Forbes Columnist: RI Will Be Blown Away by Pension Investigation

High profile Forbes columnist Edward Siedle, along with the American Federation of State, County, and Municipal Employees (AFSCME) will be unveiling today the findings of a months-long investigation into the Rhode Island pension system.

"I think Rhode Island taxpayers will be blown away by these findings, if they understand what's going on, and I think I've put it in language that they can," said Siedle. "This is a shot across the bow of the hedge fund takeover of public pension funds across the country, which has been going on for close to ten years now."

AFSCME, in conjunction with Siedle, will be unveiling their findings today at a press conference at 2 P.M.

See Timeline of Rhode Island Pension Reform Battle BELOW

Siedle, a former SEC investigator involved in the Bernie Madoff case, was retained by AFSCME this past June to conduct the investigation. Siedle is the founder of the Whistleblower Opportunity Trust and Benchmark Financial Services, and counts among his experience having "pioneered over $1 trillion in forensic investigations of the money management industry."

The findings will present a major development in the continuing local and national scrutiny of the state's pension system, following on the heels of Matt Taibbi's recent indictment of Rhode Island's pension reforms in Rolling Stone magazine - and could raise questions on the future legal proceedings which are currently the subject of a lawsuit pending before the state.

Fees Under Fire

Siedle, who has written such articles as "Rhode Island Pension Reform Looks More Like a Wall Street Feeding Frenzy," and "Rhode Island's 3% COLA Will Go to Pay Wall Street 4%+ Fees" was tapped by the union to look into Rhode Island's pension system -- and the fee structure to hedge fund money managers in particular.

AFSCME had pursued information on ERSRI (Employees' Retirement System of Rhode Island) through a Freedom of Information Act (FOIA) request back in January for money management fees to investment managers -- both in dollars and basis points. When told by the General Treasurer's office that they would need to pay a fee for the search and retrieval of the public information on the latter, AFSCME criticized the "continuation of the ratcheting up of opaque investments not on the market."

Siedle said at the time, "In my experience, hedge funds -- and their managers -- know exactly what they're charging, and what their management fees are in basis points. These numbers should be readily available. For a public office to ask that kind of money for public records, while legal, is pretty much unheard of."

The investigation, according to Siedle, was two-fold. "There really were two parallel investigations here, one of the Treasurer, and of the state's pension fund itself."

Siedle believes the findings will have major ramifications nationally -- most notably on the hedge fund industry. "They're savvy, they have incredible financial resources -- you need to understand the level of secrecy, and really understand finance and politics to get a grasp of what's going on here."

He noted however that a great deal of the information he used in his investigation was from the hedge fund industry itself, when he was not getting the information he requested from Raimondo's office.

"The saying is investment money is like water -- if you build a dam, the water will flow elsewhere," said Siedle. "It's the same for information. If you try to stop people from getting it from one source, they'll get elsewhere."

Raimondo's Response to Critics

Raimondo, who was awarded the "Small Public Plan of the Year" award by Institutional Investor magazine in July, currently has over $2 million in her political war chest as of the last campaign filing reporting period, and is widely considered to be announcing a run for Governor soon.

Raimondo recently responded to criticisms of her handling of the state's pension systems in Rolling Stone. Raimondo spokesperson Joy Fox said, “This is clearly a political propaganda piece driven by the critics of pension reform, including those who are paid by local labor leaders to discredit the state’s reforms and its investment policies."

Fox continued, "In 2011, Rhode Island had a choice. It could have done nothing and been dishonest about its problem. Instead, Rhode Island leaders came together, courageously put politics aside, and made the tough decision to protect the retirements of hard working public employees and retirees.”

Fox went on to note that it was "important to remember" the following regarding pension reform, including that the treasurer "fought to always keep a defined benefit pension, and always respected collective bargaining," reform "passed overwhelmingly in a Democrat-controlled General Assembly," there were "countless hours of labor-attended pension advisory group meetings, legislative hearings and town hall-style meetings with the Treasurer and Governor," and "all but one vote to approve the hedge funds were unanimous."

Siedle and AFSCME's findings are due to be released today at 2pm.

Related Slideshow: Timeline - Rhode Island Pension Reform

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