The Rhode Island Retired Teachers Association is one of the most innocuous-sounding organizations one could imagine, ranking up there with the Canadian ice growers lobby and the like. What scary political demands are likely to emanate from Sinatra fans whose most audacious requests would normally be demanding that the dry cleaner use extra starch for the brunch tablecloth? More to the point, what mortal threat would state treasurer Seth Magaziner, son of Clinton crony Ira Magaziner, see in this bookish group of pensioners?
But then came the great Rhode Island pension reform heist.
As part of the swindle, the General Assembly, a hive of scum and villainy run by career Democrats who in another era would be called Rockefeller Republicans, passed the blandly-named but sinisterly-intended Rhode Island Retirement Security Act of 2011. This eliminated pensioners’ annual cost of living hike until the fund reached 80% liquidity — which was impossible given that the politically-wired hedge funds the pension invested in were losing money hand-over-fist.
In response, the retired teachers hired former SEC lawyer and forensic auditor Ted Siedle to figure out where the hell their money went. What he found was a pipeline leading straight from the state treasury to the coffers of the 1 percent with “no prudent, disciplined investment program at work here—just a blatant Wall Street gorging,” to quote one of his columns for Forbes.
Siedle’s two audit reports, Rhode Island Public Pension Reform: Wall Street’s License to Steal and Double Trouble: Wall Street Secrecy Conceals Preventable Pension Losses in Rhode Island, are so juicy you’ll need a bib to read them.
He found that when Gina Raimondo first became state treasurer, she had her assets put into an allegedly blind trust called the Point Judith II Fund. But, following the roll-out of her reform scheme, she invested the pension in her own fund, netting her a pretty return. It’s worth noting that her successor as treasurer, Magaziner, had no problem with her incestuous arrangement.
When Siedle began auditing the fund’s real estate portfolio, one of the lowest-performing in the country, Magaziner threw up roadblocks by outsourcing management of public records to a private firm called NextRequest. They charged Siedle thousands of dollars per request and sometimes up to $10,000, in an obvious effort to keep him from obtaining the documents he needed to unravel the web of “reform” sleaze.
This all appears to be part of a strategy devised by John Arnold, a former Enron trader who has waged and paid for a public war on the state pension. For example, Arnold made big donations to Raimondo’s gubernatorial campaign SuperPAC.
A nonprofit called Code for America is also the recipient of huge sums of Arnold donations. It ostensibly exists to provide the computer programming necessary to digitize the public sector workplace. And oh yeah, three of its alumni run NextRequest, the price-gouging private firm running the public records ripoff.
As a nonprofit, Code for America — motto: “What if all government services were good” — is not allowed to lobby. But it is clear that Code for America alumni at Next Request are working in sync with Arnold’s legislative efforts to destroy the state pension system.
“Arnold has come up with a novel concept to help plans block Open Records requests,” says Chris Tobe, an expert on public pensions. To help better understand this tangled web, Tobe sat down for a conversation with me. He has has 25 years of institutional investment experience with a focus on public pension plans and is the author of the book Kentucky Fried Pensions.
Click the Player to Listen to My Interview with Tobe!
Could this scam possibly get any more flagrant? Actually, yes, it does.