(The Center Square) – An Ohio judge ruled that two former members of the State Teachers’ Retirement System board participated in “a high-stakes scheme that jeopardized the financial security of half a million teachers and retirees.”
Judge Karen Held Phelps barred the former board members, Wade Steen and Rudy Fichtenbaum, from ever serving on the panel again.
Steen and Fichtenbaum were frustrated with the retirement system’s inability to give cost-of-living raises to retirees, while at the same time giving bonuses to the retirement system investment staff, according to the ruling.
Around 2020, another board member, Robert Stein, received an email about a startup investment firm, QED Technologies.
“The QED investment proposal was an innovative alternative strategy designed to improve fund performance and restore COLA by leveraging artificial intelligence, machine learning, and the Ohio Supercomputer to replicate market index returns while generating investment income through automated trading and total return swaps,” the judge’s ruling said.
Stein asked Matthew Worley, the investment supervisor for the retirement plan, to evaluate the QED proposal.
“Worley testified that this was the only time in 30 years of service with STRS that he saw board members pitching a specific investment opportunity,” the judge said in her ruling.
Worley rejected the idea as too vague and risky.
QED later lobbied other staff members, and Steen. The company communicated privately with Steen on the message app, Signal.
On Nov. 19, 2020, Steen made a motion that the board form a committee to “come up with ideas to make more money,” according to the ruling, and Steen and Fichtenbaum made a presentation to the full board promoting the QED proposal.
It met with such strong resistance from other board members that it was never brought to a vote.
Steen and Fichtenbaum “were essentially acting as agents” for QED, the judge ruled.
“The Court concludes that the Attorney General has proven by clear and convincing evidence that Defendants repeatedly breached their fiduciary duties.” the judge wrote.
Ohio Attorney General Dave Yost, whose office filed the legal action seeking a permanent injunction barring Steen and Fichtenbaum from ever serving on the board again, praised the ruling.
“Their actions were deceptive, disruptive and fundamentally incompatible with their fiduciary duties,” he said in a statement. “The court today rightly found that the defendants have forever forfeited any right to serve as members of the STRS board.”
