Pension Fight Club Film Review

A very engaging and alarming film entitled Pension Fight Club documents how pension money has been siphoned from retired workers and transferred into secret Wall Street bank accounts.

The director Doug Orchard does a great job telling the story of how public pension funds across the United States have been taken over by Wall Street alternative investments such as private equity through secretive accounts.

The star of this film is Ted Siedle, a Securities & Exchange lawyer and author of Who Stole My Pension, who had been hired to conduct forensic audits of public pensions in Rhode Island, North Carolina, Ohio, Minnesota and California. He has documented how private equity and private credit have teamed up with corrupt politicians, pension funds, and unions to take people’s retirement money in order to enrich the Wall Street millionaire investment firms, who kick back a percent to fund the election campaigns of politicians who cover up this crime against the people.

How do they do it? When it comes to the world of finance, people, including myself, can be intimidated and ignorant of how capital works. The Minnesota teachers who hired Siedle to do a forensic audit of the MN teachers pension fund noted that they put in 16.5 percent, but only receive 11 percent. Who can you turn to if your own pension system is screwing you over?

So what’s happening to teachers in Minnesota, Ohio and other states is they end up much worse than if they just put their money into social security. The same goes for Chicago teachers, if they want a better retirement plan they need to find a job that pays into social security.

Siedle says in the film that colleges should be teaching how public pension funds are regulated and managed. A forensic audit means something that will hold up in court. He noted that half of public pension money ($6.5 trillion) has been swept up into secret accounts. He won the largest whistleblower award of $78 million from the federal government against JP Morgan, as well as a $30 million award from the CFTC (Commodity Futures Trading Commission).

Ted Siedle

Siedle’s first forensic audit was of the $7 billion Rhode Island State Pension Fund. Like in Ohio, the state removed COLAs (Cost of Living Adjustment) from retirees that were promised. Imagine receiving a simple pension and each year prices go up 3-4 percent, but your pension stays the same. A heartless move to simply impoverish state workers in retirement. “It was wage theft,” said Michal McDonald, the president of Rhode Island Council 94 AFSCME union. “In 2011 and 2012 they did a massive overload of the state retirement system that resulted in largely decreased benefits for the majority. That’s when we brought in Ted Siedle.”

It should be noted here that this was happening across the country. Illinois politicians led by former union favorite Speaker Michael Madigan, who was convicted of bribery, were doing everything to cut state pensions and eventually settled on the cruel Tier 2 Law that drastically cut the pensions of state workers hired after 2011 so that they are now worth less than Social Security - the minimum wage of retirement income.

“The cuts were supposed to sustain the pension, but instead the 3 percent cuts to retirees went to pay the 3 percent increased fees to Wallstreet,” Siedle said in the film. “So it was effectively a wealth transfer, not pension reform at all.

Siedle said the fees paid to Wallstreet were wildly underreported, and the reason the fees were hidden was because the state treasurer decided to move all the money into hedge funds. Rhode Island declared the pension fees were $11 million a year, but in fact the fees were closer to $100 million. “Within 3 months of my investigation the fee disclosure went from $11 million to $80 million and the following year they upped disclosure to $188 million.” The State Treasurer who punished the retired teachers and rewarded the hedge funds was Gina Raimondo who went on to become the Rhode Island Governor and U.S. Secretary of Commerce. Today she joined the Council on Foreign Relations to focus on AI and workforce integration. Raimondo said hedge funds were not high fee high risk and opaque, that investing in hedge funds was actually lowering the risk (exactly what Callan has been telling the Chicago Teachers’ Pension Fund about private equity PE). “She said she doesn’t know what the fees are, and I said did she really say that, that she doesn’t know what the fees are, but she’s sure they’re ok,” Siedle said. “All private equity funds have to disclose in their offering documents that these are highly speculative investments, where you could lose all your principal. Raimando told the public she would reform the pensions by cutting the COLA by 3 percent paid to state workers, and invest the money in alternative investments.”

The film director next interviewed Gretchen Morgenson, an NBC senior financial reporter who has written a book on how private equity has plundered the public pension funds. She said PE began during the takeovers in the 80s beginning with RJR Nabisco. PE has now expanded into fast food, health care, daycare, education, and newspapers where 50% of all newspapers are owned by PE or hedge funds. “Really every step of your day is touched by PE,” she said. “There is so much secrecy in PE it’s almost impossible for a beneficiary to know where his money is going to. PE invests in the activities that harm their own beneficiaries.”

Ardis Watkins, the Ex. Dir. of SEANC, State Employment Assoc of North Carolina, (voluntary membership association), spoke next about Ted Siedle’s public pension investigation in 2014 in North Carolina, where they have 46k active and retired members. There is no collective bargaining in North Carolina. “Money talks in any legislative endeavor and money is not with the people, the money is increasingly with PE and buying up everything.”

She said there is a bipartisan effort in support of PE. “When Ted did forensic audit work in North Carolina I was so disheartened that the press didn’t cover it much until I realized No. 1 advertiser is hospitals who are increasingly owned by PE.” She added that PE is buying up whole neighborhoods to rent out at increasing unaffordable prices. “Retired teachers may have paid for their homes, but they can’t stay in them because they can’t pay the taxes. They also can’t pay for health insurance. They can’t make ends meet. STRS (State Teachers Retirement System of Ohio) put out literature that it was one of the most secure pensions in the country and teachers retirement was secure including the COLA, but turned out that was a lie.” Morgenson, the NBC financial reporter, said on FB that she wanted to interview Ohio retired teachers who must continue working and hear how difficult their lives are today after the COLA was stolen from them.

Robin Rayfield, Ex Dir of ORTA (Ohio Retired Teachers Assoc.) said they would have been better if they invested in a 401k with employer match and paid a much lower rate and paid into social security. Their group hired Edward Siedle to do a forensic audit. “I thought it was hairbrained and it turns out it was brilliant.”

Ted Siedle said public pensions lie about the high fees they pay to Wallstreet. He said when he looked at all the investment contracts, and he still didn’t have all of them, they sued and the state Supreme Court said we should get them and we still didn’t get them. “In some of these documents they would blow your mind,” he said. “For example, if the manager engages in criminal activity the manager can withhold that information from any investor who is subject to FOIA laws. You hire me, I engage in criminal activity, you agree I can hide that information from you. Why would you do that?” He noted 30 years ago if you asked for investment contracts you would get them, whereas today they are secret. “So today 40 percent of investments in PE are in secrecy accounts. It shows a remarkable conspiracy. In Ohio it took us 5 years to fight in court to get these documents. Even at the end of day we only got redacted documents. I’ve never seen a board member who has seen a private investment contract. Never.”

John Damschroder, a reporter with The Blade newspaper in Ohio, said staff bonuses were paid while retired teachers’ COLA was not paid. So the Fund’s employees were essentially rewarded for impoverishing their members, because their real bosses in Wall Street made their profits. “No one’s accountable.” Dean Dennis, former ORTA Dir who I interviewed earlier, noted that they have a clause in Ohio that states whenever there is a shortfall it should be made up by the employer, but instead employee contributions to the pension fund have increased a lot and their benefits have been cut, while Wall Street and pension fund employees get rewarded.

The other public pension board trustees interviewed in the film agreed that they do not like people asking questions. “They would just cut you off,” said JJ Jelincic, former CalPRS board member. “They don’t want you asking questions.” Retired Teacher Trustee Maria J Rodriguez said, “I just recently asked for information and the staff asked if she is able to get that information. We need to move on, I was told, this wasn’t a Spanish inquisition.” Pennsylvania Public School Employees’ Retirement System (PSERS) Board member and State Senator Katie Muth said the staff has access to everything and the board members don’t. “We don’t see a draft contract prior to a vote, I’ve never seen it since my time on this board. I’ve been in litigation with PSERS over access to records, that says in the retirement code that trustees have access to any and all unfettered access to these records. I should not have to FOIA to find information about a $200 investment on this board as a trustee, that’s obscene.”

“Coming into the Pennsylvania State Senate I knew things were corrupt, but I had absolutely no idea how corrupt the government really is,” Muth told the interviewer. “They would say it’s about competition which is BS because it was just allowing these PE companies to rip off public pensions.”

Margaret Brown, a former CalPERS (California Public Retirement System) board member, said, “They didn’t expect me to read the material, they just expected me to vote yes along with the rest of the board, not to ask any questions, not to do your job as a fiduciary. Everything is unanimous. We could not have read the material. They need to control everything.”

“As a trustee I was not allowed to see board contracts because they knew if I looked at them I would see that they broke state fiduciary law,” said Chris Tobe, former Kentucky pension board member. “We should talk about investments and instead we talk for two hours about the new apple pods we have to do our job. I would make comments at board meetings and they would vote to not put my comments in the minutes. Any time a reformer comes around they have a hundred tricks up their sleeve to get around it.”

“For decades we were not allowed to invest in alternatives,” Ohio’s Rayfield said. “The investor gets rich, the senior manager at STRS gets rich, the consultants they hire to tell them to do these investments get rich, Everybody is getting rich, Wallstreet is getting rich. The only people who don’t get rich are the people who put in the money. People put in 14 percent and the teachers get a benefit that is less than 12 percent.”

The lies in the mainstream media are blatant and built upon an ignorance of the general public about what is really going on. The Blade reporter said when former Ohio Governor John Kasich ran for president, he said he made Ohio pensions ‘rock solid’ and he and former New Jersey Gov. Chris Christie increased alternative investments in public pension portfolios and then hit up Wall Street for election money to run for President.

Ted Siedle said public pensions hire outside money managers who charge 1 or 2 percent annually. “That doesn’t seem like much, but over 30 years that amounts to 100 percent of your principal.”

The director interviewed Drew Warshaw, who is running for NY State Comptroller. He said current pensions in NY are fully funded because it’s the law. But the investment performance has underperformed their own benchmarks by 39 percent which has cost New Yorkers $59 billion of additional taxes to make up for the underperformance. “This is happening all over the country.”

“Transparency fixes everything,” Siedle said. “Toxic investments with high fees are rooted out and go to index funds. All garbage gets exposed and rooted out.”

Rayfield said the STRS (State Teachers Retirement System) Board had 11 trustees and 4 were appointed, and 7 elected. “We elected 7 reformers and as soon as we got a majority, government officials in OH panicked and lobbyists called the Governor and he said don’t worry about it I will replace one so we have the majority. That was Wade Steen who was told he needed to resign his position on the STRS Board. Wade was a reformer even though he was appointed. “I asked questions and they didn’t want someone asking too many questions,” Wade said. “When I didn’t step down they attacked me and said terrible things about me, none of it true.”

“Many trustees represent political interests, so their job is what their boss wants them to do, who put them on that board and do what you’re told,” Chris Tobe said.

Former Ohio State Teachers Pension Board Member Wade Steen

“So we crowdfunded Wade’s legal battle and the 10th district Court of Appeals in Columbus told the governor you don’t have authority to do what you did and this person is being reappointed to the board,” Rayfield said. “There was a time when the Pension Fund lost $5 billion and I asked how do we justify paying bonuses to an already well compensated staff while cutting benefits to teachers,” Wade said. “It just didn’t make sense. I led the effort to get the bonuses stopped.” Within a month the Attorney General filed a lawsuit against Wade and another board member Rudy Fichtenbaum. The Ohio AG then threatened that if you do that I will bring you into court for failure to do your fiduciary duty. “It’s pretty hard when you are threatened with financial ruin by the AG who says you pay these guys their bonuses or else,” Rayfield said.

The Ohio State Auditor Keith Farber said had the Teachers’ Pension Fund been prudently managed it would have been worth twice the amount, $180 billion, instead of $90 billion, Siedle said. And then the Fund would have had the money to pay the COLAs rather than impoverish the retired Ohio teachers. “Warren Buffet has advocated that public pension funds invest 100 percent in index funds. Not a single pension fund does that in the US, and not one has beaten an index return. All public pensions will consistently underperform the stock market.”

The North Carolina rep said had we put our funds in a low cost Vanguard fund we would have had the money to pay for COLAs.

Chris Tobe was a pension consultant for the past 35 years. He reviewed the Kentucky pensions for the Kentucky state auditor and was later named to the board from 2008 - 2012, and then became the first SEC whistleblower on public pensions. He said anytime there is a trustee who wants to push their role as a fiduciary, they are attacked and driven off the Board. He cited the case of Herb Myberger who tried to clean up the hedge funds on a public pension board in San Francisco and then his own union SEIU funded a candidate to run against him. The same happened to JJ Jelincic at CalPRS who raised questions and the union funded hundreds of thousands of dollars in the pension election to defeat him. Former CalPRS Trustee Margaret Brown said she raised $27k and her opponent spent $700k through PACs and other associations. She said in 2021 she ran for re-election and they sent out these horrible mailers that were full of lies. But after her opponent Jose Luis Pacheco was elected he started asking questions and acting as a fiduciary and now they’re getting ready to do the same to him. She noted that CalPRS had more PR people on staff than legal staff. “Politicians on these boards want Wall Street to give them money for their political campaigns,” Siedle said. “They don’t want to be forced to hire the best investment firm at the lowest cost.”

“Politicians on these boards want Wall Street to give them money for their political campaigns. They don’t want to be forced to hire the best investment firm at the lowest cost.”

“The one thing that all Republicans and all Democrats agree on is that state retirement money should be available to fund their political campaigns,” Siedle said. “So the money is directed to investment firms that are able to contribute to their political campaigns. The decisions are being made about what is best for the politicians and not for the retirees, whose retirement security is at risk.”

The Minnesota teachers talked about how they organized their FB page with 20k members and then hired Ted Siedle to do a forensic audit which met resistance and intimidation from the higher ups. They have an even worse Tier 2 pension law that began in 1989 and they can’t retire until 65 despite having over 30 years experience. They discovered they were contributing 16 percent of their salary to the pension, but their return was 11 percent. “I’m not anti-pension, but if I had taken that 16.5 percent and invested for 30 years I would have millions of dollars sitting there and I would get all of it,” one MN teacher said. “Yes there would be some risk to that but I would have control of that and there would be transparency.”

When Ted conducted his forensic audit of the MN Teachers Pension Fund the Fund sought out STRS in Ohio to discredit Siedle and shut down the audit. “My investigation of MN was that the books had been cooked,” he said. “They reported fees on PE 90 percent lower than anyone in the nation. Fees disclosed were mathematically impossible. No one in MN would report this out, it was only reported in the NY Post and Fox News.” MN increased their fee disclosure by 400 percent, “a staggering amount”.

MN Teacher Maggie Temple

“We’ve educated thousands and thousands of people about the pension system, and we kind of put the union on the ropes to do their job,” said Maggie Temple, a MN teacher who helps run the FB page. “We’ve had some success, but we have a lot of work to do.” Siedle said the MN teachers asked the state auditor to investigate the pension fund, but the auditor said they were too busy investigating other criminal activities even though this was the largest financial crime in the history of MN.

“For the pension staff who know all about the pay to play with PE to keep them quiet you need to pay them,” Chris Tobe said. “They need to be paid more to look the other way. So you’ve seen an explosion in staff salaries. You see it all over the country.”

I find Chicago far more interesting than CalPERS because they have the same amount of assets as they had in 2000, and they got something like $50 billion more in liabilities. It is the most ridiculous situation you can have.

Steve Church, a former CalPERS advisor, had something to say about the Chicago Teachers’ Pension Fund. “I find Chicago far more interesting than CalPERS because they have the same amount of assets as they had in 2000, and they got something like $50 billion more in liabilities. It is the most ridiculous situation you have.” Chris Tobe said a city pension like CTPF can declare bankruptcy unlike the states. “The City of Chicago is probably the most threatened city in the country.” Tobe talked about Detroit which filed for bankruptcy in 2013. “It was a well funded pension, (but the) pension was not indexed to inflation so in the last 30 years you had about a 60 percent increase in prices. So think of Detroit retirees, cops and firemen who served the public for so long to get their pension and then this. So this is what is facing pensions across the country.”

“It takes individual people doing extraordinary things,” Drew Warshaw said about what can be done to fix this mess. “If they don’t act now to correct the situation, the money won’t be there in the decades to come,” Siedle said. “The idea that you can sit back and let someone else manage your pension regardless of what’s going on, those days are over,” Gretchen Morgenson the reporter said. “Once they find out the dominoes are going to fall,” Drew concluded.

You can watch the film at Pensionfightclub.com