Pension Pauses Audit

Chicago Teachers Pension Fund Votes Down Forensic Audit

By Jim Vail

Pension Fund Trustee Tina Padilla 

Chicago Teachers Pension Fund (CTPF) trustees voted down a forensic audit at the June 16, 2022 board meeting.

CORE and Members First Trustees voted against the forensic audit that would have taken a closer look at the $13 billion fund and any spending irregularities. Teacher Trustee Tina Padilla with the REAL Caucus and Retired Teacher Trustee Maria J. Rodriguez, an independent who introduced the motion, were the only two who voted in favor of the audit.

"Are we going to be fiduciary delinquent?" Trustee Padilla asked during the vote. "It should be investigated. I don't want to be delinquent."

A forensic audit can seek answers to longstanding trustee questions regarding potential conflicts of interest, fiduciary breaches and violations of law regarding its investments, said Edward Siedle, a pension expert.

Siedle wrote in an article entitled "Questions Surround Chicago Teachers Pension Fund Long, Long Overdue Forensic Audit," that it was a mystery why public pension funds were so reluctant to find out if they could be hurt by investment consultants' conflicted loyalties, which is a big concern in the industry.

A SEC investigation revealed that pension consultant conflicts of interest involving Wall Street money managers paying consultants to recommend them to pensions was pervasive and resulted in significant financial harm. 

Siedle who audits pension funds said teachers should know how safe their pension money is when it is only 45 percent funded. 

"Since the Government Accountability Office has estimated investment conflicts can result in 1.3 percent lower returns, the harm to the $13 billion pension from this single form of industry wrongdoing alone may amount to nearly $170 million per year over time and may exceed $3 billion," he wrote.

Siedle said the CTPF spokesperson refused to answer his following questions: would a BDO audit review conflicts of interest, fiduciary breaches, hidden and excessive fees and potential violations of law related to the investment portfolio. The CTPF spokesperson said the audit was "confidential." A lawyer for the fund said there are trade secrets which could cause competitive harm to a person or business. 

The CTPF had earlier voted for the first part of a 2 part phase of a forensic audit. CPS Board Trustee Dwayne Truss suggested scheduling another meeting to discuss the audit. Some stated they were worried about the cost of the audit.

A trustee said there will be a special meeting in July to further discuss the forensic audit.

Siedle said his audits were made public and revealed a lot of missing money. "Pension stakeholders deserve to know."

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