This year, an estimated four million Americans will reach retirement age. After decades of work and careful saving for their golden years, retirees rightly expect to live comfortably off of their hard-earned savings. That is what many former Ohio educators and school staff expected when they retired. Unfortunately, private equity firms ransacked their pension and left teachers without the cost-of-living adjustments they desperately needed. Without more transparency and accountability for bad actors in private equity, your retirement savings could be at risk.
The State Teachers Retirement System of Ohio (STRS) pension plan serves as the primary vehicle for Ohio educators’ retirement savings. More than 500,000 Ohio teachers, administrators, and other school staff pay into the fund throughout their careers with the expectation that they will be able to live comfortably off of their earned benefits later in life. However, beneficiaries suddenly stopped receiving cost-of-living adjustments in 2017, and like any good teacher, they started asking tough questions.
An analysis of the fund by the Ohio Retired Teachers Association discovered the fund was paying high management fees to private equity managers entrusted with their investments, and that “billions have been squandered” on fees and poor performance. Sadly, this story is all too common. Other public servants have also suffered the same fate at the hands of bad actors in private equity.
The Maine public employee pension lost nearly $22 million of retirees’ savings as a result of a bad investment with a California-based private equity firm called Paine Schwartz Partners, which allegedly misrepresented the performance of its largest holding, a large peach farm that the firm drove into bankruptcy.
In another case, Blum Capital and Golden Gate Capital took hundreds of millions out of Payless ShoeSource before forcing it into bankruptcy. Vice Media was driven into bankruptcy after the private equity firm TPG took over the once-thriving company.
These stories should serve as a warning for the American public and investors who are considering doing business with private equity firms. Without proper due diligence and transparency, we will inevitably see more innocent investors lose millions to private equity firms like those behind the Ohio and Maine pension losses.
To be sure, there are plenty of ethical private equity firms out there. Nevertheless, we must hold the bad actors accountable for their poor behavior, which has serious consequences for hard-working Americans. Ohio teachers and Maine pensioners may be forced to go back to work to cover the lost income that they deserve. It’s a shame, because nobody should have to spend their golden years worrying about losing their life savings to private equity vultures.
It’s time for all of us to hold these private equity firms accountable.
Michael Whitten
Retired Teacher
Circleville, OH
