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.”

READ THE ENTIRE REPORT HERE
or the Providence Journal coverage here.

It also unearths new evidence that shows why  the over-arching non-disclose agreements Rhode Island entered into with its hedge fund advisers is inherently risky for public sector funds.

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.

Like Gina Raimondo did in 2011, the Sox crushed the ball against Tampa Bay. But last night the hirsute home team looked more like the Gina Raimondo of 2013, swinging and missing against more major league pitching. Raimondo’s only hit since being at-bat against the likes of Ted Seidle and Matt Taibbi has been to label the recent influx of high-and-tight, hard-hitting, anti-Wall Street journalism as “political football.”

I posted about political football Wednesday morning and both ProJo op/Eds (Fitzpatrick and Achorn) followed suit this weekend. It was an obvious great line right from the get-go. Interestingly, the Providence Journal news coverage led with the quote in print and the online version ended with it.

Ed Fitzpatrick looked at how the national narrative about Raimondo has gone from protagonist to “Wall Street Raimondo.” (we like to call Raimondo a Wall Street Democrat). I wrote that I thought it hypocritical that Raimondo used pensions as a political football when it was to her advantage and dismissed them when it did not.

Conversely, Ed Achorn wrote that people in unions are against good. And those who support their interests are childish. And failing to cut pensions would have been akin to “murdering” the private sector. (I am not making this up, you can read it for yourself here!!) It begins:

Frank Caprio, the last Democratic nominee for Rhode Island governor, made his mark by pledging to stand up to the special interests and fight for the common good. Public-employee unions did not like that very much, and turned on him with a vengeance in 2010, tearing down Mr. Caprio while dragging Lincoln Chafee into the governor’s office.

But wait, it gets even more ridiculous. Those who don’t agree are just being childish:

It would be nice to make politically powerful groups happier with more generous retirement benefits, but grownups realize the state has only so much to spend on government. There are other areas that cry out for funding; notably education, roads and bridges, and programs to help the neediest among us.

I would agree that education, infrastructure and ending poverty are more important that pensions, and so would every single retiree. Where we disagree is whether these are either/or propositions. Well, Rhode Island’s paper of record’s official editorial voice actually wants you to believe that cutting pensions was necessary to save capitalism!

Murdering the goose that lays the golden eggs — the private sector — would have hurt public employees vastly more than making some reasonable changes in the system. Reform was a question of math, not politics.

Well Rhode Island, if you thought the Ed Achorn era as op/ed editor was bad, wait till we get a healthy dose of the Ed Achorn era minus Froma Harrop. The ProJo really needs to send Achorn to the showers and bring in someone from the bullpen who isn’t scuffing the ball.

Take hedge funds, for example. They do produce a good outcome, in that they manage against investment risk. But that doesn’t mean that investing in hedge funds is a net good for the state’s pension fund.  Mike Stanton’s Sunday blockbuster on Rhode Island’s hedge fund gamble points out that there are lots of competing goods going on here.

Hedge funds do manage investment risk, there’s no doubt about that. But this management strategy has required a massive divestment from our workforce and a transfer of that wealth to Wall Street.

Ted Seidle writes, “paying huge pension fees to Wall Street hasn’t hurt the Treasurer’s campaign fundraising efforts.”

It’s reasonable to assume hedge fund managers would be willing to underwrite pension reform if reform means they make tons of money on the deal. Billionaire hedge fund manager John Arnold underwrote pension reform in Rhode Island with massive donations to Engage RI and now he is investing in pension reform in California, Reuters reports.