Ohio AG files suit to remove 2 from teachers' pension board. Board stands by members

• State law allows the attorney general to bring a civil case to remove public pension board members if they failed to act in the best financial interest of the system
• Last week, Yost opened an investigation into whether some board members may have violated their fiduciary duty
• Gov. Mike DeWine sent documents to Yost and other state agencies that allege that STRS Ohio is facing a "hostile takeover" by private interests

Ohio Attorney General Dave Yost filed a lawsuit on Tuesday to remove two board members of the State Teachers Retirement System, saying they breached their fiduciary duty to protect the pension fund.

Yost filed the case in Franklin County Common Pleas Court just before the 11-member board began its monthly meeting.

Yost is seeking removal of Wade Steen, who is the governor's appointee to the board, and retired Wright State University economics professor Rudy Fichtenbaum.

But the lawsuit did not shake the board's confidence in Fichtenbaum. Instead, the board voted 6-5 to remove teacher Dale Price as chairman and install Fichtenbaum.

STRS Ohio oversees about $90 billion invested on behalf of 500,000 teachers and retirees. The system is facing historic turbulence as control of the board tips toward "reformers," its executive director is on paid administrative leave and Aon, a national consulting firm, opted to cancel its contract early.

Last week, Yost opened an investigation into whether some board members may have violated their fiduciary duty. State law allows the attorney general to bring a civil case to remove public pension board members if they failed to act in the best financial interest of the system.

Yost argues in the new lawsuit that Steen and Fichtenbaum as well as two former board members, Yoel Mayerfeld and Bob Stein attacked STRS and advocated for QED, a relatively new investment firm.

Yost said in the lawsuit that Steen and Fichtenbaum have "backdoor ties" to QED and have tried to steer $65 billion to QED.

Steen on Wednesday questioned whether Yost conducted a fair and thorough investigation in the five days between when he received documents and then filed the lawsuit. He also said that the lawsuit complaint is full of defamatory statements against him.

Steen said he never suggested earmarking $65 billion for QED to manage.

Fichtenbaum declined to comment on the lawsuit or other matters at the board meeting but pointed reporters to a statement he published online. It said in part: "I have done nothing wrong and will continue to fight for the interests of STRS members."

Anonymous memos trigger big decisions

Last week, Gov. Mike DeWine sent documents to Yost and other state agencies that allege that STRS Ohio is facing a "hostile takeover" by private interests. The records included a 14-page anonymous memo that details how a handful of STRS board members have worked in concert with founders of QED and the Ohio Retirement for Teachers Association.

The retiree association called the anonymous memo an arrogant and shameful effort by STRS employees to preserve their jobs. "For years STRS Ohio has failed our teachers while enriching STRS staff. This is not a hostile takeover, it is a teacher takeover through fair and free elections."

Another anonymous memo prompted the board to put the pension fund's executive director, William Neville, on paid leave in November. Investigators hired by Yost's office said in February that the allegations against Neville were unfounded.

Rather than bring Neville back, the STRS board delayed making a decision until May 17. The board met in executive session on Wednesday to discuss personnel issues and other matters.

STRS hired Neville more than 19 years ago, named him chief legal officer in 2018 and appointed him as executive director in 2020. His contract runs through June 2027.

Neville, who continues to be paid is $318,000 salary, hired a civil litigator, Rex Elliott.

Pension power struggle

Over the past few years, activists have been mounting a board takeover, electing members who are more sympathetic to their complaints about transparency, senior leadership, investment staff bonuses, and the suspension of the cost-of-living allowances for retirees.

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 and Ohio General Assembly and the director of the Department of Education and Workforce.

Former Republican Gov. John Kasich first appointed Steen. DeWine reappointed him but replaced Steen with G. Brent Bishop in May 2023. Steen sued to get the post back. Bishop stepped down for personal reasons. DeWine then appointed Brian Perera. In April, Steen won an appeals court ruling that put him back on the board.

Steen's term ends in September and DeWine won't reappoint him.

On May 11, another reformer, Michelle Flanigan, easily won election.

The reformer faction holds a majority of seats now and will continue to have the upper hand when Flanigan starts her term in September.

The divide on the board was on full display Wednesday when members spent more than 45 minutes arguing over the wording of minutes and how it could replace the board chairman and vice chairwoman.

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.