Former SEC attorney Edward “Ted” Siedle is an expert on Rhode Island’s public pension system, which had been plundered by Democratic Party state officials, including Seth Magaziner, the son of Clinton crony Ira Magaziner. Desperate retirees, spearheaded by the Rhode Island Retired Teachers Association, retained Siedle using a crowdfunding effort to conduct three forensic audits of the pension system, most recently a look at its murky real estate portfolio.
READ MORE: Check out the complete transcript
Following the 2008 crash, the public pension system was in need of some help. So former venture capitalist-turned-Treasurer Gina Raimondo, who is now state governor, “reformed” the pension by investing holdings in risky hedge funds and in a not-too-blind trust holding her assets, the Point Judith II fund. Then she had the state legislature shut off the yearly cost of living adjustment (COLA) for pensioners, leaving thousands of seniors out in the cold while insiders made fat profits. Raimondo claimed these moves were solely to reinvigorate the pension and not for the benefit of either her or her Wall Street cronies.
The cherry on top of this massive mess is that hedge fund managers, who bear major responsibility for the 2008 crash, are now leading the charge to privatize retirement programs and at the head of the union-busting charter school movement. And it just so happens that Gina Raimondo’s husband, Andy Moffit, is a charter school industry leader.
And let’s be clear, this type of “pension reform” is not limited to Rhode Island. Raimondo-styled policies have been enacted in several other states already. The pension reform scheme could at some point prove to be a blueprint for privatizing the federal Social Security system down the road.
I recently sat down for a conversation with Siedle, who explained the mess that remains in the Ocean State Treasury. This interview was lightly edited for length and clarity.
*Editorial note: Siedle clarified in email “that [Point Judith II] fund lost 2.5 percent and the pension paid 2 1/2% to invest in it.”
Q1/ Current state Treasurer Seth Magaziner and Raimondo aren’t up for reelection until 2018. What should the voters be demanding in terms of the pension system?
A1/ The Point Judith II fund should have been dumped a long time ago! The pension fix that Raimondo initiated was based around the COLA cuts and hedge fund ramp-up. The COLA cuts savings have been squandered on hedge funds that have under-performed. So the fix, the “reform” that was supposed to make the pension fund sustainable has not worked. So I would just tell voters to watch the pension fund and watch it closely!
Q2/ The drop of 2.5% in the value of the overall pension fund matches the 2.5% gain in Raimondo’s Point Judith Fund. How bad is the situation for retirees in general?
A2/ Losses are mounting. We’re looking at a $2 billion loss on a $7.5 billion fund, this is a massive blunder, so somehow it’s going to have to be covered. The pension fund is much worse off than it was before Gina Raimondo got her hands on it.
Q3/ What are the key findings of the recently-completed audit of the fund’s real estate component?
A3/ The biggest issue was that they simply lied about when they started investing in real estate. They said ‘We started investing in 2005 and any real estate we invested in before that, forget about it, we’re not going to include it in our records.’ For the past 27 years the pension’s real estate investments earned about .69% but they’re still projecting real estate is expected to return 8.5%. Real estate gives a very concrete example of how the Rhode Island pension fund has been mismanaged for a long time and state officials pretends like the numbers don’t exist!
Q4/ It seems like the state was using the pension fund to bail out bad public real estate investments for a long time. Do you think Raimondo told state officials to invest in the Point Judith Fund and hedge funds when she became Treasurer and realized the extent of the misuse of the pension fund?
A4/ Raimondo fired the real estate consultant who the pension had used for the prior ten years and she basically said “I’ve got investments I want to see in this portfolio.” The pension fund said it would no longer directly invest in real estate so that came to an abrupt end and they moved on to hedge funds. There’s a long history of politicization of the investments. There’s also a long history of politicians misrepresenting and obscuring fund performance and that continues to this day.
Q5/ When you issued your most recent audit report, the Treasury responded by saying you were lying. Is it just me or is this reminiscent of how kids behave on the school yard?
A5/ Yeah, and it overlooks the fact that Magaziner is the one who has the legal duty to disclose accurate information about pension fund returns, not me. I can say what I want, it is not my statutory legal fiduciary duty to report to the public about the state of Rhode Island’s pension fund. The state still hasn’t done that.
Q6/ In your new column in GoLocal Providence you explain that the Podesta email cache released by WikiLeaks includes a message about how closely Ira Magaziner, the Clintons, and Podesta were involved in young Seth’s election to the Treasury despite having no experience to merit such an election. Any additional thoughts?
A6/ It shows that if your Daddy is politically connected and willing to hit up his pals for $500,000 you can be Treasurer of Rhode Island, even if you utterly lack any requisite experience or skills.