COLUMBUS — Hours before the board of the state pension fund for teachers was to meet, Ohio Attorney General Dave Yost sued to remove two of its members, claiming they've violated their fiduciary responsibilities to the system.
One of the two members he is seeking to remove is Wade Steen, a Columbus investment expert who was just restored to the panel by the 10th District Court of Appeals Court last month.
The other is Rudy Fichtenbaum of Clayton, Ohio, a former Wright State University economics professor, who represents retirees on the State Teachers Retirement System board.
The new 6-5 reformer majority on the board promptly voted later on Wednesday to remove Toledo Public Schools math teacher Dale Price as chairman and replace him with Mr. Fichtenbaum. So the attorney general is now seeking the permanent removal of the board’s new chairman.
Retired teacher Elizabeth Jones of Cincinnati was elected vice chairman, replacing active teacher Carol Correthers of Lorain, Ohio.
"I was illegally removed [from the board],” Mr. Steen said prior to the votes. “The two people in leadership today were the two people in leadership then, and they did nothing.”
The suit filed late Tuesday night in Franklin County Common Pleas Court contends that the pair sought to invest as much as 70 percent of STRS assets, about $65 billion, with a “shell company that lacks any indicia of legitimacy and has backdoor ties to Steen and Fichtenbaum themselves.”
Mr. Yost announced last week that he had opened an investigation after Gov. Mike DeWine forwarded to him a 14-page anonymous memo claiming some current and former members have conspired with some organized retired teachers to promote investment with a company called QED Systematic Solutions.
Internally, STRS staff and a consultant argued that QED had no track record or existing clients, lacked the proper technology, and could have opened STRS to regulatory problems.
“While this scheme may benefit Steen and Fichtenbaum, it may spell disaster for Ohio teachers who have retired or hope to retire someday,” Mr. Yost’s lawsuit reads.
The anonymous memo suggested the fund is being maneuvered into a “hostile takeover” by a private entity.
“It reeks of the governor using the AG’s office and the courts to wage an unfounded public relations campaign,” Mr. Steen’s Toledo attorney, Norman Abood, said. “The AG’s office has not conducted an investigation.”
He called the allegations “absurd.”
“Wade never suggested moving $65 billion into a new investment vehicle,” he said. “That didn’t happen. I have never seen a lawsuit filed, especially by the government, based on unsubstantiated, anonymous rumors.”
Toledo attorney Rick Kerger, hired Tuesday to represent Mr. Fichtenbaum, also said his client has done nothing wrong.
“It’s interesting to think that the attorney general ordered an investigation, but the governor and the attorney general just jumped ahead to do whatever they want,” he said. “They don’t care what an investigation determines.”
The attorney general has asked for the permanent removal of the two board members or, at the least, an injunction preventing them from playing any role in investment decisions.
He wants an accounting of any financial interests the two members might have in QED or any other company controlled by its founders, Seth Metcalf, a former deputy state treasurer, and Jonathan Tremmel, whom the lawsuit contends is a "former professional colleague and/or acquaintance of Steen."
The suit contends Mr. Steen and Mr. Metcalf know each other through church and politics.
The attorney general contends that Mr. Metcalf and Mr. Tremmel, both registered lobbyists for QED, are not registered as brokers or qualified to manage such an investment.
The lawsuit comes just days after Michelle Flanigan, a reformers-backed teacher of 26 years with Brunswick City Schools, was elected to the board with 85 percent of the vote of fellow active contributing members. Replacing Mr. Price, her four-year term will begin on Sept. 1, and her addition — with Mr. Steen and Mr. Fichtenbaum still on the board — would further tilt the balance of power in favor of the reformers.
STRS is the second-largest public employee pension fund in Ohio and among the largest in the nation with $91 billion in assets and nearly 540,000 active, inactive, and retired members as of June 30.
The 11-member board has been engrossed in controversy for more than a year. Mr. DeWine had removed his appointee, Mr. Steen, from the board, pointing to his attendance record at meetings.
The Columbus appeals court found that the governor lacked authority to remove and replace Mr. Steen in mid-term and ordered his reinstatement, which occurred in the midst of last month's meeting.
Mr. Steen’s term will end on Sept. 27, and Mr. DeWine will again appoint his replacement. Last month’s meeting was abruptly adjourned after Mr. Steen’s return before any substantive votes could be taken.
Although an appointee of two governors, Mr. Steen has been allied with the Ohio Retirement for Teachers Association. These retired teachers have sued for greater transparency of investments, questioned in-house investment decisions, challenged performance bonuses paid to investment staff, and sought restoration of their annual COLA.
The board’s executive director, Bill Neville, has been on paid leave following anonymous allegations that were later determined to not be substantiated.
The consulting firm Aon Fiduciary Services, hired in September to assist the board with corporate governance guidance, recently severed its contract in the midst of this turmoil.
The arm of the attorney general's office advising the board said that fiduciary counsel has been retained to advise the board on compliance but would will not be present until next month's meeting.
Reformers on the board questioned whether they could trust the advice coming from the attorney general’s representative given Mr. Yost's lawsuit. The representative present said there is a wall between the two functions and that she learned of the lawsuit at the same time board members did.
First Published May 15, 2024, 2:56 p.m.
