CINCINNATI (WKRC) – A judge’s ruling is set to reshape the State Teachers Retirement System of Ohio after finding that two board members violated their fiduciary duty to the fund.

The decision announced on Thursday stems from an investigation by the Ohio attorney general two years ago. The ruling centers on board members Rudy Fichtenbaum and Wade Steen, who were apparently trying to restore cost-of-living increases but, in doing so, pursued a plan the fund’s staff had already rejected.

A judge’s ruling is set to reshape the State Teachers Retirement System of Ohio after finding that two board members violated their fiduciary duty to the fund. (WKRC, Provided)

The judge found the two were acting as agents of QED, a startup that proposed managing $65 billion—more than two-thirds of the pension fund. The effort did not persuade fellow board members, but once it came to light, state lawmakers moved to reduce the number of educators on the board.

“The fund has since then grown. The state found issue with two of the board members and took it to court. The court made its decision. Through all of this, the system continued to perform well, and the board continued to perform the functions of a board,” said Ohio Federation of Teachers President Melissa Cropper.

State Rep. Adam Bird, a former superintendent in New Richmond and one of the lawmakers involved in altering the board, said the ruling supports the need for the change.

“I am confident that the judicial system will ultimately rule in our favor. I appreciate that they’ve got a job to do and they’ve got to go through their due process—and I’m not going to argue with that—but I do think that ultimately, the state legislature’s bill that passed back in June will ultimately prevail,” Bird said.

Cropper said she disagrees with using the ruling as an example to justify changing the board’s makeup.

“I think that is wrong to use this as an example, because if anything, this proves when board members need to be removed, there’s a mechanism for removing them, whether they’re appointed or elected, and this composition of the board has been this way since its inception,” Cropper said.

The change to the board’s setup is frozen pending more litigation, as teachers unions back a lawsuit challenging it.

As for the two board members, Chairman Fichtenbaum will be removed, and Steen is barred from ever rejoining the board.

STRS says it manages more than $100 billion for more than 500,000 educators. Almost 7,000 Hamilton County retirees are receiving benefits.