David Sirota with a blockbuster story everyone should read:
Thanks to confidential documents exclusively obtained by Pando, we can now see some of the language and fee structures in the agreements between the “alternative investment” industry and major public pension funds. Taken together, the documents raise serious questions about whether the government employees, trustees and politicians overseeing major public pension funds are shirking their fiduciary responsibilities under the law when they are cementing “alternative” investment deals.
The documents, which were involved in a recent SEC inquiry into the $14.5 billion Kentucky Retirement Systems (KRS), were handed to us by SEC whistleblower Chris Tobe, an investment consultant and former trustee of the KRS. Tobe has also written a book — “Kentucky Fried Pensions” — about the scandalous state of the Kentucky public pensions system.
The documents provided by Tobe (embedded below) specifically detail Kentucky’s dealings with Blackstone – a giant Wall Street investment firm which has deployed a platoon of registered lobbyists in Kentucky and whose employees are major financial backers of Kentucky U.S. Sen. Mitch McConnell (R).
The Blackstone-related documents, though, don’t just tell a story about public pensions in Kentucky. The firm, which just reported record earnings, does business with states and localities across the country. The Wall Street Journal reports that “about $37 of every $100 of Blackstone’s $111 billion investment pool comes from state and local pension plans.”
There are a zillion different issues in this article. A 37% administration charge for handling the accounts seems illegal. Who sits on the Board of Directors of Blackstone is also interesting. But there is a backlash developing. Last week the Florida legislature which is controlled by Republicans from top to bottom rejected a proposal to make a 401(k)-style pension plan automatic for anyone opting out of the Florida Retirement System. That doesn’t address the Blackstone issue head on, but it is a hopeful sign nonetheless. Then we have bankrupt Detroit. Because of “white flight” Detroit’s tax base was insufficient to fund public employee pensions and pay the related investment fees. Hence the bankruptcy. It’s interesting to note that the greater Detroit area has the largest population of Muslims in the United States. And the greatest number of white, Christians leaving a metropolitan area in any major US city. Which is probably why the tax base collapsed.