CTPF Watchlist

Chicago Teachers Pension Fund Starting to Ask Questions

By Jim Vail

Trustee Victor Ochoa wants more accountability for money managers.

An interesting discussion was taking place when I tuned into the Chicago Teachers Pension Fund (CTPF) board meeting in December.

It revolved around holding the Pension Fund's money managers accountable, especially when their performance levels are low, and they do not represent minorities.

"We're here to make money to get our pensions," said Teacher Trustee Victor Ochoa. "We want to make sure it's there when we retire."

CTPF has a watch list of certain money managers including Ariel Investments and Lazard who are losing money for the fund and have been on the watch list for a while. While some Trustees support Ariel because it is a minority-owned local investment company, Ariel President Melody Hobson who may become the next CEO also sits on the board of directors of Starbucks which has been behind a brutal union-busting campaign that the Chicago Teachers Union called out. 

She has also suggested that if she takes over the company they could move out to San Francisco. 

The concern was raised about minority money managers that are not in compliance with the EEOC policies. While certain managers can claim they have a certain number of minority employees, where do these employees work. Are the minority employees just maintenance workers or secretaries versus higher up level investment managers.

"The people on this watch list are a concern to me and they don't have diversity," Ochoa said. "Then you question that and they don't have an answer." 

CTPF has invested a lot more money with Lazard, who is not minority-owned, versus Ariel, who is minority-owned. 

There has been talk that the Pension Fund will take action at its next board meeting concerning the watch list.

According to Crain's, Ariel has hit rock bottom in year to date performance. 

Ariel became a leading black-owned investment company and one of the few significant mutual fund firms from Chicago. The current CEO John Rogers said he would like Melody Hobson, who is the chairman of Starbucks Board of Directors and married to Star Wars Founder George Lucas, to be the next CEO. 

Ariel has powerful Chicago Machine connections to the unions whose pension money they are investing, and despite prior poor performance, they continue to hang on. Former Chicago Public Schools Chief Arne Duncan who declared war on the public schools and the CTU with his turnaround model sits on Ariel's Board of Directors.

The topic was "CTPF Discussion of Investment Manager Diversity and Brokerage Goals" at the Dec. 15 board meeting. 

"We reviewed our policy and the watchlist, and failure to make goals is considered a factor when rating a manager," Chief Investment Officer Fernando Vinzons told the Board. "This could lead to termination."

However, Vinzons was careful in the words he used, stating they would use "a little bit of of punitive action."

"We look at everything, what actions we can take for managers on the watch list," he said.

Members First Teacher Trustee Victor Ochoa spoke up forcefully in holding money managers accountable.

"I think this is something we have to enforce, we can additionally talk to AFT and put our heads together, we don't want people to remain on the watchlist indefinitely," he said. "That's up to us to say enough is enough. We don't want to endanger our fund. I am a fan of democracy as messy as it is. I think we did things right to get rid of carbon fuels. But we don't want to hurt ourselves. We want to make sure they have diversity at all levels." 

CORE Teacher Trustee Quentin Washington agreed.

"If I could piggy back on that, there is a lack of diversity and even those people are on the watch list," he said. "It concerns me that people on the watch list and they don't have diversity. We're here to make money so we can get our pensions."

VP Trustee Jaqueline Price-Ward said she is happy to hear the new trustees elected talk about the importance of having minority money managers, but also holding people accountable.

"We have got to hold people accountable," she said. "I think it's insulting and disrespectful managing our money and not meeting diversity, but your'e grinning and smiling at us. We have to enforce. If we cut off one or two heads everyone will get in line. I'm so glad to see new trustees on the board get this."

The one trustee who preached caution when looking closely at performance and minority status was former UPC now CORE Retired Teacher Trustee Mary Sharon Reilly. She said she does not want to see anyone get fired. She also noted that the Pension Fund does not see the managers report out like they used to in the past so that the Fund is kept up to date.

It's one thing to talk the talk. We will have to see how these trustees vote and whether they are serious about removing money losing managers from a Pension Fund that is only about 45 percent funded and has been losing a lot of money lately.

Top 5 Books

Second City Teachers Top Five Books of the Year

By Jim Vail

Now that the newspaper industry is practically dead, luckily there are still great books to read.

We at Second City Teachers would like to recommend to our readers our Top Five books of the year. Only one book was actually published this year, the rest are oldies but goodies that we discovered and highly recommend. 

These books focus on public schools and the politics that swirls around them. A couple were written about the history of the Chicago Teachers Union and the Chicago Public Schools and one was written by a fantastic writer who spent a lot time trailing a group of refugee students at a North Side High School.

Happy Holidays everyone!

No. 1 - The Chicago Schools: A Social and Political History by Mary Herrick, 1971 

I finally learned about the history of the Chicago public schools and the Chicago Teachers Union when dynamic high school teacher Ed Hershey recommended a few fantastic books about our history. This book gives a fascinating history going back to the beginning of Chicago and how the public schools were formed. Mary Herrick did incredible research to tell the stories behind amazing heroes who helped build up the Second City public schools, including William Wells (Wells High School), Albert Lane (Lane Tech High School) and Ella Flagg (Ella Flagg Elementary School). This is a must read book for any teacher or follower of the Chicago public schools to know our true history. You can find this book in the library or purchase it online. We wrote a review in our Oct. 3, 2022 issue.

No. 2  - Teachers and Reform: Chicago Public Education, 1929 - 1970 by John Lyons, 2015. 

This is the best book I have read so far about the history of the Chicago Teachers Union. The research goes back to the early days when the Chicago Federation of Teachers led by Margaret Haley was first formed and then transformed into the Chicago Teachers Union by the 1930s. The story of John Fewkes is one that is not well known in our union. He was the first CTU President who was a reformist militant who helped led protests against the city leaders for teachers to get paid after the Great Depression cut salaries dramatically. He also led a very conservative and anti-communist union that did not embrace the Civil Rights movement like their brothers and sisters in New York. But his fight and story is still powerful. Second City Teachers featured a 3-part series based on the book in our July 2022. issues.

No. 3 - Reds at the Blackboard: Communism, Civil Rights and the NY City Teachers Union by Clarence Taylor, 2011 

This is yet another fascinating history of the NY Teachers Union and the influence of the Communist Party that helped make it the leader in fighting racism and demanding better conditions for the poor inner city students. It also broadened our scope of the McCarthy Red Scare communist witch hunt that included the NY Board of Education and its purging of activist teachers in the NY Teachers Union who were at the forefront of fighting racism in the schools.

No. 4  - A Fight for the Soul of Public Education: The Story of the Chicago Teachers Strike by Steven Ashby and Robert Bruno, 2016. This is a must-read book for a contemporary history of the powerful Chicago Teachers Union who led the first teachers strike in 25 years in 2012. The authors are history professors who did a nice research job and filled in the blanks about how the teachers union got into the mess of privatization with Mayor Richard Daley's Renaissance 2010 and Barack Obama's Race to the Top - all hell bent on destroying the teachers union and public schools via corporate reform. The question I had on my mind was how in the hell did the Chicago Teachers Union just give up all its hard-earned union rights and allow this madness to nearly destroy us all? The authors pinpoint the time when CPS lawyer James Franzek on behalf of the business class threw a few silver coins at the union leaders to look the other way as collective bargaining and pension payments exited and non-union charter schools flooded in.

Truly disgusting!

No. 5 - Refugee High by Elly Fishman, 2021. 

This is the best book I've read about the lives of student refugees in a Chicago Public High School. Fishman wrote a riveting account of several students who hailed from Syria, Burma, Guatamala and the Congo and how they had to navigate the gangs, the violence and learning English. She followed the students' footsteps everywhere to give us the inside scoop of what life is like for the immigrants in a rough and tumble Sullivan High School on the North Side. These are the lives we as teachers need to know about, because what happens in a student's home, affects what happens in the student's classroom. 

Douglass Park

CTU Delegates Pass Resolution to Denounce Hostile Concerts Takeover of Douglass Park

By Jim Vail

The Chicago Teachers Union (CTU) Delegates passed overwhelmingly the Resolution to Demand the City of Chicago and the Chicago Park District Stop Allowing Douglass Park to be Used for Large, For-Profit Festivals at the Dec. 7 House of Delegates meeting.

The Resolution comes on the heels of three music festivals - Riot Fest, Summer Smash and Heatwave - takeover of the beautiful West Side park that kicks out the community for a quarter of the summer season.

The for-profit festivals have forced youth soccer leagues in Little Village to relocate, increased traffic that mandate longer commute times for residents and noise levels that upset the community. The festivals also hurt local businesses because the concert goers purchase food and trinkets inside the roped off park and damage the park that already suffers from disinvestment and chronic flooding. They also cause disruption to Mt. Sinai and St. Anthony Hospitals that are located next to the park.

"Resolved the Chicago Teachers Union demands that the City of Chicago recognizes that Douglass Park should remain open to the public, and we join the many community members who demand that Douglass Park and all BIPOC communities no longer be used to host large for-profit music festivals and instead be placed in designated concert venues. No privatization of public lands."

The resolution also advocated for economic development in North Lawndale and Little Village where the park is located. 

A group of activists surrounding the park have worked hard over the years to bring light to the city about the takeover of their beloved park. However, Riot Fest and others have paid off the local aldermen to support the private concerts even though thousands of people in the community have signed petitions to remove the concerts.

The CTU Resolutions hold a lot of weight politically. When we passed a resolution asking that the Celebration of Columbus Day be changed to Indigenous People's Day, the Chicago Public Schools took note that the teachers were in favor of changing the name and thus changed it.

The United Working Families - the political arm of the CTU - had earlier passed a resolution in favor of demanding Riot Fest and others be relocated from Douglass Park.

However, the fight continues at Douglass Park. Organizers say that they will challenge the election of local 24 Ward Alderman Monique Scott who supports the Riot Fest. The Mayor named her to replace her brother who also supported the Riot Fest. Ward  12 Alderman George Cardenas had accepted a $40,000 donation from Riot Fest and thus did not hold one public forum to discuss the concert that prevents the community from accessing their park for almost a month.

While the news of the privatization of Douglass Park hit the local and even national news, and the Chicago Park District pledged to review all private venues proposed in parks across the city, there is still no word whether or not these concerts will continue. 

One delegate spoke against the resolution stating that the CTU should not be involved in matters that are outside the schools. However, the CTU has taken up many social justice causes, including advocating for Black Lives Matter, environmental justice and affordable housing because these issues affect the students and their learning in the schools.

Who Stole My Pension?

Who Stole My Pension?

Book Review

By Jim Vail 

This is the book every teacher, retired teacher or wannabe teacher should read if they want to know if their pension is safe.

Who Stole My Pension was written by Robert Kiyosaki of Rich Dad Poor Dad fame and Ted Siedle, who successfully sued public pension funds and writes how Wall Street money managers are ripping off the pension funds.

These are the questions we need to ask about our Chicago Teachers Pension Fund:

--  Pensions are becoming less transparent at the behest of Wall Street

--  Pensions are gambling on high-risk, high-cost investments more than ever

--  Pensions routinely lie about the investment fees they pay, their investment performance and funding levels

--  Pension are not fully audited by independent accounting firms

We cannot trust the government to protect our defined benefit pension in which we work a number of years and are guaranteed a pension payment each month (roughly 2.2% of salary earned each year on the job). Ted writes that the Pension Benefit Guarantee Corp. that is supposed to police pensions instead has a private agenda to assist corporations. He noted the federal agency has no capacity to audit pensions.

His 2011 forensic audit of the bankrupt US Airways pilots pension revealed profound omissions, conflicts of interest, hidden and excessive fees, and potential violations of law with dozens of firms who do audit, actuarial, investment consulting, and money management.

Why is the Chicago Teachers Pension Fund dragging its feet on conducting a forensic audit that would probably reveal the same things?

The Teamster Alliance for Pension Protection key finding was a massive $767 million gamble on high cost, high risk, illiquid and opaque "alternative' investments that cost $400 million. It too like CTPF was only 45 percent funded.

Illinois is one of the worst offenders of short changing its public pensions. But Ted writes that not enough money in the pot is not the primary cause of pension problems.

The authors predict that the next big bailout with taxpayer money will be the pension 'too big to fail' banks selling fake, toxic assets to the world. The bailout will be in the name of saving pensioners retirements, but really just a repeat of bailing out corrupt Wall Street.

In the US the combined value of pension plan assets held by state and local governments in 2018 was over $4 trillion. overseen by trustees of laymen who lack knowledge in investments.

CTPF is overseen by teachers and retired teachers with little investment background.

“Fortunately there are globally recognized experts in pensions and investments who offer sound advice on how pensions should be prudently managed.”

Public pensions have failed to meet overly optimistic return assumptions over the past 2 decades and dug themselves into deepening funding hole as they allocated ever greater assets to highest cost, highest risk ever devised by Wall Street - hedge and private equity funds.

Second City Teachers is hearing reports that the Chicago Teachers Pension Fund is heavily invested in high-risk, high cost private equity funds. The question is why amidst our crisis!

"In fact, every forensic investigation I've ever undertaken has exposed that the nearer a pension is to insolvency, the higher the fees and the greater the risks the pension takes on."

Is the Chicago Teachers Union paying 'obscene fees to Wall Street and moving further away from transparency?’

Every teacher and pensioner should be able to ask a simple question, like how much do we pay these private equity funds to manage our pension money.

While CORE has boasted that their trustees have kicked out hedge funds, they still work with private equity funds who are not much different.

"The workers should tell the pension fund board to refuse any secrecy agreements with investment firms. There is no justification ever for secrecy agreements."

Siedle writes that you need to know the assets (stocks, bonds, private equity, etc) in which your pension is invested, the names of these firms managing the assets, how much the firms get paid and how well they performed.

"To protect your retirement security, you need to pay particularly close attention to your pension's investments in these risky "alternatives" because these deals are riddled with abusive provisions amounting to a license to steal - from you."

"In summary, less transparency in pension results in less accountability and greater looting."

If Warren Buffet says, “It’s a lopsided system whereby 2% of your principal is paid each year to the manager even if he accomplishes nothing .. and additionally 20% of your profit is paid to him if he succeeds," then it can’t be good if our beloved Chicago Teachers Pension Fund is doing this.

Pension overseers are supposed to be on the pensioners’ side, not cuddling up to investment firms. That is a question I had when I noticed how poorly Ariel Management performs for the CTPF, yet some of our trustees continue to support them. Why must our trustees take exotic trips to sales conferences?

A 2014 internal review by US Securities Exchange Commission (SEC) found that more than half of about 400 private equity firms charged unjustified  fees and expenses without notifying investors.

Senator Elizabeth Warren has even proposed new regulations on the private equity industry to end "legalized looting" by "vampire" investment firms that take over troubled companies. 

The CTPF should seriously consider index investment management services that can be purchased for 1 basis point (one one-hundredth of a percent) or even for free.

“Active managers, who attempt to beat the market by stock picking, may charge pension fees up to 120 times greater (1.2 percent). Private equity may charge up to 9 percent or 900 times greater than indexing. Paying higher fees negatively correlates to superior investment performance. Overwhelming majority of active managers fail to outperform market indexes over time net of fees. The higher the fees, the greater the drag on investment returns.”

Siedle said shifting from passive investing to active investing is a terrible idea. He recommends all of us writing the following letter to CTPF:

“Please disclose all fees, expenses and other costs related to pension investments, but not limited to asset based investment advisory fees and performance or incentive fees as well as investment advisory fees. Please provide this comprehensive fee and expense information by manager and for the pension as a whole.”

In countless investigations, Siedle said he has proven that the fees pensions disclosed to the public as just the 'tip of the iceberg,' most often due to complexity, and multiple levels of hefty fees which are not fully disclosed to pensions or participants.

We should be suspicious when the CTPF newsletter gives glowing reports about beating their benchmark, because you need to compare the pension to relevant benchmarks like S&P 500, not their own benchmarks.

About 60 percent of all corporate pensions in the US are not audited or they pretend to audit, or they have limited scope audits but then disclaim responsibility for fraud or mismanagement.

Here are some more eye-opening takeaways from this must-read book:

1. World is faced with retirement crisis

2. Pension benefits promised are in danger

3. People overseeing your pension are not knowledgeable about pensions or investments

4. Wall Street firms hired to manage pension money are profiting at pensioners expense (aka looting)

5. You can and should get involved in scrutinizing the pension for your retirement security.

We need to take action and start asking the Chicago Teachers Pension Fund these very same questions!

DNH Removed!

Former Football Star Coach Removed from DNH

By Jim Vail

Former Dunbar Football Star Coach Freddie Lesser who was unfairly placed on a Do Not Hire List 20 years ago was successfully removed from the black list.

“Please be advised that the Do Not Hire designation (DNH) has been lifted from your file,” stated the Dec. 9 letter from the Chicago Public Schools Office of Administrative Hearings. “As a result, I am pleased to inform you that you are eligible to reapply for employment with the Chicago Public Schools.”

The letter was written and signed by Jennifer Rogers, Executive Director of Administrative Hearings.

Lesser contacted Second City Teachers just a month ago to complain that it was taking a long time for him to get his DNH removed. We then ran his incredible story and posted it on social media on Nov. 30.

One week later CPS announced their decision to remove him.

The power of the media!

“It feels good,” Lesser told Second City Teachers. “Thank you!”

His story was one of many outrageous stories we have featured at Second City Teachers about wonderful teachers unfairly placed on the DNH List.

You could call it the equivalent of someone serving a prison sentence for a crime they never committed.

In Lesser’s case, it was a clear case of mistaken identity that was easily explained. Except, it did not turn out that way.

A provocateur accused him of being assaulted by Lesser at their football practice. Even though his co-coach admitted to everyone that he was the one who threw the punch to defend Lesser, and even though the courts agreed and threw out his case, the Chicago Public Schools still unfairly labeled him guilty and put him on a Do Not Hire List.

Lesser was not only a star football coach at the top-rated Dunbar High School at the turn of the millennium, he was also a star graphics design teacher who had a waiting list of a thousand students to take his award-winning class.

Lesser said he is not sure he wants to work again in CPS, but he did want to clear his name.