The Public Pension Reform Scheme is Coming Your Way

For the past several months, I have been taking a second look at the so-called “pension reform” effort undertaken in 2011 by then-Treasurer and now-Governor Gina Raimondo of Rhode Island, a former venture capitalist from Point Judith Capital with connections to the Tudor Investment Corporation, dubious Clinton operatives, and former Enron trader John Arnold. Aided by forensic audits created by Ted Siedle’s Benchmark Financial Services, it has become clear to me that this is in effect a multi-year heist and that Raimondo constructed a pipeline from the public sector employee pension fund to Wall Street that is becoming systemic.

This action could be considered a type of rearguard assault on public sector unions, unlike the frontal assault of the recent Friedrichs v CTA Supreme Court case, which sought to effectively destroy unions in the public sector by revoking the all-important Abood decision. Here, the goal is to make the pension plan of the public sector seem risky and unattractive while bankers make off like bandits.

The scheme is rather simple once one cuts through the deceptive polysyllables that obscured the real status of the pension. In the wake of the 2008 crash, some public pensions were made vulnerable by their investment in falsely-marketed commodities that were far more risky than should have been acceptable. So Raimondo, using her highfalutin graduate school math and finance vocabulary, was able to devise some phony equations that created a false notion of a pension crisis, a narrative device right out of John Arnold’s armory. Despite protests and naysayers, she was able to get the Rhode Island General Assembly, a longtime single-party Democratic legislature known for corruption and backroom deals, to pass first the “reform” policies and then the key Rhode Island Retirement Security Act of 2011 that barred the increase of cost-of-living adjustments (COLAs) for existing pensioners until the fund returns to 80% viability. However, due to the outrageous fees that are being billed to the pension fund by Wall Street, such a return to viability is impossible.

In a letter dated December 8, 2015 sent to the FBI, SEC, and US Attorney’s Office, Seidle laid out with clarity the potential future civil and criminal liabilities to roll out from an investigation of the pension policies and which was met with “a good deal of interest” by these agencies. Yet after I publicized the letter and revisited the pension question with Seidle’s audits at hand, the local power brokers are still insisting there was a crisis, exemplified by a March 11, 2016 televised roundtable on the local PBS affiliate, A LIVELY EXPERIMENT, wherein Democratic Party Chair Joseph McNamara stuck to the now demonstrably deflated narrative of a pension crisis (

So what could be at stake here?

As Treasurer, Raimondo misrepresented the state of the pension fund to the public as its chief fiduciary. But it gets far better. Before taking office, Raimondo created a blind trust to hold all her assets while in office. However, she was able to get the pension to invest in that same trust, which would effectively be making the blind see and putting money from public sector workers directly into her pocket. Along with a host of other hedge funds that the pension was invested in, she also was able to get it to put money into the Point Judith II Fund, giving her old venture capital firm a taxpayer handout.

In an interview with Seidle recently, he acknowledged that this kind of activity falls under the heading of the RICO Act. However, besides the obvious illegalities, there are a bevy of other abuses that have taken place. Under the auspices of “proprietary information”, Raimondo and now Seth Magaziner, the current Treasurer, have refused to release documents and information about the pension fund investments that would traditionally fall under the heading of public domain information, a massive assault on the basic coordinates of transparency and accountability laws. Seidle’s second audit of the pension also show that what has been publicly disclosed about the fund has been largely misrepresentations and that so far there have been losses amounting to nearly $2 billion as of June 2015. Here are results from a recent survey of retired educators in the state:

Rhode Island Retired Teachers’ Association Survey

Survey was sent to 603 members of RIRTA, 247 responded

Age range from 58 years to 96 years, 36 retirees live out of state.

6 questions were asked. We have eliminated question 2 and 3 as they were poorly worded.

Question 4 asked how they keep current with local and state news (Newspaper, Radio, Television)

Two remaining questions were:

Are you in favor of more open information from the RI State Treasurer about pension investments and fees? Yes or No

247 responded yes

Has the loss of the yearly COLA had a negative impact on your standard of living? Yes or No

230 responded yes

Is it important the RIRTA continue to investigate the RI Public Pension Fund for possible criminal mismanagement? Yes or No

247 responded yes

Finally we asked “In a few sentences, please tell us how the new pension law (loss of COLA) has impacted your life.” Following are some of the comments:

Believed the COLA/pension was a guarantee-thought it would be wisely invested.

A sad ending (COLA loss) to a job I loved.

Rent goes up! Healthcare goes up! Check does not.

I am chipping at my savings to keep pace with rising taxes, insurance, goods, fees etc.

I have no hope that my pension alone (no COLA) will keep me financially viable.

Mentally for sure. Am I going to have enough money till the end? How long will I be able to stay in my house? All the same concerns I heard from my Mothers’ generation.

It is like living in Limbo and the future is scary.

I cannot be a consumer anymore. The bottom line is there is no expendable income to support out local businesses, charities and nothing for political contributions.

Have discussed with my wife the advantage of moving out of RI to a state that will not tax my pension.

I made my decision to retire based on the 3% COLA…..I don’t have the funds I thought I could count on.

The comfort level we anticipated for us through our elder years has been stolen from us.

There are over 20,000 of us suffering our own recession.

Of course, the operative question becomes why has the rest of the state government not done anything to remediate these huge failings? That speaks to the nature of Rhode Island itself, a Democrat-dominated single-party state that looks remarkably akin to the government of an old Soviet republic. The ethnic mobs, dominated by Italians, Irish, Portuguese, and Armenians, went legitimate by getting involved in electoral politics decades ago. The public-private hybrid industry known as “construction” is infamous for corruption and malfeasance, particularly when it comes to cement and asphalt used in roadworks projects. Officers of the Progressive Democrats are apt to mention that the private sector unions supported Raimondo’s efforts. This only can suggest a further question, who else is invested in Raimondo’s not-too-blind trust and benefitting from pension deduction on the pay stub of every public worker? Seidle has just completed raising funds for a third audit to address the dismally-performing real estate portfolio, which could very well reveal a host of shady figures, including perhaps some political players who are also major landlords in the Providence area.

The benefit for Wall Street is also rather easy. After the flaccid Dodd-Frank Act was passed, the business as usual model of cyclical boom-and-bailout became untenable. As a result, Arnold and friends recognized that the public sector pension fund system, holding $4 trillion on behalf of America’s workers, was an easy target. There had been some pensions left vulnerable by the 2008 crash but the conflation of that dire situation, where some funds were invested in derivatives, and the rather healthy pensions on the whole was a genius trick of propaganda on behalf of the banking class.

This is important to understand because it is a nationwide plot. On December 20, 2015, perhaps as an early Christmas present, Fred Hiatt wrote a column for the Washington Post that sang hosanas in the highest for Raimondo that was picked up in syndication by other papers. The effort speaks to the existence of a wider campaign to make this setup tenable to the wider public. It has already been tried out in New York, Pennsylvania, Kentucky, Illinois, Nebraska, Colorado, Missouri, Oklahoma, Texas, Alabama, Florida, Arizona, California, and Washington with varying results. And because of the Clinton connections, including Democratic fundraisers and the fact that Raimondo is a pledged Clinton super-delegate, it could be seen as a nationwide policy in a future presidential administration quite shortly.

Andrew Stewart is a documentary film maker and reporter who lives outside Providence.  His film, AARON BRIGGS AND THE HMS GASPEE, about the historical role of Brown University in the slave trade, is available for purchase on Amazon Instant Video or on DVD.