Raimondo’s Top Hedge Fund is Being Investigated by Feds
Friday, May 02, 2014
The firm Och-Ziff has received millions in fees from the Employee Retirement System of Rhode Island - the board selecting Och-Ziff is chaired by Raimondo. Her strategy to shift large portions of the state's pension dollars over to hedge funds has come under criticism by Ted Siedle of Forbes and a forensic investigator, Matt Taibbi of First Look Media (formerly Rolling Stone magazine), public unions and former General Treasurer Frank Caprio. He is running for General Treasurer in 2014 after a failed campaign for Governor in 2010.
The SEC announced an investigation of Och-Ziff for violations of the Foreign Corrupt Practices Act.
"Under Raimondo's secrecy scheme, there's no way for the public to know that Rhode Island pension fund investments are being investigated in violation of law, said Siedle in an interview with GoLocal Thursday night.
Raimondo, who was elected as General Treasurer in 2010, has defended the investments in hedge funds as important to diversify the state's investments. Raimondo is a 2014 candidate for Governor.
Siedle is the head of a forensic auditing firm and a columnist for Forbes magazine. He is presently conducting a review of misspending in the South Carolina pension system.
Hedge Fund Shift
Since Raimondo became General Treasurer she has led a an effort to shift billions of retirement funds to hedge fund investments.
"Raimondo's position that 25% of the state pension fund -- or $2B -- can be cloaked in secrecy illustrates the dangers of her position, with her lack of oversight," said Siedle.
Barron's report, "The Wall Street Journal reported that Och-Ziff faces Securities and Exchange Commission and Justice Department scrutiny over $234 million in loans to companies controlled by Israeli mining magnate Dan Gertler in connection with controversial oil and mining deals in the Democratic Republic of Congo. The news prompted a 10% slump in the stock on Monday."
"In this case, it really tests whether Rhode Islanders are willing to accept a culture of secrecy that fosters illegal activity by shielding it from the public eye. She's the only one to know how these secret investments are being made, and whether they're violating the law," said Siedle.
Related Slideshow: Timeline - Rhode Island Pension Reform
GoLocalProv breaks down the sequence of events that have played out during Rhode Island's State Employee Pension Fund reform.
Governor Don Carcieri makes pension reform a top priority in his emergency budget plan. His three-point plan included:
1. An established minimum retirment age of 59 for all state and municipal employees.
2. Elimination of cost-of-living increases.
3. Conversion of new hires into a 401(k) style plan.
See WPRI's coverage of Carcieri's proposal here.
Rhode Island's state administered public employee pension system only held 48% of the assets to cover future payments to its emplyees.
"This system as designed today is fundamentally unsustainable, and it is in your best interest to fix it" - Gina Raimondo
Check out Wall Street Journal's coverage here.
Gina Raimondo defeats opponent Kernan King in the election for General Treasurer of Rhode Island using her platform to reform the structure of Rhode Island's public employee pension system. She received 201,625 votes, more than any other politician on the 2010 Rhode Island ballot.
Raimondo leads effort to reduce the state’s assumed rate of return on pension investments from 8.25 to 7.5%.
Her proposal includes plans to suspend the Cost of Living Adjustment (which allows for raises corresponding with rates of inflation for retirees), changing the retirement age to match Social Security ages, and adding a defined contribution plan.
Raimondo releases “Truth in Numbers”, a report detailing the pension crisis and offering possible solutions. She continues to work to raise public support for her proposal.
"Decades of ignoring actuarial assumptions led to lower taxpayer & employee contributions being made into the system." - Gina Raimondo (Truth in Numbers)
Read GoLocalProv's analysis of the report here.
Read the Truth in Numbers report here.
Governor Lincoln Chafee and General Treasurer Gina Raimondo present their pension reform legislation proposal before a joint session of the General Assembly.
“Our fundamental goal throughout this process has been to provide retirement security through reforms that are fair to the three main interested parties: retirees, current employees and the taxpayer…I join the General Treasurer in urging the General Assembly to take decisive action and adopt these reforms.”- Gov. Lincoln Chafee
Head of Rhode Island firefighters’ union accuses Raimondo of “cooking the books” to create a pension problem where one did not exist. Paul Valletta Jr. states that Raimondo raised Rhode Islanders’ assumed mortality rate to increase liability to the state, using data from 1994 instead of updated information from 2008, and lowered the anticipated rate of return on state investments.
“You’re going after the retirees! In this economic time, how could you possibly take a pension away?” Paul Valletta Jr (Head of RI Firefighters' Union)
Read more from the firefighters' battle with Raimondo here.
Check out the New York Times' take on RI's pension crisis here.
November 17, 2011
The Rhode Island Retirement Security Act (RIRSA) is enacted by the General Assembly with bipartisan support in both chambers. RIRSA’s passing is slated to reduce the unfunded liability of RI’s pension system and increase its funding status by $3 billion and 60% respectively, level contributions to the pension system by taxpayers, save municipalities $100 million through lessened contributions to teacher and MERS pension systems, and lower the cost of borrowing.
Read more from GoLocalProv here.
November 18, 2011
Governor Lincoln Chafee signs RIRSA into law. According to a December 2011 Brown University poll, 60% of Rhode Island residents support the reform. Following its enactment, Raimondo holds regional sessions to educate public employees on the effects of the legislation on their retirement benefits.
Read about how Rhode Islanders react to RIRSA here.
Raimondo hosts local workshops to explain the pension reforms across Rhode Island. She also receives national attention for her contributions to the state’s pension reforms. The reforms are given praise and many believe Rhode Island will serve as a template for other States’ future pension reforms.
Read about the pension workshop here.
Read Raimondo's feature in Institutional Investor here.
March - April 2012
Raimondo opposes Governor Chafee’s proposal to cut pension-funded deposits. She continued to provide workshops on the pension reforms.
December 5, 2012
Raimondo publicly opposes Governor Chafee’s meetings with union leaders in an effort to avoid judicial rulings on the pension reform package. In response, Chafee issues a statement supporting the negotiations.
Read more about Raimondo's opposition here.
Read about Chafee's statement http://www.golocalprov.com/news/new-chafee-issues-statement-supporting-pension-negotiations/">here.
Led by the Rhode Island State Association of Fire Fighters, unions protest the 2011 pension reform outside of the Omni Providence where Governor Lincoln Chafee and General Treasurer Gina Raimondo conduct a national conference of bond investors.
Read about Raimondo's discussion of distressed municipalities here.
The pension plan comes under increased scrutiny as a result of the involvement of hedge funds and private equity firms. Reports show that $200 million of the state pension fund was lost in 2012.
"In short, impressive educational credentials and limited knowledge of investment industry realities made Raimondo ideally suited to champion private equity’s public pension money grab." - Ted Seidle (Forbes)
Read GoLocalProv's coverage of the State Pension Fund's losses here.
Read Ted Seidle's criticism of Raimondo in Forbes.
- Exclusive: Rolling Stone’s Taibbi Responds to Raimondo Comments
- Chafee Pushes Pension Reform to Cities
- Exclusive Poll: Two-Thirds Of Voters Don’t Trust Pols With Pension Reform
- NEW: Chafee Release Video Touting Pension Reform
- NEW: Governor and Treasurer Outline Pension Reform Proposal
- NEW: Poll Says Rhode Islanders Want Pension Reform
- Pension Reform Breakdown: Plan Kills COLAs For 19 Years
- Rob Horowitz: Pension Reform Poised for Adoption
- Tea Party Lines Up Behind Treasurer Raimondo on Pension Reform
- Matt Taibbi’s Deceptive Hatchet Job on Gina Raimondo
- Chafee: Everything on Table for Pension Reform
- Experts React to Rhode Island Pension Reform Agreement
- NEW: Chafee Releases Pension Reform Video
- NEW: Governor and Treasurer Unveil Pension Reform
- NEW: Providence City Councilman Calls for Local Pension Reform
- Pension Reform Coming For Providence
- Rob Horowitz: Pension Reform is a Political Winner
- Travis Rowley: Pension Reform? Or Pension Negotiations?
- In Case You Missed It: Siedle Report on RI Pension Investments
- NEW: Caprio Splits with Raimondo on Hedge Funds
- Council at Odds: Members Call for Changes to Pension Reform
- Forbes: Retirement Planning in the Face of Pension Reform
- NEW: EngageRI Supports Providence Pension Reform
- NEW: Hassett and Igliozzi Call for Changes to Providence Pension Reform
- NEW: Providence Council Takes Up Pension Reform
- Pension Reform Lawsuit Decision: The Timeline
- Rob Horowitz: RI Leads the Way on Pension Reform
- Travis Rowley: “Hope and Change” for “Pension Reform”
- MINDSETTER™ Ted Siedle: News from the State Pension is All Good
- A LIVELY EXPERIMENT: Pension Reform
- Does Rhode Island’s Pension Reform Law have Any Hope of Survival?
- Kerry King Addresses Pension Reform
- NEW: Former Union Head Day Blasts City Council on Pension Reform
- NEW: Judge Won’t Halt Pension Reform Law
- NEW: Providence Retirees Approve Pension Reform
- Providence Would be Devastated if Courts Block Pension Reform
- Russell Moore: Don’t Gut Pension Reform
- Who Won this Round of the Pension Reform Battle?
- NEW: Siedle Blasts Raimondo for Withholding Hedge Fund Info
- Aaron Regunberg: Think Again on Pension Reform
- Donna Perry: Don’t Ruin the RI Pension Reform Law
- Laffey Blasts Raimondo on Pension Reform
- NEW: Fox and Binder Battle Over Pension Reform
- NEW: Mediation Ordered in State Pension Reform Lawsuit
- NEW: Raimondo Featured In Institutional Investor on Pension Reform
- REPORT: RI Public Pension Reform - Wall Street’s License to Steal
- Special Session 2011: Business Leaders Demand Pension Reform
- Will the State & Organized Labor Reach a Deal on Pension Reform?
- State Pension System to be Investigated by Siedle
- Anti-Pension Reform Lawmakers Cash in with Unions
- Donna Perry: No Time for Timid Pension Reform in Providence
- Lawmakers Rake in $120k Since Voting Against Pension Reform
- NEW: Freezing COLAs is Only One Step to Local Pension Reform, Group Says
- NEW: New Pension Reform Coalition Formed
- NEW: Raimondo—Pension Reform Needed to Avoid Budget Disaster
- RI Groups Will Target Lawmakers Who Oppose Pension Reform
- State Pols Left in the Dark on Pension Reform Bill
- Should Raimondo Release Contracts with Hedge Funds
- Ted Siedle and Matt Taibbi: 13 Who Made a Difference in RI in 2013
- BREAKING: Pension Reform Bill Passes; Heads to Governor’s Desk
- Donna Perry: Time for Heavy Lifting on Disability Pension Reforms
- Majority of Anti-Pension Reform Lawmakers Returning to Smith Hill
- NEW: Governor Chafee Says Pension Reform is “Incomplete”
- NEW: Pawtucket Mayor Calls for Municipal Pension Reform
- PODCAST: Rhode Island Pension Reform Showdown - Who Will Prevail?
- RISC’s Five Pillars of Pension Reform
- State Report: Rhode Island Pension Reform & Falling Off the Fiscal Cliff
- Ted Siedle: Hedge Fund Industry Loves RI Pension—For Good Reason
- Central Falls Paves the Way for Pension Reform
- Donna Perry: Union Strategy: Sabotage Pension Reform
- Municipal Pension Reform May Be Impossible
- NEW: Governor Postpones Israel Trip to Focus on Pension Reform
- NEW: Pension Reform Coalition Created
- PODCAST: State Pols Left in the Dark on Pension Reform Bill
- Rhode Island Pension Reform Showdown - Who Will Prevail?
- Taveras Budget: No Pension Reform—Yet