COLUMBUS, Ohio — Several key witnesses testified in Ohio's trial against two of the state's top pension leaders, who are accused of participating in a multi-billion-dollar corruption scheme.
"It's the erosion of confidence in the institution that safeguards retirement security for Ohio's teachers," Assistant Attorney General Chad Kohler said.
The state is arguing that the State Teachers Retirement System (STRS) board chair, Rudy Fichtenbaum, should be removed from his position, and Franklin County Court of Common Pleas Judge Karen Held Phipps should ban both him and former board member Wade Steen from ever returning to public pensions.
"There's been no proof of any of the salacious accusations," Norman Abood, attorney for Wade Steen, said.
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In summary, the state is accusing Fichtenbaum and Steen of attempting to contract steer 70% of STRS assets to QED, a startup investment firm. The AG's office says QED's leaders, Seth Metcalf and JD Tremmel, have "backdoor ties" and no track record, clients or capability to invest the $65 billion they were seeking.
For more of an in-depth recap, please click here.
Former CIO Matt Worley was one of the first to raise concerns about the situation and their qualifications.
"They would fail miserably at all due diligence that had taken place," Worley testified. "We also thought they were using their viewpoint about STRS and trying to scare trustees into coming to them for a solution."
Worley made his feelings abundantly clear during a now-archived meeting we obtained via records request.
"We would not invest all $65 billion with one manager," Worley said, laughing during a November 2021 meeting. "That would be crazy."
He said when denied, he believes QED, Fichtenbnaum and Steen helped push a smear campaign against STRS and specific staff members.
"Personal attacks in campaigns, personal attacks on us as well," Worley testified, adding that there was massive criticism on the investment returns that had never been there prior to the denial of QED. "Trying to poison the well."
But the defense claimed that Worley was just trying to save his job, as the board was debating downsizing investment staff. Staff continued to get bonuses while pensioners had their cost-of-living adjustments restricted.
"They were desperate for alternative suggestions as to, 'How do we make enough money to pay COLA?'" Abood said.
Worley pointed out concerns that QED was getting too close to the board. When Fichtenbaum took the stand, state attorney Martin Cordero pressed him about his messages with QED leaders, reading one of the messages out loud.
"The question we need to ask is, 'Will this get us a six vote?' What we really need to figure out is what can drive a wedge between the staff and board," Cordero said, reading a message from Fichtenbaum to QED on the app Signal.
Before Attorney General Dave Yost sent out the subpoenas in this case, I made several of my own records requests to the pension fund, asking for all communications between the board members and QED.
Screenshots from Fichtenbaum’s phone show that he used the encrypted app Signal to speak to the men. This app automatically deletes messages within a set time of the receiver reading them; however, the call logs don’t.
As of the time of our reporting in 2024, the AG's team said they were learning about the use of Signal from the records request. Although I was unable to get the deleted messages, Signal will give up data if it is subpoenaed for the records.
The state said this breaches ethics and conflict of interest laws. Several state employees reached out to me to point out how Fichtenbaum responded to why he, a board member, would be presenting a company's proposal and intellectual property as his own.
"We're trying to explain their idea," Fichtenbaum said.
He said there is nothing wrong with getting advice on proposals to get better returns for educators. The state says this went beyond just friendly guidance.
RELATED: Ohio Gov. Mike DeWine stunned by teachers' pension fund behavior with firm accused of corruption
After Worley's testimony, the defense moved for a directed verdict, basically a dismissal of the case in certain circumstances if there isn't enough evidence or a legitimate basis for a jury to even consider an opposing party's viewpoint.
Abood argued that the state didn't prove any corruption or any reason why the men should be punished. Kohler, smirking at this assessment, argued that the case was clear-cut and they had clearly proven the men breached their fiduciary duties.
The judge sided with the state, denying the defense.
As it became later in the day, the defense called former board member Bob Stein to the stand to discuss how nothing corrupt happened with QED and that he didn't trust the staff.
During the cross-examination, the judge was visibly shocked when Stein told the state that he believed board members could show favoritism to companies wanting to do business with STRS, didn't think it was important to "foster public confidence in the integrity of the retirement system" because that was the "staff's" job and he didn't care about avoiding the "appearance of impropriety," because "appearance doesn't matter."
As of at least 5:45 p.m., the whistleblower in this case — whom we have not named publicly yet — was still on the stand.
Coverage will go more in-depth regarding Stein, the whistleblower, and the coming witnesses on Thursday.
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