The release last Friday of a forensic audit of the Rhode Island public pension system’s real estate portfolio reveals a dire situation for state Treasurer Seth Magaziner, son of longtime Clinton power player Ira Magaziner. The audit, prepared by Benchmark Financial Services, was crowdfunded by retirees themselves because Magaziner and other state officials had all but blocked them from obtaining public information they had sought from the state.
How bad is the situation? Well, the audit report is titled Beyond Bad and it traces a generation of mismanagement of the pension system that has put retirees’ futures at grave risk. It said that it began investing in real estate about 27 years ago, the pension portfolio has performed “wretchedly” and that the best interests of pensioners “have time and again been ignored” by state treasurers, including Magaziner.
The real estate portfolio of the pension has effectively been a bail-out fund for bad deals Rhode Island has gotten itself into. Former state treasurer and now-Governor Gina Raimondo even invested pension fund money in hedge funds she was linked to — deals that lost pensioners vast sums.
The real estate and construction industries in Rhode Island have were traditionally controlled by the Italian, Irish, Armenian, and Portuguese communities that settled in Providence during the Gilded Age and “went legit” by joining the Democratic Party en masse after World War II. Beginning in the 1950s, these players — whose heyday came during the infrastructure boom spanning the Eisenhower to Nixon years — made a fortune by working in collaboration with government contractors, organized labor leaders, and cement and asphalt companies.
“Real estate underperformance has cost the pension over $500 million…and losses may amount to as much as $1 billion,” the report, authored by former SEC investigator Ted Siedle, said. A primary reason for this, the report suggests, is that state officials used pension monies as a bail-out fund for bad real estate deals the state was mixed up in.
As mentioned in my previous story on this issue, earlier this year Magaziner charged pensioners $10,893 for access to materials to complete the audit they were legally entitled to for free and in turn refused to provide the documents upon payment. “To date, only $2,657.50 has been refunded,” the report says. “Magaziner has refused to refund the remainder.”