A “thank you” to Labor Union Report for posting this on his website.
Ohio state treasurer Kevin Boyce is under fire for recently hiring Boston’s State Street Corp. to manage portions of several of Ohio’s state pension programs. State Street is facing fraud allegations in California and Attorney General Jerry Brown has filed a lawsuit demanding $200 million in compensation for “raiding” state pension plans there. According to the New York Times Brown stated:
“State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California’s public pension funds,” said Jerry Brown, the California attorney general. “This is just the latest example of how clever financial traders violate laws and rip off the public trust.”
Boyce was well aware of the fraud allegations as he hired State Street five months after California’s lawsuit was filed. According to the Cleveland Plain Dealer California’s state treasurer Bill Lockyer went as far as calling State Street “crooks”:
“I’m just not sure that we ought to be doing business with them given that circumstance,” Lockyer said, according to a transcript of the Feb. 16 CalPERS board meeting. “But if we don’t have any choice…I guess we do business with crooks.”
Lockyer’s statement came after he was advised by staff members of CAIPers, one of the CA pension programs State Street was accused of defrauding, the bank’s contract needed to be renewed and there was no time to launch a bidding process for a replacement.
Boyce’s actions are suspicious as State Street’s lobbyist in Ohio, Noure Alo, is a friend of Boyce’s top deputy Amer Ahmad. It’s reported Ahmad once had a business relationship with Alo although Ahmad has denied his relationship with Alo had any role in securing State State as a pension manager. Double suspicions have arisen as Boyce also hired Alo’s wife Walaa Waeda to be an office assistant about a month earlier. What’s also interesting here is the position Alo’s wife was hired for was bid out only in Alo’s mosque and his wife was the only respondent.
When New York Attorney General Andrew Cuomo decided to cut ties with Bank of New York-Mellon and sued a subsidiary
charging that it intentionally failed to inform clients, including pension plans, of risky investments with Bernard Madoff, the convicted architect of a massive Ponzi scheme. Workers for the subsidiary, Ivy Asset Management LLC, continued to collect fees while neglecting to warn its clients
Boyce had an entirely different reaction. On May 11, the very same day Cuomo filed the lawsuit, Boyce stated he had already moved $19 billion of assets out of Bank of New York-Mellon out of their control. Boyce continues to maintain the $32 billion of assets will be “safe” and will save the three Ohio pension programs; State Teacher’s Retirement System, the Ohio Public Employees Retirement System, and the Ohio Police and Firemen Pension Fund, $7.3 million. Should any problems arise, by Ohio law taxpayers in the state would be required to bail out these pension funds. Ohio right now has one of the highest unemployment rates in the country, the funds in the pensions programs are way down because of the recession, so the prospect of taxpayers having to fill in any gaps would be met with extreme consternation.
According to this table STRS has $94 billion in unfunded liabilities, Ohio Police and Fire $15 billion unfunded and Ohio Public Employees $64 billion. Given the above, it is no wonder many of Ohio’s major newspapers are sniffing around demanding names of retirees and how much they receive. So far the pension programs have not obliged, stating it is private information not available to the public.
In an interesting development in July, although I can find no major newspapers reporting this, several Ohio blogs are stating Boyce’s campaign manager recently resigned. Boyce was appointed treasurer by Ohio Governor Ted Strickland and is running for the post in November against GOPer Josh Mandel. The blogs cite growing concerns over ethics problems and Boyce’s “poor management” for the reason Marquez Brown resigned and is now working for the Ohio Democratic Party.
FYI as of the writing of this post the California lawsuit has not yet been resolved.
Crossposted at Emerging Corruption
Crossposted at Conservative Outlooks