The entrance to the Ohio State Teachers Retirement System headquarters in Columbus. (Photo by Marty Schladen, Ohio Capital Journal.)
The retired teachers’ pension board chair is defending himself after being accused of bribery and corruption by the Ohio attorney general. In this one-on-one interview, Rudy Fichtenbaum explained his side — and why he is still considering a deal with the investment firm at the center of the scandal.
A (somewhat long) recap
The State Teachers Retirement System (STRS) is in chaos. In summary, there has been constant fighting , two board resignations and allegations of both a public corruption scheme and mishandling of funds .
In May, Yost filed a lawsuit to remove two members of STRS, 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 Wade Steen and Chair Rudy Fichtenbaum have been doing the bidding of investment firm QED.
QED was started by former Deputy Treasurer Seth Metcalf and consultant Jonathan (JD) Tremmel. In 2020, they set their eyes on STRS, according to the main 14-page memo.
The documents claim that they — despite having no clients and no track record — tried to convince STRS members to partner with them.
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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 pair should be removed because they broke their fiduciary duties of care, loyalty and trust when “colluding” with QED, according to Yost’s case.
This fight began from a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less.
In short, “reformers” want to switch to index funding, while “status quo” individuals want to keep actively managing the funds. Recent elections have allowed the “reform-minded” members to have a majority of the board.
Reformers want a cost-of-living adjustment, or COLA. The COLAs were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. They were reinstated, but there has been a suspension of increases, significant for retirees who need this money and are dealing with inflation.
The faction also believes that this is a “sham” investigation meant to prevent democratically elected individuals from choosing what they want to do with their pension money.
Steen and Fichtenbaum have repeatedly brought up how quick the turnaround time was between Yost receiving the memo and filing the civil suit. It is unclear the total timeline, but 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.
In late Aug., Yost filed a slew of subpoenas against QED and others allegedly involved in this scheme. QED spoke out to us for the first time last Friday.
Fichtenbaum vs. Yost
In an hour-long interview on Friday morning, Fichtenbaum defended himself against the allegations of public corruption.
“I’ve never taken any money,” the STRS chair said. “I was never offered any money.”
A retired professor of economics at Wright State University, Fichtenbaum was elected to the STRS board in 2021. He ran on the platform that he wanted to fully restore the COLA, increase transparency within the pension fund and move towards passive investing.
He has been critical of STRS, including the benchmark system used to calculate bonuses for investment staff.
At the end of June, Fichtenbaum led the charge to eliminate millions of dollars in bonuses for their investment staff, which educators cheered. They said it wasn’t fair that the staff get performance-based incentives (PBIs) when they have a restricted COLA.
However, the $10 million is nowhere near close enough to restore the COLA, which Fichtenbaum acknowledged.
“Even if it is symbolic, I think is important because it kind of says, ‘We’re all in this together.'”
Less than a month later, he joined the majority on the board to restore them.
“I think we were basically between a rock and a hard place because we were told that if we just simply eliminated the PBIs, it would be a breach of fiduciary duty,” Fichtenbaum said.
Still, the PBIs weren’t fully restored; they did cut a percentage off from the top investment staff.
“We’re starting to make some progress and moving in a positive direction,” he said.
That positive direction was sidetracked by the attorney general’s lawsuit, he added.
“Anytime there’s an allegation that a public contract is being steered in a particular direction, that’s concerning,” Yost told me. “It’s not only illegal, but it points to a larger corruption.”
Yost doesn’t care about which financial structure the board chooses, he told me, but the alleged process the board is going down is concerning.
“I don’t have a favorite outcome here,” the AG said. “I just want to make sure that we’ve got a transparent clean process that gets the best possible result for the retirees.”
Thus, the problem isn’t reform to the board; it’s the massive amount of money — nearly $70 billion — being possibly delved out to people with a lack of experience, he said.
“If I had $67 billion sitting around that I wanted somebody to invest, it probably wouldn’t be somebody who said, ‘Hey, I think I can do this, I’ve never done it before, but I think I can do this,'” Yost said. “I would want somebody with a track record and somebody with some solid experience.”
All Statehouse leaders that we have spoken to, both Republican and Democratic, are bewildered by the idea of giving the money to QED.
But Fichtenbaum is furious with the AG and believes this is political gamesmanship.
“Politicians do lots of things in general — they do it to try and further their political interests and their careers,” Fichtenbaum said.
Yost denied this.
“There’s no political gain here for the governor, there’s no political gain for the attorney general,” the AG said. “We’re doing what we need to do to enforce the legal obligation of the board to the teachers, the fiduciary obligation.”
This is a way to pause and look at the allegations, he added.
“The lawsuit, it gives us certain tools to be able to collect information that we don’t have just by asking questions,” the AG responded. “The lawsuit is actually, in this case, not an indication of wrongdoing, but the identification of a concern and a mechanism to put some teeth in the investigation.”
“He should have thought about saying that before he decided to libel me and falsely accuse me,” Fichtenbaum responded. “There wasn’t really any, what I would consider to be, a fair, objective and impartial investigation.”
Yost did not reach out to Fichtenbaum or the members of QED before filing the civil suit.
In Fichtenbaum’s view, the STRS staff that put together the 14-page memo see reformers as a “threat.” If the board switches the system from active investing to index funding, that could cut a good portion of jobs.
He didn’t get the chance to share that with the AG.
“He never talked to me, never asked me anything before,” Fichtenbaum said. “I just found out that there were these charges that were filed.”
To clarify, no one was indicted here. He is referencing the civil lawsuit that accuses him of bribery.
Many attorneys want to make the legal request for documentation before revealing their hand, Case Western Reserve University business law professor Eric Chaffee said, defending Yost. That way, all documentation is maintained.
“We are working the investigation, we’re gonna get the facts,” Yost said. “Everybody should withhold judgment until we know what the truth is — but when the truth is out, then we will know what the next right steps are to make sure that the right thing happens.”
This sentiment frustrated Fichtenbaum.
“It’s like when you go in and you light a fire and now the building is on fire and you say, ‘Well, we didn’t mean to burn down this building,” the chair said. “Well, if you light the fire, the building is going to burn down.”
But due to the severity of the claims and the information he had already, the lawsuit was essential, Yost said.
“They’ve got a legal duty to do what’s in the best interest of the retirees,” the AG said. “This whole process is about making sure that that duty is honored.”
Yost should have thought about the impact it could have on the board members’ lives, Fichtenbaum argued.
“It has hurt me personally — my reputation, my family,” he said.
But for STRS staff, there are more important things at stake.
“It’s about protecting the assets and the investments that are represented by all these teachers’ retirement accounts,” Yost said. “They’ve worked for decades to have their retirement.”
QED
Metcalf and Tremmel reached out to him before he joined the board in 2021, Fichtenbaum said.
“We became friends over time,” he added.
You wouldn’t be able to tell they are friends because there is a lack of communication — or rather, evidence of it.
Before Yost sent out the subpoenas, we made several of our own records requests to the pension fund, asking for all communications between the board members and QED.
A small portion was returned, showing Fichtenbaum’s communication with Metcalf and Tremmel. But they weren’t over text messages or emails.
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.
“They said, ‘We use signal and this is a good way to communicate,’ and I just didn’t really think that much about it,” Fichtenbaum said after we asked him about it.
For the most part, it was used for “passing documents back and forth,” he said.
In an article he published following my story exposing his use of Signal last Friday, he defended it more strongly.
“It was recommended to me by Tremmel and Metcalf. I accepted that recommenda, on [sic] without critically appraising it, and certainly without realizing that some years in the future, a misguided plaintiff might be seeking to recover that information for his or her own purposes… I certainly did not use Signal to hide any wrongdoing on my part! I knew I was not doing anything wrong and saw no need to preserve those communications.”
Still, Fichtenbaum never meant to hide anything, he said.
“A few months ago, I was confronted with the requirement that I preserve all communication, and subsequently I stopped using Signal,” he wrote.
That conflicts with the records we obtained.
Even after Yost filed the lawsuit in May, Fichtenbaum talked to QED leaders more than two dozen times throughout the following month and a half. We sent my records request in early July, thus we received documents up until then. He had a phone call with Metcalf on July 15 on Signal.
In their communication, the chair said they had discussed QED’s proposal to “partner” with them to help allegedly restore the COLA.
“Whether it’s a good idea or not or whether QED were the people to do it, the point really is that the pension needs more money in order to restore benefits,” Fichtenbaum told me.
He referenced the allegation of giving $65 billion to QED as a “myth.”
That also conflicts with the records we obtained.
We obtained a video recording of a now-archived STRS meeting, one that shows members Fichtenbaum, Steen and former member Bob Stein proposing to change their funding system to work with QED.
“We would make available $65 billion in our inventory in order to implement this strategy,” Fichtenbaum said in the 2021 recording.
This wasn’t a one-off either. The reformers were forced to address the $65 billion on numerous occasions because the other members and STRS staff seemed flabbergasted by the proposal.
“The $65 billion number, if you want to earn $4 billion, is correct,” Fichtenbaum said.
That being said, the $65 billion wasn’t the only thing the reformers proposed.
“I think I only said $65 billion for the total implementation, but that it could start with $250 million,” Fichtenbaum added.
This wasn’t presented as an “all-or-nothing,” he added.
“If you don’t want to make $4 billion, or if you don’t think this will work, that’s fine,” Fichtenbaum said.
However, the reformers repeatedly acknowledged that the $65 billion is what is needed to get the return.
In the present day, we read these quotes to Fichtenbaum.
“How would that not be proposing the $65 billion to QED?” we asked.
“Well, because it’s not clear that, I’m not even sure in initially where the 65 number came from, but it certainly was out there,” he said, proceeding to explain that he believed that it would produce $4 billion a year. “The question I was asked was if you want to get $4 billion, how much inventory would you have to make available… That was my answer.”
He said he never said they should do it, but rather it was misconstrued.
“This is also just a misunderstanding, in a sense, what the idea is,” he continued. “I don’t know if I can really explain it.
I asked if he saw that this was concerning for pensioners. He said, “sure.”
“That’s why you would have, I think, a thorough vetting process and when you’re drawing up a contract, you have to obviously put in place protections for the pension,” he responded.
There was never a chance to explore that idea because he was immediately shut down at the meeting, he said.
“I don’t think we were really, ever even given a fair shot at trying to articulate and explain why we thought this was something that was worthwhile looking into,” he added.
On several occasions, including in an evaluation done by the board’s outside consultant, all sources rejected or highly advised not to follow QED’s project or use them.
“Are you still considering QED?” we asked him.
“I don’t know at this point,” he responded. “I think that the idea that they had about earning fees is not a bad idea.”
Right now, he said, his emphasis is on trying to work to increase the employer contribution. He wants to also work at switching to passive investment.
“But would you choose QED?” we asked again.
“I think that — would it be worth having somebody vetting that idea and looking at it?” he responded.
But if it’s a good idea, and if QED isn’t the right firm to do it, he wondered if they should look for another entity to do the same thing.
“I think we should always be looking for ways to try and make money with and take less risk for the pension.”
Moving forward
If he thinks Yost defamed him, is Fichtenbaum going to sue?
“If it were up to me and it was possible, yeah, I might, but I’m not even sure it’s possible,” he said.
This whole thing has been stressful, but he is confident it will work out in the end.
“I will be cleared of any wrongdoing,” he said. “I just want to keep on working on behalf of the members to help restore the benefits that I think they were promised and deserve.”
Follow WEWS statehouse reporter Morgan Trau on X and Facebook .
‘This article was originally published on News5Cleveland.com and is published in the Ohio Capital Journal under a content-sharing agreement. Unlike other OCJ articles, it is not available for free republication by other news outlets as it is owned by WEWS in Cleveland.
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