COLUMBUS, Ohio — An investment firm worked extensively with an embattled former member of the retired teachers’ pension fund, according to text messages in newly released court documents.
Communications obtained via a records request reveal that QED associates consistently told then-board member Wade Steen what questions to ask, gave him documents to propose and pushed him to follow its plan.
This is a developing story and will be updated.
In the court battle between Attorney General Dave Yost and former STRS board member Wade Steen and current board chair Rudy Fichtenbaum, the AG provided extensive text messages between Steen and the founder of the investment firm at the center of an alleged corruption case.
“The extent to which Steen communicated, coordinated, and acted almost as an agent of QED (rather than a fiduciary to the STRS Board) is shocking,” the filing states.
In May, Yost filed a lawsuit to remove Steen and Fichtenbaum, 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 Steen and Fichtenbaum have been doing the bidding of investment firm QED.
Steen and Fichtenbaum have repeatedly brought up how quick the turnaround time was between Yost receiving the memo and filing the civil suit. The documents were received by government officials in early May. Yost said he was investigating on May 9, and by May 14, a lawsuit had been filed in Franklin County Court of Common Pleas.
Steen had asked the court for a partial summary judgment because he is no longer on the STRS board, so he thinks the asking for his removal is “moot.”
This week, the state asked the judge not to issue judgment because the AG asked for the “permanent” removal of Steen and Fichtenbaum, meaning they won’t be allowed to make a “comeback,” the docs state.
“The salient question is not whether Steen is currently on the Board, but whether he should ever be allowed to join the Board again,” the filing says.
Steen argues that the AG’s “request for an accounting and disgorgement of unlawful benefits allegedly received by Steen from QED is not supported by the evidence,” which the state denies.
The circumstantial evidence and exhibits provided by the AG team “must be considered” by a jury, the state argues.
“The self-serving narration of facts set forth in Steen’s motion is unsupported by record the evidence,” the state said. “Steen alleges that the Complaint was spurred by some vendetta… That narrative is both false and irrelevant to the motion.”
Recap
QED was started by former Deputy Treasurer Seth Metcalf and Jonathan (JD) Tremmel. Metcalf worked under Josh Mandel in multiple capacities, including as deputy treasurer and general counsel. In 2020, they set their eyes on STRS, according to a 14-page whistleblower memo.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them.
They couldn’t impress the board members, mainly because of their lack of experience and also because 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.
Steen and Fichtenbaum had allegedly been bidding continuously, pitching QED’s direct documents to board members and proclaiming the company’s talking points to other staff.
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 here to learn more about the lawsuit.
In late August, Yost filed several subpoenas against QED and others allegedly involved in this scheme. The same month, QED spoke out to us for the first time, and so did the AG.
Ohio Attorney General Yost defends lawsuit amid teachers’ pension fund scandal
“Ohio law does not allow Steen to now dodge liability for breaches of fiduciary duty as a public trustee simply by leaving the Board,” the AG team’s states in the new filing.
Texts
Texts between Steen and Metcalf and Tremmel show that the pair consistently told the board member questions to ask, ideas of what to say and pushed him to follow their plan.
There are hundreds of text messages.
In a message from Metcalf to Steen in August of 2022, Metcalf seemingly gives the board member talking points.
1. Just doing my job as trustee – not getting paid. Bad stuff going on. Would be easy to rubber stamp, but I refuse to be part of the problem.
2. Problems at STRS are real for active and retired teachers and are not going away. Teachers are pissed (and have been for a long time) that staff are getting rich while teachers get the short end of the stock.
3. Cash burn of $4B a year means STRS’ assets are shrink quickly during this recession, high risk of entering a “death spiral.” Stock market boom over that last decade only allowed STRS to tread water. Going to be very clear in next couple of years that STRS will be bankrupt in 15-20 years. Only options are further benefit reductions, higher contributions, a state bailout or earning dramatically more money.
4. STRS is tone deaf and arrogant. Won’t change.
5. Teachers are driving change. You should talk with them.
That is one example of the dozens of pieces of advice Metcalf gave. Although some texts are out of order date-wise, there is a pattern.
In what appears to be an effort to get Steen to send a letter to an individual, Metcalf worked on editing for him.
“Not yet, I need your edits that you mentioned and did not want to send in advance of talking with him so as not to give him any advantage,” Steen said.
Metcalf also talked about vote counts in order to sway other board members to follow his and Steen’s agenda, the texts show.
“You and Hunt should call Dale together. We NEED him,” Metcalf wrote in Dec. 2020.
After sending Steen more “themes” and topics to cover during meetings and private pitches, the board member asked for additional help.
“Can you resend me your 3 points on why we need an active engaged Investment Comm,” Steen asked Metcalf. “You gave me a copy but I’ve misplace[d] it.”
Private conversations were also discussed, the texts show.
“Please call when you’re free. Announce that you have a solution! Make the motion! I think you’ve got the votes!” Metcalf texted Steen in Oct. 2020.
“Be patient my friend,” Steen replied.
“Can’t wait to hear about exec committee. You’re not done at all if it fails. It is only the beginning – you’re just staring to figure out this big problem,” Metcalf continued.
“I won a few battles in Exec meeting that we can discuss later. I think we can win this but I need to nuisance it,” Steen said.
Then, texts show a group chat between Steen, Metcalf and Tremmel. The pair constantly text Steen during board meetings with advice, including numerous messages of “Vote!” and “Force the vote” when it comes to policy.
“Wade – you are a champion! We moved the ball down the field today and have time to recoup and refresh during the holiday!” Metcalf texted the group.
“Thanks for the support today!” Steen responded.
Throughout all the texts, the pair argue for transparency and accountability of the STRS staff, arguing that they are skewing the benchmarks for bonuses for staff.
“Wade: Please ask each person to summarize four things: sharpe, return, capacity and edge during the next twelve months. We need $1.5 billion today. How fast can we get to that?” Metcalf asked in Nov. 2020.
“Give him the dagger,” Tremmel said about another board member seemingly disagreeing with Steen and QED.
In another message, Metcalf asked to overhear a conversation between Steen and a board member.
“Wade – we do you plan on calling Stein? We’d love to be a fly on the wall,” he said in Nov. 2020.
Metcalf requested focus.
“Wade: need to keep eye on the prize,” he texted in Nov. 2020.
I have reached out to Steen, Metcalf and Tremmel for comment.
“Wade, this is the benefit of persistent, thoughtful work. We are starting to see green shoots of the seeds we’ve sown. Great work. You were masterful,” Metcalf said in Sept. 2020.
The court case will continue as the board tries to function.
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“Today will go down in history,” Tremmel texted in Feb. 2021.
QED response
Although I have not yet received a comment, Metcalf spoke with me last year.
“The anonymous, self-serving accusers attack everyone who has been critical of STRS: including defendants Wade Steen and Dr. Rudy Fichtenbaum; former STRS board members Bob Stein, Steve Foreman, and Yoel Mayerfeld; former SEC attorney and pension expert Ted Sidle [sic]; renowned pension consultant Richard Ennis; teacher unions; individual active and retired teachers; eight of the eleven current STRS board members; and the media. We are another voice in the chorus of criticism. QED has a relationship with some, but not all, of these individuals and groups. The inference that we aren’t allowed to talk to someone is ludicrous. Frankly, the only people supporting STRS staff are either political or consultants and lobbyists paid to reinforce STRS’ false narrative,” Metcalf said.
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