COLUMBUS, Ohio (WCMH) – The Ohio Attorney General wants two board members of the state’s teacher pension fund removed, claiming they violated their fiduciary duty by advocating for a “backdoor” investment scheme.
Attorney General Dave Yost filed a lawsuit Tuesday seeking the removal of Wade Steen and Rudy Fichtenbaum from the board of the State Teachers Retirement System, the $91 billion pension fund for retired public school teachers. In his complaint, he accuses Steen and Fichtenbaum of colluding with unqualified, personal acquaintances of Steen to “peddle to STRS a secretive and untested investment scheme” that would “spell disaster for Ohio teachers.”
The board, which is scheduled to meet Wednesday afternoon, has been mired in controversy between the governor’s ultimately failed attempt to remove Steen from the board, anonymous allegations against its executive director, accusations of campaign finance law violations, and calls from the governor for a state investigation into claims of a “hostile takeover" by outside interests. It also comes as Steen and other reform-minded board members – who have openly criticized lavish bonuses for investment staff and lack of cost-of-living adjustments for retirees – are poised to take a controlling majority of the board.
Yost’s complaint largely contains accusations from an anonymous memo his office published last week when announcing an investigation. The memo, and Yost’s lawsuit, accuse Steen and Fichtenbaum of aggressively pitching an alternative investment scheme to their personal benefit – and to the detriment of the pension fund’s beneficiaries.
Under the alleged scheme, about $65 billion of STRS’s current assets would be managed by a company called QED and, according to investment committee member Steen, increase the fund’s revenue by $4 billion. But Yost says that QED is operated by close acquaintances of Steen who lack relevant investment management experience.
Yost’s complaint alleges that even after an investment consulting firm recommended STRS not pursue a relationship with QED, Steen and Fichtenbaum continued to pressure the board into adopting their plan. His complaint also claims that the Ohio Retired Teachers Association has picked up Steen and Fichtenbaum’s mission and has launched an attempt to sway public interest in their favor.
Yost claims that in pushing for a relationship with QED, Steen and Fichtenbaum violated their fiduciary duty to the retirement system by using “their public office for private gain.” He has asked a Franklin County Court to remove Steen and Fichtenbaum from the STRS board and to permanently bar them and “those persons in active concert or participation with them” from serving on STRS’s investment committee.
Read the full complaint below.
