COLUMBUS, Ohio — The member who resigned from Ohio's chaotic teachers' pension board differed from reform-minded leaders, sharing concerns about giving billions of dollars to an "illegitimate" investment firm.
Both the proposed controversial firm and the current system aren't good financial options for the state's educators, Steve Foreman told us in an exclusive interview.
Meet Steve
Of the 11 members of the State Teachers Retirement System of Ohio (STRS) board, Foreman was one of the five elected contributing teachers, meaning he represented active educators. The other seats include two retirees and four investment experts appointed by different government leaders.
The Zanesville teacher was elected to the STRS board in 2022 and was set to serve until 2026. However, he plans to retire in November with 34 years in education.
He refers to himself as "reform-minded," a term that divides the board.
Click here to learn more about the reformers, the STRS staff and status quo.
There is a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less.
To get a larger overview of the situation, we did a Q&A with viewers.
RELATED: Answering viewer questions about Ohio's retired teachers' pension fund chaos
In short, "reformers" want to switch to index funding, while "status quo" individuals want to keep actively managing the funds.
Battle for control
"My resignation is happening at the best time that it could happen," Foreman told me.
In a surprise announcement in late June, he stepped down from the board early — but he believes he is leaving the board in good hands.
"Everybody is acting in what they believe is the best interest," he said.
One of Foreman's main priorities when getting into his position was lessening the number of years teachers had to work to retire. Prior to 2012, public school teachers had to work for 30 years to get retirement benefits. Effective 2013, STRS bumped up the years from 30 to 35. Starting in 2026, educators would also need to be 60 years old in order to receive full benefits.
But he helped work that down. He voted to permanently reduce the years to 34 — and eliminate an age requirement.
"I'm going to take advantage of that and retire," he said.
He is stepping down early to let another person "learn the ropes," he said.
"I am so confident that the board is going to elect someone who has all the best interests of the reform-minded board," he added.
The other major concern he had that the reformers were focused on fixing was the lack of cost of living adjustments, or COLAs. They were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. In 2023, STRS approved a 1% COLA to eligible retirees.
He mentions that reform members Rudy Fichtenbaum, Wade Steen, Elizabeth Jones, Pat Davidson and Julie Sellers are putting STRS back on track, away from "corporate interests."
"Those reform members that I have named, those are people that are acting in the best interest of this organization," Foreman said.
Ohio leaders disagree.
In May, Attorney General Dave Yost filed a lawsuit to remove two members of STRS, stating they are participating in a contract steering "scheme" that could directly benefit them. Yost started the investigation after documents prepared by STRS employees alleged that Wade Steen and Chair Rudy Fichtenbaum have been doing the bidding of private investment group QED Systematic Solutions.
Yost started investigating after STRS employees gave documents to Gov. Mike DeWine's office. The office believes "numerous whistleblowers" wrote the 14-page memo, also including about a dozen other documents in an attempt to verify their allegations.
Steen and Fichtenbaum "seek to steer" as much as 70% of current STRS assets, which is $65 billion, to a "shell company" that has "backdoor ties" to the members, Yost argued.
The AG states that the pair should be removed because they broke their fiduciary duties of care, loyalty and trust when "colluding" with QED.
Click hereto learn more about the lawsuit.
House Speaker Jason Stephens (R-Kitts Hill) warned that the nearly $95 billion pension fund needs to be reviewed carefully.
"It's really important that the pensions, STRS in this case, make sure they have the transparency and the accountability so that everybody can see what's going on," Stephens told me in June.
QED
Despite the reformers denying it, I obtained a now-archived video meeting proving Yost's claim that Fichtenbaum and Steen were promoting a $65 billion partnership with an investment firm that lacks "legitimacy."
According to Yost's suit, board members want to give $65 billion to QED so that they could allegedly restore the COLA.
"The mention of $65 billion is patently false," Steen said at a board meeting in May. "That was never proposed by me, never proposed by any other board member."
Steen felt so strongly about this that in a June 20 court filing in response to Yost, he denied that he and Fichtenbaum ever proposed that STRS invest $65 billion in QED.
But that isn’t what our recording from 2021 shows.
"We would make available $65 billion in our inventory in order to implement this strategy," Fichtenbaum said.
In a 2021 meeting, Fichtenbaum, Steen and former member Bob Stein can be heard getting shut down by other board members and STRS staff after proposing the billions.
Case Western Reserve University business law professor Eric Chaffee says the reformers' answers are questionable and understands why Yost is investigating.
"QED has an unproven track record," Chaffee said. "It's unclear as to why exactly these board members are focusing on this particular entity and doing it so strongly."
QED was started by former Deputy Treasurer Seth Metcalf and Jonathan (JD) Tremmel. Metcalf worked under Josh Mandel in multiple capacities, including as general counsel.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them starting in 2020.
They couldn’t impress the board members, mainly because of their lack of experience and also the fact that QED was not registered as a broker-dealer or investment adviser. The men also didn't own the technology to "facilitate the strategy," the documents say.
Then, an evaluation of QED was done by the board's outside consultant, Cliffwater. The company highly advised not to follow their project or use them.
Click hereto learn more about the alleged ties between the reformers and QED.
RELATED: The alleged ‘backdoor ties’ between retired teachers’ pension fund and investment firm
Since the reformers took control, the executive branch has been worried that QED will get a deal.
But Foreman says he doesn’t think so. Although he is a reformer, he broke from leaders Fichtenbaum and Steen.
"I have trepidation about the fact that they don't really have that history or that portfolio," Foreman said about QED. "That's very concerning to me."
According to Foreman, legitimate public conversations about QED stalled following that 2021 meeting. He doesn't remember if Metcalf or Tremmel reached out to him — but said it was possible.
"I do rely on investment staff, their decisions," Foreman said. "If I didn't, why would we have an investment staff?"
STRS Chief Investment Officer Matt Worley didn't approve of QED, so it was never a major conversation for Foreman, he said.
I asked if he would have voted in favor of giving the billions to the investment firm.
"The amount of money is secondary in the line of your question because I guess I would first be looking at the performance of the organization," he said. "Once I would felt confident, then the [dollars] would come into play of 'what do I feel comfortable giving them?'"
He never got there because of Worley's roadblock.
That being said, there is nothing wrong with hearing a firm out about an investment opportunity, the reformer added.
"I've heard the rumblings of a kickback and all that — I'm not speaking to that," Foreman said. "I'm just speaking to, 'can a board member talk to someone, educate themselves and come back and talk to the board?' I think that's fine."
He thinks there needs to be change but doesn't think QED is the answer. But he is also suspicious of the attorney general's lawsuit.
"The timing of activities is always very curious to me," he said.
Financials
Foreman believes that Yost may be filing the lawsuit to protect Wall Street from losing their Ohio investments.
As of the end of May, the fund had a market value of about $95 billion — with $8 billion in real estate.
Two-thirds of STRS' investment assets are managed by more than 100 staff members. There are about 400 additional employees.
The average daily investments include $70 million in liquidity reserves, $65 million in domestic equities, $55 million in fixed income, $30 million in international and $5 million in real estate.
Yost and other status quo individuals deny that the lawsuit was meant to do anything but stop a "hostile takeover" by QED.
Reformers like Foreman want STRS to get rid of their out-of-state real estate investments so the fund can provide COLAs for retirees — but he also raises concerns about STRS' so-called opulence.
"I look at the building, the holdings in other states, real estate, the artwork, the cafeteria that I look at the number of employees," he said.
The STRS building is in the heart of downtown Columbus — with a waterfall outside of it. It used to have a childcare center for kids of employees but was closed after educators fought against it. Some of the current benefits include an on-site fitness center, outdoor balcony and lunchroom with kitchen appliances.
One of Foreman's final acts on the board was voting not to give STRS staff raises, which educators applauded. Last year, the board approved $10 million in bonuses for staff.
Educators complain that this money could be going toward giving retirees a COLA, but STRS staff argue that the building is pennies in comparison to how much it would cost to provide a larger living adjustment.
When it looked like reformers would get the supermajority in the most recent elections, the government either filed a suit or attempted to remove a member from the board, Foreman said.
"It seems to be a little bit of jockeying for seats on the STRS board to me," Foreman said. "I've added to that mess, I guess."
Moving forward
Reformer Michelle Flanigan is set to take the place of now-resigned member Dale Price, meaning a 7-4 supermajority prior to Foreman's resignation. Price stepped down after the reformers removed him as chair.
Foreman's replacement will likely be a reformer, so change could be coming soon — but not that soon.
"If there has been any frustration during this time with me, it's been the urgency, the urgency versus action," he said. "They want these changes today, but it's very hard to make changes today with something that has been happening for so long."
The reformers on the board need educators to be patient with them because this is how government works: slow.
"So we have set a course, these discussions are starting to happen," Foreman said. "Some of the immediate fixes that need to come are unfortunately going to come with probably an increased employer contribution."
But this isn't the end for the reformer and education policy. Maybe he will run for one of the expiring retired seats, he hinted.
Meanwhile, the lawsuit between Yost and Steen and Fichtenbaum is heating up.
"If Defendants appear outraged and aggressive, they are," the joint filing by the reformers' attorneys states. "Both men have volunteered countless hours to have the satisfaction of seeing that the fund is properly managed which they were on the cusp of doing when the Attorney General filed his lawsuit."
Interestingly, QED doesn't seem to be done. In a joint filing by the pair — they defend their support of the firm.
"Mr. Tremmel, one of the QED founders, has a sterling track record, having successfully managed a $1 billion plus fund at the age of nineteen (19) and having an unparalleled 5-year track record of 5-star investment management performance results," the filing says.
Later, the pair criticized Yost, DeWine and the STRS staff who provided documents to the executives.
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