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T pension fund loses $25-million bet on what might turn out to be a Ponzi scheme by former official
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Comments
wow
*face palm*
ugh.. does this mean a fare increase or cuts in service to make up the difference?
(gosh I hate to be like that but it was the first thing that came to mind)
25 Million
would buy a lot of bikes.
It would also buy
it would also buy 5 new MBTA buses @ 5Mil each (I think thats what they cost)
That estimate seems very high
That estimate seems very high, like an order of magnitude high. Do you have a source for that $5M figure?
No I don't
Just a guess.. I remember reading somewhere they cost around a 2mil or something. no don't ask me for a link, I don't have it.
Maybe it was a green line trolley that was that much...
(and folks, if you're going to nitpik about this, seriously.. move on.. it really doesn't matter at all..)
Bikers magazine
The Bus edition.
It would buy 27 of the diesel
It would buy 27 of the diesel/hybrid buses: http://mbta.com/about_the_mbta/news_events/?id=19288&month=&year=
$900k for a 60-foot diesel
$900k for a 60-foot diesel-hybrid, or $250k for a standard clean-diesel bus. Guess which they chose?
Spend so much in the capital budget that you don't have enough money to actually run the buses and trains -- it's the American way.
Unlike the Commonwealth
Capital expenses, operating expenses, and pension expenses do not come from a common pot of money.
They are also not frangible.
But you know that, right? Right?
Mr Mulhern start explaining
Mike don't you believe the pensioners deserve an explanation of where the money went? Time to open up the books and see how many phony disability pensions you authorized to your close friends.
Sounds like…
An argument to end pensions and get new employees on standard 401ks like the rest of us and at least that way if someone is going to gamble with their retirement it's the employees themselves and not someone so easily selling snake oil.
Also Adam, having serious issues with your site in embedded WebKit views when trying to type into forms (eg RSS readers etc) on iOS 7. Do you have any weird Js screen positioning or field focusing stuff going?
Well, it's a catch 22. The T
Well, it's a catch 22. The T needs those new employees' contributions to keep the system going, but years of underfunding pension contributions for employees "grandfathered" into the old system, thanks to overaggressive, short-sighted union tactics, have made the system unsustainable. So, unless you have a generation of workers who both contribute to a system from which they'll never benefit and contribute to their own deferred-compensation plans (that's the public-sector's version of a 401(k) you really can't do this.
This guy was a terrible GM
This guy was a terrible GM and responsible for the Silver Li(n)e/A-line destruction debacle. He's a gift that keeps on giving.
so....
This is pretty much the plot to The Other Guys? (except those were police retirement funds) Maybe Mark Wahlberg can save the day just one more time?
Karl E. White needs to go to jail
Let’s hope there’s a real investigation and that if it’s found that he misled the Commonwealth or abridged his fidtuary responsibility to the Commonwealth, that he goes to jail for a good long time along with whoever authorized this scheme.
Hedge funds are the casinos of the investment world; a few get lucky and strike it big on returns, but looking over the returns and fees 99% of them under preform even normal exchange funds. They're a terrible ROI, they have a terrible track record, and at worst they end up becoming scams when high rolling Investment Managers get stuck between a rock and a hard palce.
Sadly too many underfunded and over leveraged municipalities have bought into the scam with promises of balancing their ever increasing pension obligations. Sad to see the MBTA the victim of the same crap peddled so Mr White could get a leg up with his new bosses.
Take it easy anondeuce
First - disclosure - I know Mr. White casually - had an office on my floor. Just hallway pleasantries - seemed like a decent enough guy.
Sounds like he was the salesman for lack of a better word. VERY likely he had absolutely no idea what was going on with the money - although as a seasoned investment professional I'm sure he saw and used the performance numbers of the fund in his pitches so he maybe should have suspected something if the numbers got too out of whack when the markets were declining. The guy is definitely entitled to the benefit of the doubt - for now.
Hedge funds can have a place in a portfolio - but any time you are dealing with private placements with limited disclosure - hard money lending, hedge funds, private equity, venture etc. you have to be EXTREMELY careful and willing and able to follow-up on this stuff which is why I won't touch it with a 10 foot pole for my clients. However, if you are running a large pension fund with hundreds of millions or even billions - you probably do need a smattering of this type of investment - not for the upside - but to protect your downside. The returns are often low in isolation - but mix these in with a diversified portfolio and if you are lucky, good or both - you probably won't enhance your returns much - but you can likely reduce your losses in bad markets which can be very important for a pension fund if they need to tap cash when the other markets turn south. NOT having to sell something when it takes a hit can be a huge advantage by either riding out the storm and occasionally buying the things that have taken the biggest hits.
Oh, well in that case
If someone can exchange hallway pleasantries with Stevil, then he can't be a criminal.
Not even if he abuses his public position of trust to funnel money into a ponzi scheme he personally benefits from, then splits just before it falls apart, crying HOOCOODANODE?
Yes, the evidence seems to indicate that even a pleasant man can be a grifter. Heck, it's quite doubtful that someone could be a successful grifter without being pleasant in person. How else do you convince people to give you money on hare-brained premises?
Karl White doesn't need to be incarcerated. He just needs to be arrested and charged with fraud. Bail set at, I dunno, 25 million?
Evidence
The guy left the company in 2008 in the middle of the financial crisis. Evidence of wrongdoing doesn't appear to have come up until 2-3 years later. It's possible there was some funny business in 2008 - but there is no evidence of that. Do you know something we don't about why this guy should be arrested?
Perhaps you are confusing Mr. White's role with Mr. Fletcher's? It appears Mr. Fletcher had been quite successful in prior times, but had gone over to the dark side after 2008- and after Mr. White had left. There is absolutely no evidence that Mr. White knew of any problems or even that the investments had problems while Mr. White was an employee of the firm - although that certainly doesn't exonerate him and an investigation is warranted.
I would, however, be far more concerned with the people at the MBTA pension fund and what they were doing to monitor this. At a MINIMUM, especially after Madoff, they should have insisted that the assets be held at a reputable third party custodian - like State Street, Fidelity, Charles Schwab etc. If at some lesser known firm (some "exotic" assets can't be custodied at these firms), the custodian should have had a third party audit and it should have been reviewed by someone at the MBTA. You also need to monitor the strategy and be sure the current returns are not abnormal for the strategy - which is a red flag - there's no such thing as a truly "unique" strategy - and there are usually some type of benchmarks to compare with - if everyone's losing 10% and your guy is making 10% - that's a red flag. I'm guessing good pension funds have a host of other controls, none of which were apparently present at the MBTA.
I never said the guy was innocent - just saying there is scant evidence to say he did anything wrong and I think the reporting in the Globe is highly biased.
Tax funded pensions
Are all ponzi schemes.