‘Shocking’: Dave Yost details secret texts and private emails exchanged at STRS Ohio

A former State Teachers Retirement System board member relentlessly advocated for a firm looking to do business with the pension fund, even after the pension staff rejected the firm, according to new records filed by Ohio Attorney General Dave Yost.

Ten months ago, Yost sued to remove two members of the State Teachers’ Retirement System board, based largely on a memo from an anonymous whistleblower.

In a court filing this week, Yost and his team put more details into the public record and said they found a “shocking” level of covert coordination and communication with a firm looking to do business with the pension fund.

Wade Steen, a now former board member who is one of the targets of Yost’s lawsuit, sought to get at least part of the lawsuit dismissed.

Yost responded with a 16-page memo that accuses Steen of prioritizing secrets over transparency, failing to preserve records, failing to disclose his ties with QED, which sought to do business with STRS, and relentlessly advocating for QED’s proposal.

Steen served on the STRS board as an appointee of Gov. Mike DeWine. In May 2023, DeWine removed Steen and appointed a replacement.

Steen sued to get his seat back and a non-profit organization, Ohio Retirement for Teachers Association, paid the legal bills for Steen and STRS Board Chairman Rudy Fichtenbaum. That arrangement may conflict with state ethics laws.

Ohio Ethics Commission Director Paul Nick said he could not comment on ongoing investigations.

Steen won reinstatement but his term expired in September 2024.

The lawsuit against Steen and Fichtenbaum alleges that they violated their fiduciary duty to the pension system by working behind the scenes for QED, a relatively new investment firm.

Steen and Fichtenbaum have said they were searching for ways to cut pension fund costs and boost investment returns, to benefit retirees and teachers.

In early 2020, QED, formed by former state treasurer officials Seth Metcalf and J.D. Tremmel, pitched STRS board members and staff to partner on an investment opportunity. The strategy called for earmarking up to $65 billion, which could generate a $4 billion return.

In May 2020, STRS managers rejected the deal, in part because QED lacked a track record. In February 2021, the pension fund’s outside consultant, Cliffwater, also rejected the proposal.

The next month, QED told STRS that it no longer wanted to do business with the pension fund. But Steen and Fichtenbaum kept working with QED to advance the proposal, according to Yost. In November 2021, the duo made a presentation to fellow board members on QED’s proposal.

QED aligned with the Ohio Retirement for Teachers Association to help elect new board members who might be more open to the new strategy.

Steen has said in court filings that since he’s already off the STRS board, the lawsuit to remove him is moot. He has said he wants STRS to cut expenses and find investment opportunities that would yield higher returns. STRS staff stymied his efforts to get information to help improve the system.

Last year, Fichtenbaum declined to comment on the lawsuit but said in an online statement: “I have done nothing wrong and will continue to fight for the interests of STRS members.”

What evidence did Yost uncover?

Once STRS Chief Investment Officer Matt Worley rejected the QED pitch, Steen began challenging STRS’s returns, calculations and other data, according to the lawsuit.

At the same time, Steen communicated regularly with Metcalf and Tremmel via texts, personal email accounts and Signal, a private chat system that automatically erases messages. After STRS staff told QED no, these messages were exchanged:

• Sept. 3, 2020: Metcalf tells Steen it’s best to use personal email addresses, not the STRS email accounts.
• Sept. 20, 2020: Metcalf sends the QED business plan to Steen’s personal email.
• Oct. 14 and Nov. 23, 2020: Metcalf ghostwrites emails for Steen.
• Oct. 15, 2020: Metcalf sends Steen instructions during a pension board meeting.
• Nov.13, 2020: Steen asks Metcalf for a list of questions or issues he could raise in the following week.
• Nov. 19, 2020: Metcalf noted he’d email motions for a board member to read at the meeting.
• Dec. 16, 2020: Metcalf sends a memo to Steen’s personal email.
• Jan. 8, 2021: Steen asks Metcalf for input on changing STRS board policies.
• Aug. 16, 2021: Tremmel provides info to Steen and Fichtenbaum for an STRS staff meeting.
• Aug. 15, 2022: Metcalf tells Steen he sent him time-sensitive message via Signal.
• Sept. 6, 2022: Steen seeks to coordinate a consistent message with Metcalf and Tremmel.
• Oct. 19, 2022: Metcalf and Steen talk about exchanging messages and documents via Signal.

While Steen is no longer on the board, Yost wants to permanently block him from returning.

What’s happening at STRS?

The Ohio Retirement for Teachers Association and its allies on the board are pushing for several changes. They want to reinstate regular cost of living adjustments for retirees, cut down on administrative expenses and staff bonuses, dial back on higher-risk investments such as private equity funds, and increase transparency.

The board is made up of five teachers and two retired teachers elected by system members, three investment experts appointed by the governor, state treasurer, Ohio General Assembly and the director of the Department of Education and Workforce.

The board oversees about $95 billion invested on behalf of 500,000 teachers and retirees.

Board members aren’t compensated, and they have a fiduciary duty to act in the best interest of the system. State law allows the attorney general to bring a civil case to remove public pension board members if they violate that duty.

The attorney general is the legal counsel for the pension systems.

Laura Bischoff is a reporter for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.