Two controversial members of the State Teachers Retirement System of Ohio violated their fiduciary duties to the pension system and will be barred from serving on the board in the future, a judge held on Feb. 19.
Franklin County Common Pleas Court Judge Karen Held Phipps issued a 27-page ruling that will immediately remove STRS Board Chairman Rudy Fichtenbaum, bar him from future service on the board and prohibit former board member Wade Steen from returning to the board.
The decision has been long-awaited.
Phipps held a five-day bench trial at the end of October over whether Fichtenbaum and Steen violated their fiduciary duty to act in the best interest of the public pension system.
Ohio Attorney General Dave Yost filed a lawsuit in May 2024 to remove the two men. Steen’s term on the board later expired.
Yost said the two aligned themselves with QED, a small startup business that wanted to use untested investment strategies with up to $65 billion in pension fund money. Pension managers and most of the board members rejected the idea.
What is the State Teachers Retirement System?
Ohio has five public pension systems. STRS is the second largest, serving 500,000 teachers and retirees. It has $100 billion invested, most of which is managed by internal investment staff.
STRS is funded by a percentage of payroll contributed by workers, a percentage from employers and investment returns. The system is governed by an 11-member board of elected teachers and retirees as well as political appointees.
Public employees in Ohio do not receive Social Security, so the state pensions are their primary retirement programs.
Turmoil at teachers’ pension fund
In recent years, activists mounted a board takeover, electing board members who were more sympathetic to their complaints about transparency, senior leadership, staff bonuses, and the suspension of the cost-of-living allowances for retirees.
Beginning in 2020, QED, led by former deputy state treasurer Seth Metcalf, pitched its services to STRS staff. After being rejected, QED worked with Steen, Fichtenbaum and other former board members.
In November 2021, Fichtenbaum and Steen pitched fellow board members on the idea of partnering with QED to explore a way to increase investment returns and lower management costs.
At trial, STRS Chief Legal Counsel Stacey Wideman said that she started documenting issues beginning in 2020 – QED’s unsuccessful pitch and subsequent work directly with board members, QED working with a retiree group to elect different people to the board, and an anonymous memo that accused the STRS director of misconduct.
In May 2024, Wideman turned the 14-page memo over to the offices of the governor, state treasurer, attorney general and FBI. Yost filed suit to remove Steen and Fichtenbaum days later.
The fund has seen a turnover of top managers, including the executive director, the chief financial officer and the chief investment officer.
The controversies prompted state lawmakers to change the law so that teachers and retirees would have a minority voice on the powerful board. Teachers’ unions are challenging that law change in court.
This story will be updated.
State government reporter Laura Bischoff can be reached at lbischoff@usatodayco.com and @lbischoff on X.
This article originally appeared on The Columbus Dispatch: Judge rules on removal of Ohio teachers’ pension board chairman
Reporting by Laura A. Bischoff, Columbus Dispatch / The Columbus Dispatch
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