate another racketeering investigator to serve as custodian of the documentary material, and transmit notice in writing to the person who produced the material as to the identity and address of the designated successor. Any designated successor has all duties and responsibilities as to the materials imposed by this chapter on his or her predecessor in office as to them, except that he or she is not responsible for any default or dereliction which occurred before his or her designation as custodian.
(k) Enforcement of investigative demands for production. Whenever any person fails to comply with any civil investigative demand served upon him or her under this chapter requiring the production of documentary material, or whenever satisfactory copying or reproduction of that material cannot be done, and the person refuses to surrender the material, the attorney general may file in the superior court and serve upon the person a petition for an order of the court for the enforcement of the demand.
(l) Refusal of persons served to testify or produce documents. Whenever any natural person neglects or refuses to attend and give testimony or to answer any lawful inquiry or to produce documentary material if in his or her power to do so in obedience to an investigative demand served upon him or her under this chapter, he or she may be adjudged in civil contempt by the superior court until any time that he or she purges him or herself of contempt by testifying, producing documentary material or presenting written answers as ordered. Any natural person who commits perjury or false swearing in response to an investigative demand pursuant to this section is punishable pursuant to the provisions of chapter 33 of title 11.
(m) Motion to quash. Within twenty (20) days after the service of an investigatory demand upon any person, or at any time before the return date specified in the demand, whichever period is shorter, the person served may file in the superior court and serve upon the custodian a petition for an order of the court modifying or setting aside the demand. The time allowed for compliance with the demand in whole or in part as deemed proper and ordered by the court shall not run during the pendency of the petition in the court. The petition shall specify each ground upon which the petitioner relies in seeking relief, and may be based on any failure of the demand to comply with the provisions of this chapter or on any constitutional or other legal right or privilege of the person.
(n) Right of persons producing documents. At any time during which any custodian is in custody or control of any documentary material delivered by any person in compliance with an investigatory demand, the person may file in the superior court and serve upon the custodian a petition for an order of the court requiring the performance by the custodian of any duty imposed upon him or her by this chapter.
(o) Duty to testify. (1) If, in any investigation brought by the attorney general pursuant to this section, any individual refuses to attend or to give testimony or to produce documentary material or to answer a written interrogatory in obedience to an investigative demand or under order of court on the ground that the testimony or material required of him or her may tend to incriminate him, that person may be ordered to attend and to give testimony or to produce documentary material or to answer the written interrogatory, or to do an applicable combination of these. The above order is an order of court given after a hearing in which the attorney general has established a need for the grant of immunity, as subsequently provided.
(2) The attorney general may petition the presiding justice of the superior court for an order as described in subdivision (1) of this subsection. The petition shall set forth the nature of the investigation and the need for the immunization of the witness.
(3) Compelled testimony shall not be used against the witness as evidence in any criminal proceedings against him or her in any court. However, the grant of immunity does not immunize the witness from civil liability arising from the transactions about which testimony is given, and he or she may nevertheless be prosecuted or subjected to penalty or forfeiture for any perjury, false swearing, or contempt committed in answering or in failing to answer or in producing evidence or failing to do so in accordance with the order. If a person refuses to testify after being granted immunity from prosecution and after being ordered to testify, he or she may be adjudged in civil contempt by the superior court until any time that he or she purges him or herself of contempt by testifying, producing documentary material or presenting written answers as ordered. The above does not prevent the attorney general from instituting other appropriate contempt proceedings against any person who violates any of the above provisions.
A brief by the Center for State and Local Government Excellence titled How Will State Unfunded Pension Liabilities Affect Big Cities? lays out an explanation for new rules of the Governmental Accounting Standards Board (GASB) that moved “unfunded actuarial accrued liability [UAAL] for public pension plans…from the footnotes of financial statements to the balance sheets of employers... Cities are now required to include on their balance sheets the pension accounting information currently in the footnotes of their financial statements and to report their share of the unfunded liability in cost-sharing plans. This calculation does not create new liabilities; it simply reallocates them from the state to the city.”
Translation by the Houston Municipal Employees Pension System: “Essentially, the UAAL is the amount of retirement that is owed to an employee in future years that exceed[s] current assets and their projected growth.” This means that Providence just went from $759,000,000 to $964,000,000 in pension liabilities that they could not fund in 2012.
Here is what Providence’s finances look like under the new GASB provisions:
Of course, another aspect is what is being reported here. The shortfall is caused by the City having to report their portion of the liabilities of the State Pension, which we have been reporting is facing shortfalls because of shady fees imposed by Gov. Raimondo’s friends on Wall Street.
This is an issue that is going to affect all cities and towns in the state, not just Providence. It is worth noting that Woonsocket is also mentioned in this report.
]]>There is.
The webpage Internet Archive has a fantastic device called the Wayback Machine that captures snapshots of pages every few days across the internet. With absolute ease, one can look at the campaign pages of candidates, movie websites that have gone extinct, or even the frontpage of a newspaper or magazine on a historic date, say, the Times on 9/12/01.
We present now a little jaunt down memory lane, the EngageRI webpage that foisted this scheme on an unsuspecting public.
–President & Co-Chairperson
Ed Cooney
Senior Vice President, Nortek, Inc.
–Vice President
Constance Pemmerl
Retired Financial Executive
–Secretary
Ted Long
Partner, Holland & Knight LLP
–Treasurer
John Galvin
Chief Financial Officer, Collette Vacations
-Paul J. Choquette, Jr.
Vice Chairman, Gilbane Inc.
-Susan Arnold
CEO and General Counsel, Rhode Island Association of REALTORS, Inc.
-Kas DeCarvalho
Partner, Fontaine, DeCarvalho & Bell LLP
-Bradford S. Dimeo
Dimeo Construction Company
-James Diossa
Councilman – Ward 4, Central Falls City Council
-Michael McMahon
Founding Partner, Pine Brook Road Partners
-Dan Sullivan
CEO and President, Collette Vacations
When the FBI, SEC, and US Attorney’s Office come looking to ask questions, they might do well to check in with these folks also.
]]>One of the figures that appears in this whole fracas is a man familiar to those who have paid attention to the less-publicized elements of that political machine unto itself known as the Clintons, one Marvin Rosen. Ted Seidle wrote in his letter to the federal authorities the following:
As noted in my first report, when asked by the SEC in 2009, ERSRI admitted that Fenway Partners Capital Fund III paid an influential intermediary, Marvin Rosen, of Diamond Edge Capital Partners $262,500 related to this investment and paid the firm a total of approximately $1 million related to four private equity investments. Mr. Rosen was a Democratic fundraiser linked to former President Bill Clinton whose firm earned millions in New York pension fund deals in 2005 and 2006 when Alan Hevesi was state controller. Fenway and Mr. Rosen were also was involved in a pay-to-play controversy related to the New Mexico state pension.
To delve into the history of Mr. Rosen is to journey into the dark underbelly of the Democratic Party, a party that has been co-opted and compromised by Wall Street since the days of Bill Clinton’s gubernatorial campaigns, if not earlier. Since the mid-1980’s, a brand of “New Democrats” has used the once-progressive mantle of the party to justify the adoption of neoliberal policies that a Reagan or Bush would only dream of trying to foist on the American public, be it “the era of Big Government is over” hollowing out of Welfare and other social safety net programs or “Tough on Crime” minimum mandatory sentencing guidelines. This cuts to the core of your standard DINO (Democrat In Name Only), be it Bill and Hillary Clinton or Gina Raimondo.
When one writes about Marvin Rosen, they must be cautious because of his tendency to sue over bad press. As such, what follows is copy from sources that have previously withstood the Rosen wrath. The first comes from the book Kentucky Fried Pensions by Chris Tobe, who kindly shared his materials with us to complete these stories. Tobe has been covering a similar pension scheme in the Bluegrass State and says the following:
The most colorful placement agent firm, hands down, is a small operation called Diamond Edge Capital Partners LLC led by Marvin Rosen. Eileen Kotecki, who was Al Gore’s and John Edwards’ main Presidential fundraiser, worked there for a time. [i] Glen Sergeon, a Diamond Edge partner and a former trustee of the New York Teachers’ Retirement Fund, collected around $5 million from private equity firms and hedge funds doing business with the Kentucky Retirement Systems (KRS). Sergeon used the money to buy a lavish Fifth Avenue condo. [ii] Forbes reported that, in addition to Kentucky, Diamond Edge was involved in the New York pay for play scandal: “Diamond Edge Capital Partners is another firm that was paid–$6.8 million–by money managers for lining up work with New York. In 2008 Sergeon joined Diamond Edge, where he teamed up with Marvin Rosen, a company partner and the former Bill Clinton fundraiser who arranged Lincoln Bedroom sleepovers for big donors. Later that year Sergeon landed Diamond Edge its first business with Kentucky.” [iii] Rosen and another Diamond Edge partner, Marc Correra, are being sued for their role as placement agents in New Mexico. [iv] Marvin Rosen as late as 2013 has been disclosed as a placement agent in Rhode Island. Pro Football Hall of Famer Lynn Swann has also worked for Diamond Edge.
But the most colorful Diamond Edge partner was Kenneth Ira Starr, known as Hollywood’s Madoff. [v] Currently serving a seven-year prison term, Starr managed the money of celebrities like Al Pacino, Uma Thurman and Lauren Bacall. Starr engineered a $33 million Ponzi scheme to swindle his clients and to impress his much younger, ex-stripper wife, Diane Passage. [vi] He was featured on the CNBC television show “American Greed” which focused on his rip-off of Sylvester Stallone and his obsession with, and subsequent marriage to, a pole dancer. [vii]
[i] http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atwTqj6OjY7U How Pension Placement Agent Exploited Political Ties, Martin Braun & Gillian Wee: May 18, 2009
[ii] http://observer.com/2011/07/secret-agent-glen-sergeon-sells-in-the-village-buys-in-harlem/
[iii] http://www.forbes.com/forbes/2011/0523/features-pensions-glen-sergeon-auditors-secret-agent_3.html
[iv] http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atwTqj6OjY7U
[v] http://www.huffingtonpost.com/2011/03/03/ken-starr-hollywoods-mado_n_830918.html
[vi] http://www.huffingtonpost.com/2011/03/03/ken-starr-hollywoods-mado_n_830918.html
[vii] http://www.cnbc.com/id/45554694
Of course, this begs the question what exactly is a placement agent?
Investopedia defines the term as “An intermediary who raises capital for investment funds. A placement agent can range in size from a small one-person independent firm to a large division of a global investment bank. Professional placement agents are required to be registered with the securities regulatory agency in their jurisdiction, such as the U.S. Securities and Exchange Commission. A placement agent operating in the U.S. must be registered as a broker or dealer.” When I discussed this with Tobe, he explained it as a job that has almost totally ceased to exist in the post-Citizens United era, but before then a placement agent functioned as a middle-man for big capital.
But that is only scratching the surface of Rosen’s history. Jeffrey St. Clair and the late Alexander Cockburn of CounterPunch! also have covered Rosen in their multi-decade stories about the Clintons. Their story, titled Clinton and the Cuban Fixer, is an impressive read worth the time. They write:
Marvin Rosen cut his teeth in Democratic Party politics back in 1980 when he was the Florida coordinator of Sen. Ted Kennedy’s doomed effort to wrest the Democratic Party nomination from Jimmy Carter. Though Kennedy did badly, Rosen proved himself a whiz at beating the bushes for money. By 1984 he was the leading fundraiser for Fritz Mondale. In 1988 Rosen served as finance chairman of the Dukakis campaign and, during the cash-strapped days of Clinton’s 1992 bid, was personally solicited by Gov. Bill himself to raise money, and celebrated the inaugural victory in the company of the Clintons and the Gores. Seeking to capitalize on such a long investment in time and effort, Rosen opened a D.C. office for his law firm in 1993 and immediately hired Ron Brown’s son Michael to be his director of legislative affairs. He also recruited Ted Kennedy’s new wife, Victoria.
They go on to explore Rosen’s connections to the infamous Cuban exile community located around Miami and other parts of Florida. For those readers who are unfamiliar, this bunch has a rather checkered past, including hair-brained anti-Castro efforts that date back to the darker days of the Cold War along with a bevvy of good-old-fashioned corruption and pollution of the Florida Everglades.
Another Cockburn/St. Clair piece featuring Rosen, excerpted from their book Dime’s Worth of Difference: Beyond the Lesser of Two Evils and titled All for Oil, Oil for One, explains the connections between Rosen and major fossil fuel corporations that have been looking to drill for oil in the Arctic National Wildlife Refuge and build a variety of pipelines across America, giving a great insight into why the Democrats are all in favor of the Burrillville natural gas plant despite sound science proving it would be a calamity.
ARCO [Atlantic Richfield Company]– the prime beneficiary of the new Alaskan oil bonanza–is one of the preeminent sponsors of the American political system. The oil giant maintains a hefty federal political action committee. In the 1996 election cycle, the ARCO PAC handed out more than $357,000. But this was only the beginning. Over the same period, ARCO pumped $1.25 million of soft money into the tanks of the Republican and Democratic national committees. The company contributed at least another $500,000 in state elections, where corporations can often give directly to candidates. At the time, Robert Healy was ARCO’s vice-president for governmental affairs. On October 25, 1995, Healy attended a White House coffee “klatsch” with Vice-President Al Gore and Marvin Rosen, finance chairman of the Democratic National Committee. A few days before the session, Healy himself contributed $1,000 to the Clinton/Gore re-election campaign. But from July through December of 1995, largely under Healy’s direction, ARCO poured $125,000 into the coffers of the DNC. [Emphasis added]
Need more be said?
The late Christopher Hitchens, for all his drunken sliminess and apologias for the Bush presidencies, did have a moment in his career where he contributed something useful by publishing his pamphlet No One Left To Lie To. In that slim volume, issued in the midst of the Clinton impeachment fiasco, he laid out an explanation for the Clinton strategy of triangulation, a term coined by the right wing political consultant Dick Morris. Hitchens defined it as such in a Book TV interview on C-SPAN 2: “Triangulation is three-card monte… You steal the Republican Party’s program, adopt it for the Democratic Party, hope you can bring the Republican Party’s donors along with you, which you often can, then you are faced with the task of shoring up or reassuring your own constituency, and that is done by means of a sort of cheap and superficial political correctness.” It can be said without much argument that this can very well sum up the Raimondo ideology very well, a miasma of reactionary ideals covered up by a clever game of neoliberal identity politics that passes doing the bare minimum for women’s rights as feminism. This also goes for her pension policies that benefit Wall Street while robbing Main Street.
Of course, all these points also can be applied with no modification or rejoinder to Hillary Clinton.
The Raimondo pension scheme is just a test run of a larger agenda. If this is left to stand, it would clear the way for the privatization of Social Security and the total defenestration of the social safety net dating back to the New Deal years. Through a well-financed and insidious number of organizations including the Pew Charitable Trusts Foundation, the Bill and Melinda Gates Foundation, the Blackstone Group, and the Laura and John Arnold Foundation, as well as many others, a cunning and manipulative campaign has been created to deceive the general public into believing that retired teachers, firefighters, librarians, and civil servants are costing the taxpayers exorbitant amounts of money while your friendly Wall Street banker is in need of charity. And at the center of it all is Hillary Rodham Clinton, whose campaign is both financed by these crooks and soliciting the endorsements of unions from whose members the heist is being perpetrated against!
All this begs multiple questions. For example, where are the voices of Treasurer Seth Magaziner and Attorney General Peter Kilmartin in all of this? David Sirota argues in a report that “the crisis language around pensions is, unto itself, fraudulent“. What does this say about Gina Raimondo’s public statements and testimony made potentially under oath while the pension lawsuit was being litigated? Was she totally forthcoming when the SEC previously looked into these matters? Seidle writes in Rhode Island Public Pension Reform: Wall Streets License to Steal:
[T]he General Treasurers practice of withholding information and intentionally providing incomplete disclosures regarding ERSRIs investments results in: (1) misleading the public as to fundamental investment matters, such as the true costs and risks related to investing in hedge, private equity, and venture capital funds; (2) understating the investment expenses and risks related to ERSRI; and (3) misrepresenting the financial condition of the state of Rhode Island to investors… [A]n investigation by state or federal securities regulators would reveal intentional withholding of material information and misrepresentations regarding state pension costs. [Emphasis added]
This is a scandal in development that makes Operation Plunder Dome look like shoplifting penny candy from the corner store. There never was a pension crisis, just a public swindle. This whole notion of a crisis is a gigantic fraud. And not only are public sector retirees and employees paying for it, every single taxpayer in Rhode Island is being duped into shoveling piles of cash into Wall Street’s trough.
The first person to scrutinize is John Arnold, the ex-Enron trader who was able to send a nice donation to both the Raimondo and Obama campaigns at key moments. Consider this line from a webpage cataloging his nationwide rampage:
Arnold donated hundreds of thousands of dollars to Engage RI, the PAC behind Raimondos campaign to cut benefits and move workers into a hybrid retirement system that includes a 401(k) component. The Arnold Foundation also helped finance a Brookings Institution report and an Urban Institute report trumpeting Raimondo’s pension cuts.
While Enron has gone down in history as having close ties with George W. Bush, complete with Ken Lay holding the classic Dubya appellation of “Kenny Boy”, this should not be surprising. For some years now, the Wall Street political donations have flowed into Democratic Party coffers whereas the Republicans depend on patronage from the fossil fuel industries. The reason Bush and Lay were buddies came down to the fact that Enron as a company operated in both worlds, trading in energy futures (which ended up being fraudulent in the long run), which combined the sale of commodities on an exchange floor like Wall Street with the generation of relationships to fuel corporations such as the ones the Bush family made their millions from.
David Sirota writes the following about Arnold:
According to CNN/Money, John Arnold is the second-youngest self-made multibillionaire in the United States. Only Mark Zuckerberg is younger and richer but thats not the only difference between the two. Whereas Zuckerberg made his fortune building a brand-new social media technology, Arnold made his the old fashioned way: through the kind of financial speculation that destroys economies, harms taxpayers and wrecks public pension funds… Underscoring the potential corruption surrounding the pension system, Siedle also reports that state pension officials became the target of pay-to-play allegations and a Securities and Exchange Commission inquiry. Meanwhile, the Economic Policy Institute reports that the Pew/Arnold-backed pension system actually increases costs to state and local governments and taxpayers while making retirement incomes less secure. Specifically, because of the comparative inefficiencies of the defined contribution part of the states new hybrid pension plan, state taxpayers will be forced to make upwards of $15 million a year in additional contributions while providing a smaller benefit for the average full-career worker. [Emphasis added]
All this obviates a simple question, why?
The answer is relatively easy. The over-hyped Dodd-Frank Act and recession backlash has made the typical practice of bailing out the Too-Big-To-Fail banks untenable. After 2008, it is simply impossible to carry on with business as usual. There was the logical and sane option of breaking up the banks and reinstating the Glass-Steagall Act, the law dating back to the aftermath of the 1929 crash that segregated risky Wall Street investment from typical consumer depositor banking. But President Obama, who has always been up to his eyeballs in money from firms like Goldman Sachs and Blackstone, an outfit that makes Goldman seem like child’s play, could not do that. So instead, Wall Street had to find a new source of revenue.
And what is perhaps the most trustworthy reservoir of cash to be found in America? The pension funds! Consider this line from Dan Pedrotty of the American Federation of Teachers: “Today, nearly $4 trillion is held in defined-benefit pension funds in our country on behalf of American workers for their retirement.” KA-CHING!
As with any fishing expedition, first you create the bait. Arnold has financed a “pension crisis” narrative through traditionally-dispassionate, objective venues that the public trusts immensely. For example, there was the shady report put out by the Brookings Institute that raised alarm bells. Or there was the nonsense news he financed for broadcast by the PBS division out of New York. There are all kinds of instances where Arnold’s plot is being rolled out. But you do not need me to tell you, just watch this delightful animated short created by the good union folks at AFSCME:
This of course helps to explain the motivation of why these folks are into education and push the charter school agenda. Besides the fact that it would break a major pillar of the union movement that could theoretically help union drives in the businesses of the Waltons (Wal-Mart and Sam’s Club) or the Gateses (Microsoft), it generates tons of revenue that goes into the pockets of the Wall Street investment firms! Consider also this point raised in The Plot Against America’s Pensions by David Sirota:
Like President George W. Bushs proposal to radically alter Social Security, many of these plans would transform stable public pension funds into individualized accounts. They also most often reduce millions of Americans guaranteed retirement benefits. In many cases, they would also increase expenses for taxpayers and enrich Wall Street hedge fund managers…The goals of the plot against pensions are both straightforward and deceptive. On the surface, the primary objective is to convert traditional defined-benefit pension funds that guarantee retirement income into riskier, costlier schemes that reduce benefits and income guarantees, and subject taxpayers and millions of workers retirement funds to Enrons casino-style economics The bait-and-switch at work is simple: The plot forwards the illusion that state budget problems are driven by pension benefits rather than by the far more expensive and wasteful corporate subsidies that states have been doling out for years. That ends up 1) focusing state budget debates on benefit-slashing proposals and therefore 2) downplaying proposals that would raise revenue to shore up existing retirement systems. The result is that the Pew-Arnold initiative at once helps the rights ideological crusade against traditional pensions and helps billionaires and the business lobby preserve corporations huge state tax subsidies. [Emphasis added]
It is worthwhile here to consider in closing some verbiage from Ted Siedle’s 2013 forensic audit:
Rhode Island’s state pension fund fell victim to a Wall Street coup. It happened when Gina Raimondo, a venture capital manager with an uncertain investment track record of only a few yearsa principal in a firm that had been hired by the state to manage a paltry $5 million in pension assetsgot herself elected as the General Treasurer of the State of Rhode Island with the financial backing of out-of-state hedge fund managers. Raimondos new role endowed her with responsibility for overseeing the states entire $7 billion in pension assets. In short, the foxes (money managers) had taken over management of the hen-house (the pension).
Indeed.
Several weeks ago the Washington Post ran a story about the glories of Governor Gina Raimondo’s pension policy, a matter I wrote about for CounterPunch.
Since then, sources have shared with RI Future a 13-page letter dated December 8, 2015 sent by Edward “Ted” Seidle, President of Benchmark Financial Services to Elizabeth Rosato of the FBI’s White Collar and Complex Financial Crimes unit, LeeAnn Ghazil Gaunt of the SEC’s Municipal Securities and Public Pensions unit, and Stephen Dambruch of the U.S. Attorney’s Office – District of Rhode Island’s Criminal Division. The U.S. Attorney’s Office and the FBI said that they do not comment on potential or current investigations. The SEC has yet to get back.
[Editorial note: On the phone Seidle told RI Future editor Steve Ahlquist that he spoke to the agencies before sending the letter and that his concerns were met with a “good deal of interest.”]
Mr. Seidle has previously written about the Raimondo pension policy in Forbes:
Theres no prudent, disciplined investment program at work herejust a blatant Wall Street gorging, while simultaneously pruning state workers pension benefits. Its no surprise that some of Wall Streets wildest gamblers have backed her so-called pension reform efforts in the state legislature. Former Enron energy trader emerges as a leading advocate for prudent management of state worker pensions? Thats more than a little ironic.
Here’s the letter with all emphasis contained in the original and only minor formatting adjustments:
Re: Rhode Island Retired Teachers Association Request for Further Investigation and Prosecution of Potential Civil and Criminal Violations Related to the Employees Retirement System of Rhode Island
Dear Ladies and Gentleman,
Why have 40 percent of the assets of the tax-exempt Rhode Island state pension been invested offshore in high-cost, high-risk hedge and private equity funds that permit billionaire fund managers to avoid U.S. taxes and mystery investors to profit at the expense of the state pensionall in secrecy? Rhode Islanders want to know.
The Rhode Island Retired Teachers Association (RIRTA) has retained me to bring potential civil and criminal malfeasance related to the Employees Retirement System of Rhode Island (ERSRI) that I have investigated to your attention for both further investigation and prosecution and I am writing to you on RIRTA’s behalf. While RIRTA works to safeguard retirement benefits for Rhode Island educators, the potential violations of law discussed in this letter impact all stakeholders in ERSRI, including participants and taxpayers.
I am a former SEC attorney and the nations leading expert on pension forensics, having investigated over $1 trillion in retirement assets. Prior investigations include the pensions of the states of North Carolina, Kentucky and Alabama; the cities of Nashville, Jacksonville and Chattanooga; Shelby County, Tennessee and Town of Longboat Key, Florida; retirement plans of major corporations such as Wal-Mart, Caterpillar, Boeing, Edison, Lockheed, Northrop Grumman, Deere, Bechtel, ABB, Edison and US Airways; and asset managers handling retirement assets such as Fidelity, JP Morgan, Sanford Bernstein, and Banco Santander. [1] I train U.S. Department of Labor pension investigators around the country; have testified before the Senate Banking Committee regarding the mutual fund scandals and was a testifying expert in various Madoff litigations.
I write about my investigations for Forbes.com and was named as one of the 40 most influential people in the U.S. pension debate by Institutional Investor for both 2014 and 2015.
By way of background, I have completed two extensive investigations of the $7.4 billion ERSRI.
The first, entitled Rhode Island Pension Reform: Wall Streets License to Steal [2] was commissioned by the American Federation of State, County and Municipal Employees, Council 94 (Rhode Islands largest public employee union representing more than 10,000 state, city, town and school department employees) and completed October 17, 2013.
The second, entitled Double Trouble: Wall Street Secrecy Conceals Preventable Pension Losses in Rhode Island [3] was made possible through donations by 350 individual crowdfunderswith no contribution by organized labor and completed June 5, 2015. A petition to have the U.S. Securities and Exchange Commission investigate the potential violations of law related to ERSRI identified in the Double Trouble report posted on change.org by Concerned RI Taxpayers has been signed by 375 individuals to date. [4]
Each of these forensic investigations includes details regarding certain apparent civil and criminal violations of law by Wall Street investment managers and advisers managing or overseeing ERSRIs assetswrongdoing which I will discuss further below.
If I am correct in my analysisand I am confident that I amthe potential violations of law by asset managers and advisers handling the assets of the already seriously underfunded state pension identified in these reports likely represent the greatest threat to the financial well-being of Rhode Islanders in the states history.
At the outset it is paramount to note the following alarming facts:
In summary, at this pivotal moment when $1 trillion in public pension assets are at risk, it is crucial for taxpayers, public employees, regulators and law enforcement to pierce the veil of secrecy, examine the myriad forms of commonplace alternative industry wrongdoing, and craft an effective response to protect retirement funds set aside for government workers.
It is time to address whether alternative industry malfeasance may be criminally, as well as civilly actionable when public pensions, such as ERSRI, are harmed.
Bear in mind that ERSRI stakeholders are, at this time, five years into a ten year looting (since alternatives typically involve a ten-year commitment) and already an estimated $2 billion has been lost in Rhode Island.
Below are specific examples of potential violations of law which were identified in the two forensic investigations of ERSRI.
In conclusion, the evidence of pervasive wrongdoing involving alternative investments held in the portfolios of pensions established for state and local government workers nationally, including ERSRI, is overwhelming. The malfeasance evident in ERSRIs alternative investments is harmful to the already severely underfunded pension.
The so-called reform of ERSRI involving heavy use of alternative investment funds engaged in practices unsuitable or illegal for the pension is doomed to continue to fail. Five years into a ten-year looting, already an estimated $2 billion has been lost in Rhode Island. It is not too late to act to protect the retirement savings of state and local government workers of modest means.
At this pivotal moment when $1 trillion in public pension assets are at risk nationally, regulators and law enforcement must pierce the veil of secrecy, examine the myriad forms of commonplace alternative industry wrongdoing, and craft an effective response to protect government workers retirement securitybefore the ten-year looting cycle has been completed.
It is time to address whether alternative industry malfeasance may be criminally, as well as civilly actionable when public pensions, such as ERSRI, are harmed.
I am available to answer any questions you may have and provide any assistance. Please do not hesitate to call me.
Edward Ted Siedle
President
[1] Findings of certain of these forensic investigations have been made public and can be viewed at my company website, www.investigatemyretirementplan.com.
[2] http://www.scribd.com/doc/176896709/Rhode-Island-Public-Pension-Reform-Wall-Street-s-License-to-Steal
[3] http://files.golocalprov.com.s3.amazonaws.com/Double%20Trouble%20FINAL.pdf
[4] https://www.change.org/p/u-s-securities-and-exchange-commission-investigate-potential-violations-of-the-rhode-island-8-billion-state-pension-fund
[5] http://www.forbes.com/sites/edwardsiedle/2015/11/20/rhode-island-retired-teachers-association-turning-up- the-heat-on-pension-looting/
[6] Page 51.
[7] http://www.bloomberg.com/news/articles/2014-04-07/bogus-private-equity-fees-said-found-at-200-firms-by-sec
[8] How Fair are the Valuations of Private Equity Funds? http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2229547
[9] http://www.pionline.com/article/20150330/ONLINE/150339990/sec-charges-private-equity-firm-patriarch-ceo- with-improper-valuation
[10] https://people.hofstra.edu/Daniel_J_Greenwood/pdf/Looting.pdf
[11] http://www.providencejournal.com/article/20140224/NEWS/302249995
[12] http://wpri.com/2014/10/15/arnold-donates-another-100k-to-pro-raimondo-super-pac/
[13] http://www.forbes.com/sites/trangho/2015/05/09/why-hedge-funds-love-to-go-offshore/
[14] http://www.reuters.com/article/us-sec-fenway-idUSKCN0SS22620151103#GZTKQVh88ckmZo8f.97
[15] http://www.scmp.com/business/banking-finance/article/1673090/blackstone-tpg-capital-disclosefees-under-
pressure-us-sec
[16] http://www.wsj.com/articles/fees-get-leaner-on-private-equity-1419809350?cb=logged0.46937971841543913
[17] http://www.nydailynews.com/news/bill-clinton-pal-earned-huge-pension-fees-marvin-rosen-firm-millions- hevesi-reign-article-1.361953
[18] http://watchdog.org/15168/nm-gary-bland-trouble-for-the-sics-pay-to-play-lawsuit/
[19] http://www.nytimes.com/2009/05/15/nyregion/15carlyle.html
[20] http://www.nytimes.com/2014/10/19/business/retirement/behind-private-equityscurtain.html?_r=0