In the nation­al debate over what to do about pub­lic pen­sion short­falls, here’s some­thing you may not know: The texts of the agree­ments signed between those pen­sion funds and finan­cial firms are almost always secret. Yes, that’s right. Although they are pub­lic pen­sions that tax­pay­ers con­tribute to and that pub­lic offi­cials over­see, the exact terms of the finan­cial deals being engi­neered in the public’s name and with pub­lic mon­ey are typ­i­cal­ly not avail­able to you, the taxpayer.

The financial industry is citing modest public pension shortfalls to justify pushing those pensions to invest more money in riskier and riskier high-fee investments--and to do so in secret.

To under­stand why that should be cause for con­cern, pon­der some pos­si­bil­i­ties as they relate to pen­sion deals with hedge funds, pri­vate equi­ty part­ner­ships and oth­er so-called ​“alter­na­tive invest­ments.” For exam­ple, it is pos­si­ble that the secret terms of such agree­ments could allow oth­er pri­vate indi­vid­u­als in the same invest­ments to nego­ti­ate pref­er­en­tial terms for them­selves, mean­ing pub­lic employ­ees’ pen­sion mon­ey enrich­es those pri­vate investors. It is also pos­si­ble that the secret terms of the agree­ments cre­ate the heads-Wall-Street-wins, tails-pen­sions-lose effect – the one where­by retirees’ mon­ey is sub­ject­ed to huge risks, yet finan­cial firms’ prof­its are guar­an­teed regard­less of returns.

North Car­oli­na exem­pli­fies the lat­ter prob­lem. In a new report for the union rep­re­sent­ing that state’s pub­lic employ­ees, for­mer Secu­ri­ties and Exchange Com­mis­sion inves­ti­ga­tor Ted Siedle doc­u­ments how secre­cy is allow­ing finan­cial firms to bilk the Teach­ers’ and State Employ­ees’ Retire­ment Sys­tem, which is the sev­enth largest pub­lic pen­sion fund in America.

The first part of Siedle’s report eval­u­ates the secrecy.

​“Today, TSERS assets are direct­ly invest­ed in approx­i­mate­ly 300 funds and indi­rect­ly in hun­dreds more under­ly­ing funds, the names, invest­ment prac­tices, port­fo­lio hold­ings, invest­ment per­for­mances, fees, expens­es, reg­u­la­tion, trad­ing and cus­to­di­an bank­ing arrange­ments of which are large­ly unknown to stake­hold­ers, the State Audi­tor and, indeed, to even the (State) Trea­sur­er and her staff,” he reports. ​“As a result of the lack of trans­paren­cy and account­abil­i­ty at TSERS, it is vir­tu­al­ly impos­si­ble for stake­hold­ers to know the answers to ques­tions as fun­da­men­tal as who is man­ag­ing the mon­ey, what is it invest­ed in and where is it?”

Before you claim this is just a minor prob­lem, con­sid­er some num­bers. Accord­ing to Siedle’s report, this huge pen­sion sys­tem now is autho­rized to invest up to 35 per­cent – or $30 bil­lion – of its assets in alter­na­tives. Con­sid­er, too, that Siedle’s report shows that with such a large allo­ca­tion in these risky alter­na­tives, the fund ​“has under­per­formed the aver­age pub­lic plan by $6.8 billion.”

So what is hap­pen­ing to retirees’ mon­ey? As Siedle doc­u­ments, more and more of it is going to pay the exor­bi­tant fees charged by the Wall Street firms man­ag­ing the pen­sion money.

​“Fees have sky­rock­et­ed over 1,000 per­cent since 2000 and have almost dou­bled since (2008) from $217 mil­lion to $416 mil­lion,” he writes, adding that ​“annu­al fees and expens­es will amount to approx­i­mate­ly $1 bil­lion in the near future.”

The details get worse from there, which makes Siedle’s report a gen­uine must-read for any­one who wants to under­stand the larg­er sto­ry of pub­lic pen­sions. After all, North Car­oli­na is not an iso­lat­ed inci­dent. In state after state, the finan­cial indus­try is cit­ing mod­est pub­lic pen­sion short­falls to jus­ti­fy push­ing those pen­sions to invest more mon­ey in riski­er and riski­er high-fee invest­ments – and to do so in secret.

It is a sto­ry that isn’t some minor issue. On the con­trary, the fight over that $3 tril­lion is fast becom­ing one of the most impor­tant eco­nom­ic, busi­ness and polit­i­cal sto­ries of mod­ern times. The only ques­tion is whether the sto­ry can even be told – or whether those prof­it­ing off secre­cy can con­tin­ue hid­ing their schemes from the public.