Ohio Attorney General Dave Yost filed subpoenas on Aug. 23 in the Court of Common Pleas in Franklin County in connection with the ongoing turmoil at the $95.3 billion Ohio State Teachers' Retirement System, Columbus.
In the subpoena, Yost said some individuals, including current STRS board members Wade Steen and Rudy Fichtenbaum, should be removed from the board for failing their fiduciary duties. Specifically, the subpoenas allege that Steen and Fichtenbaum sought to invest up to 70% of STRS assets with a private investment firm called QED, which Yost described as a “shell company that lacks any indicia of legitimacy and has backdoor ties to Steen and Fichtenbaum themselves.”
Steen was removed from the board by Ohio Gov. Mike DeWine in May 2023. However, in April 2024, the Ohio’s 10th District Court of Appeals determined that DeWine overstepped his authority and allowed for the reinstatement of Steen to the board. Fichtenbaum was reelected as board chairman at the pension fund just last week.
In response to the subpoenas, STRS said in a statement on August 26 that it “will continue to fully cooperate with the Ohio Attorney General’s office regarding its investigation into the governance of the pension system.”
The attorney general's filings are just the latest chapter in the saga of board turmoil and political wrangling over the state pension fund.
Robin Rayfield, the executive director of Ohio Retirement for Teachers Association — a group that advocates for the pensions and benefits of Ohio's active and retired educators and who has not been subpoenaed – said he thinks that Yost’s accusations will be dismissed.
“Unfortunately, despite overwhelming evidence that there are major problems at STRS and the manner in which our pension is being managed, the A.G. and Governor DeWine have been silent and offered no assistance in getting to the bottom of the problems,” he said.
Rayfield contended the “only person to break the law associated with STRS board seats is the governor when he illegally removed Wade Steen. Now the governor and the A.G. have attacked two people (Steen and Fichtenbaum) that are attempting to fix the mess at STRS.”
Last week, Michael Harkness of Akron Public Schools was elected to fill the vacant contributing member seat on the pension fund’s retirement board. Harkness’ term runs through Aug. 31, 2025, said a notice on the pension fund’s website. Efforts to reach Harkness were not successful.
The retirement board also reelected Fichtenbaum as its chair and retired teacher member Elizabeth Jones as vice chair, effective Sept. 1. These terms last for one year.
Including Harkness, the STRS board currently has 11 members, including the reformer faction of Michelle Flanigan, Fichtenbaum and Steen.
However, Steen’s term expires on Sept. 27. A spokesperson for STRS said Steen’s successor will be appointed by the governor of Ohio and referred any questions about this seat to the governor’s office. Steen will not be reappointed to the pension fund’s board, said Dan Tierney, press secretary for the governor.
As previously reported in P&I, the board appointed Flanigan to fill the contributing member seat left vacant by Dale Price, who retired in June. Flanigan, whose term becomes effective on Sept. 1, will hold her seat through Aug. 31, 2028.
Reformers want index funds
As a reformer, Flanigan is among those who called for gutting the pension fund’s investment staff and moving assets to all index funds. According to Flanigan’s own website, Flanigan said her goals as a board member include the restoration of a “reasonable annual COLA that allows retirees an increase in purchasing power as quickly as possible.”
She also wants to look at “streamlining” STRS’ 500-plus administrative staff; reduce “unnecessary spending” and “shift away from questionable, high-fee private equity investments.”
In a YouTube interview featuring Flanigan and with Melissa Cropper, the president of the Ohio Federation of Teachers union, Cropper noted that STRS currently pays some $600 million in annual fees just on its private equity investments. Flanigan noted the fund pays about $900 million in total fees. To reduce such fees, Flanigan suggested “moving out of the private equity funds and moving that money into more low-cost index type investments.”
As of June 30, the fund had a 19.9% allocation to alternative investments (above the 19% target.)
Steen and the other reformers have also long advocated on behalf of retirees who have been angry over reduced and sometimes eliminated cost-of-living adjustments following the passage of a 2012 state law eliminating a 3% COLA and giving the board the authority to set them. Steen “enthusiastically” supported Flanigan, he said in his own YouTube video.
Efforts to reach Flanigan, Steen and Fichtenbaum were unsuccessful.
Edward ‘Ted’ Siedle, a Florida-based attorney who has sued STRS for access to pension investment records and violations of Ohio's public records act, said it his understanding that Harkness is a reformist and that his election to the board would preserve the majority status of the reform wing.
Siedle, who also serves as president of Benchmark Financial Services, was hired by ORTA in 2021 to perform a forensic analysis of the pension fund.
Siedle described Yost as a “phantom bully fiduciary” who has opposed transparency reforms. He argued that Yost — who has ambitions of becoming governor of Ohio — is basically trying to run the pension fund. Yost has been suing the board members of STRS and had prohibited them from accessing independent counsel — meaning their legal fees come out of their pockets, as opposed to being paid by the pension fund. Siedle characterized these measures as a form of “coercion.”
