Rhode Island State Pension May Never Be Able To Exit Gina Raimondo Loser
Can Rhode Island ever exit the dismally performing investment sold to the state pension in 2006, by former General Treasurer, current Governor Gina Raimondo before she entered politics? Probably not – unless 80% of the investors in the fund (including friends and family of Raimondo)—someday agree to end it. Don’t be surprised if the final accounting of this investment is delayed until Raimondo safely exits Rhode Island politics.
As I wrote last month, recently the state pension was told by Raimondo’s Point Judith Capital that it will have to remain in the floundering investment for a thirteenth straight year, even though the state’s initial $5 million, 10-year commitment had long expired.
The pension was scheduled to exit Raimondo’s fund in 2016 but the firm, supposedly exercising its discretion under a secret agreement the state supposedly signed, unilaterally extended the life of the investment in 2017 and again in 2018.
In late 2018, General Treasurer Seth Magaziner surprised pension stakeholders by announcing a new reason for delaying termination of the investment yet another year. Magaziner disclosed, for the first time, the 2006 secret agreement the pension signed with Point Judith allowed Raimondo’s fund to hold onto state money another year if 80 percent of investors agree.
The very fact that an investment, shrouded in secrecy and foisted on the state pension by the now-Governor, has continued to lose money for the pension and pay money to Raimondo for the past thirteen years—with no end in sight—should demand enhanced disclosure and public scrutiny, in my opinion.
Thankfully, according to Magaziner, his “Transparent Treasury initiative has made the Rhode Island pension system a national leader in pension transparency.” The Prince of Transparency should welcome probing questions, right?
So, for the past month I have been asking Treasurer Magaziner’s office questions about the most recent extension of the life of the Raimondo fund. Magaziner’s spokesman, Evan England, has failed to answer almost all my questions. Let’s call it the “not-so-transparent treasury.”
In response to the following questions:
- When did the pension become aware of the most recent (2019) extension?
- What evidence does the pension possess documenting that 80% of investors in the fund voted to extend?
- Who are the other investors in the fund?
- How many of the other investors are, like Raimondo, insiders of the fund?
- Do the agreements the state entered into with Point Judith permit additional extensions of the life of the fund? If so, how many extensions are permitted and under what circumstances?
- Did the pension vote against extension of the life of the Point Judith fund or simply abstain from voting?
- What was the projected liquidation value of the investment at 12/31/18, had termination and liquidation been demanded by the limited partners?
The Treasurer’s office has merely responded:
- We did not support the amendment, but enough limited partners to amend the contract did.
- It is our policy and practice to disclose key information about the state’s investments to the public. The only exception is in instances where we are duty-bound, as fiduciaries, to maintain the confidentiality of information that could cause material harm (emphasis added) to the fund and, by extension, our members.
Wow! The Treasurer is “duty-bound” to keep secret the Governor’s deal with the state pension? Disclosure would cause “material harm” to state workers?
How exactly would pension participants—state workers whose Cost of Living Adjustments (COLAs) were cut to pay fees to Raimondo’s former investment firm— be harmed by exposure/disclosure?
As one of the nation’s leading experts on pension fiduciary duties, I fail to see how, once the Treasurer has already disclosed the life of the Point Judith fund could be extended for yet another year with 80% investor approval, disclosing whether additional extensions are permitted could possibly cause material harm to the fund or its participants.
By the way, it is my understanding from speaking with experts who regularly draft limited partnership agreements, with 80% investor approval, it is likely the fund could continue, and pay fees, forever to Raimondo. Magaziner ain’t sayin.
I wrote to Magaziner’s flack,
“Help me, if you can, understand the Treasurer’s reasoning. Indeed, in my expert opinion, there is a compelling case that the Treasurer’s profound lack of transparency regarding this failing, politically-charged, dark money investment is utterly unjustifiable. To my knowledge, the Raimondo investment is unique. There is no other investment in the state’s portfolio that was sold to it by the current Governor, former Treasurer.”
Stakeholders deserve an answer to when, if ever, the pension can exit this loser.