The strange saga of the CTPF investment in 'DV Urban'... UPC Pension Trustee candidate is the liar in discussion of the controversial investment with Substance
During last week’s House of Delegates meeting when members of the United Progressive Caucus were able to convince the delegates to endorse all five teacher candidates for the two vacancies to be elected in the November 4 pension trustee election for the sake of unity, former trustee and teacher Linda Goff said she was never a trustee when the Chicago Teachers Pension Fund voted to give $25 million to the mayor’s nephew. The deal, which later became a scandal when reported in the Chicago Sun-Times, gave pension fund business to a group called "DV Urban" beginning in 2005. The investment wound up costing teachers millions.
Chicago Teachers Pension Fund trustees Jay Rehak (above left) and Linda Goff (right) at the November 17, 2009 meeting of the pension board. Rehak had just been elected to the 12-member board in November 2009 and was attending his first meeting. Goff was defeated a year later in her bid for re-election by Jeanne Freed and Jeff Blackwell. Substance photo by George N. Schmidt.Goff even went so far as to question this reporter’s integrity when she went to the Substance web site and commented on the article that summarized the meeting. Goff said, in her comment, that both she and CTPF president John O’Brill were not on the pension board when they voted in 2005 to approve the DV Urban deal.
“Your article in Substance is very one-sided including the fact that you repeated false accusations, although you could have easily researched their validity and reported the truth in your article. You are aware the Chicago Teachers Pension Fund Minutes are Public Record. Anyone can access them through the CTPF website. Check out the minutes for the March 17, 2005, meeting on page 326. It is very easy to check things out to get to the truth. Why didn’t you?” Goff wrote.
Why didn’t I? A reporter is as good as his sources. My source happened to be the Coalition of Rank and File Educators or Core (of which I am a member).
And yes, Goff is actually correct. The 2005 minutes apparently do show that she and O’Brill, who has been a CTPF trustee for nine years, according to him, were not on the board when the vote went down. In fact, Goff is also correct to say that it was actually a current CORE member who made the motion to invest the pension money with DV Urban, which eventually lost a good chunk of it. [CORE did not exist in 2005].
But Goff is also a liar.
By 2008, the pension trustees were asked to vote again on the DV Urban deal.
And Goff did in fact vote in 2008 to allow DV Urban to continue the horrendous deal with the CTPF to keep investing money in a rat-hole filled with political corruption.
And since Ms. Goff is big on checking the records, allow me to quote the minutes right here:
“A special meeting of the Board of Trustees of the Public School Teachers’ Pension and Retirement Fund of Chicago was held Thursday, July 17, 2008. The President, Mr. John F. O’Brill, called the meeting to order at 9:43 a.m”
“ROLL CALL - Members present: Mr. Carrero, Ms. Goff, Mr. Kotis, Ms. Nelson, Mr. O’Brill, Ms. Otero,
Dr. Pilditch, Ms. Reilly, Mr. Ward—9.
Ok, so it is clear that recommended UPC pension trustee candidates O’Brill and Goff, were present at this important CTPF meeting. And what was on the agenda?
“DV Urban Commitment Period Extended - Mr. Huber reported that DV Urban has requested to extend their commitment period for an additional year. Mr. Huber recommended approving an extension, with appropriate contract changes based upon invested capital. A motion was made by Mr. Ward, seconded by Ms. Nelson, and unanimously passed, to extend the commitment period with DV Urban.”
So unanimously passed means Ms. Goff and Mr. O’Brill were there to vote on extending the disastrous DV Urban contract.
The next question then is, who was that CORE member who made the motion back in 2005 to give $25 million to Daley’s nephew with loose ties to Russian organized criminals and Ukrainian drug dealers?
That would be James Ward, a retired teacher, who along with trustee Jay Rehak, appears to be the most knowledgeable trustee on the board when it comes to asking fund managers questions about investments. Ward served as the director of the fund for a number of years before he became a trustee.
“We voted on DV Urban on the advice of the counsel in a good investment house,” Ward said by phone. “DV Urban was an individual investment that didn’t work out, but what really matters is the whole portfolio.” Ward, who is running for re-election as a retired teacher trustee on the Core ticket, told Substance that the Chicago Teachers Pension Fund has earned on average 9% for the last 20 years.
“The fund isn’t good or bad because of one investment,” Ward said. “Some don’t live up to the expectations. It happens all the time. DV Urban was quite a small investment. Of the 20 or so investments, one or two won’t work out, and that’s part of the business.”
Ward said the trustees did not know about the connection to Daley when they voted on DV Urban in 2005 (and yes, Goff and O’Brill weren’t around yet).
Ward said had he known about the connection, he would not have voted in favor.
That statement, however, is not true since Ward did indeed, along with UPC trustee candidates O’Brill and Goff, vote to extend their contract in 2008.
Ward said that extending a contract with a money manager who is losing money on the investment is not uncommon. There are a number of cases when the trustees will vote, based on the recommendation of its counsel, to extend a contract to give the manager more time to make the investment work.
In many cases it works, but in the case of DV Urban, it didn’t.
“Remember, there were pension funds that lost 20% of their portfolio in 2008,” Ward said. “We went from $12 billion, down to $9 billion. So that’s not unusual. But we were diversified enough, and no member lost anything.”
According to CTPF director Kevin Huber, their investment is currently worth about 40 – 50 percent of its value, depending on the valuation process.
So who is DV Urban?
"DV Urban" stands for Robert Vanecko, Daley’s nephew, and Allison Davis, a former Daley fundraiser.
Here is what CTPF director Huber wrote, reprinted on the District299 blog, about DV Urban when the shit hit the fan in 2007 after the Sun Times exposed DV’s corrupt money-losing deals.
“The Sun Times statement that the Fund has lost money, while factually correct, is clearly misleading. The article mentions investment losses without fully explaining that this is a 10 year investment. As with all real estate investments, CTPF does not expect an immediate return on the funds it has invested.”
Huber responded to the following report from the Sun Times, published on district 299.
“On March 17, 2005, the teacher’s pension board voted unanimously to invest $25 million, contingent on Davis and Vanecko meeting their $100 million goal. When Davis and Vanecko fell short, they convinced the teachers’ pension fund to stick with the $25 million investment, offering a greater share of profits and lower management fees.”
The CTPF told its members that the DV Urban investment was equivalent to “a $2 investment for an individual with a $1000 in the bank.”
Huber vigorously defended the CTPF’s decision to invest teacher pension fund money in the clouted money-losing firm.
“The purpose of the fund is to redevelop Chicago areas through investment in the commercial, residential, and industrial sections that may have been neglected and therefore serve as a tremendous opportunity for investment return,” Huber wrote in his letter which was reprinted on the district299 blog in 2007.
Huber further wrote that DV Urban was researched and evaluated by Townsend Real Estate Consultants, who conducted a “one-year due diligence process before recommending the investment to the trustees in April, 2005.”
At the time, Huber said, the CTPF and its trustees were not aware that Vanecko was Mayor Daley’s nephew. In September, 2005, when the CTPF discovered the relationship, they immediately notified the trustees, Huber stated.
“There was nothing unethical, illegal, or inappropriate about this investment or DV Urban as a firm. CTPF understood that Vanecko’s relationship to the mayor might cast a political shadow, however, the Board of Trustees and investment consultant determined that the potential return represented in this partnership more than justified the possible investment and political risk and moved forward with the commitment.”
But the heat was too much for Vanecko and he quit the firm while a federal grand jury subpoenaed the city’s pension funds for records on DV Urban, according to Chicagoist.
It appears so far that Urban’s biggest crime was losing money, in addition to being the mayor’s nephew — a double whammy.
But an August 29, 2011 Sun Times investigation by Tim Novak, Chris Fusco and Dave McKinney entitled “City Pension Funds Could Lose $1 Million in Deal with Daley Nephew” revealed a connection to Russian and Ukrainian mobsters.
According to the article, DV Urban put $1 million of city pension money to rehab an historic building that was bought from a Wilmette man, who bought it from the estate of Lev Stratievsky, a Russian immigrant who died in federal custody as he and his son, Boris Stratievsky, were awaiting trial on charges that they tried to launder money for Ukrainian drug dealers.
Here’s the kicker, the Wilmette man who bought the building from the Russian mafia, made $413,000 profit for owning the building for just one day, according to the Sun Times reporters.
This appears to be a part of that great investment Townsend Consulting recommended the Chicago Teachers Fund to invest in blighted city property to reap big profits.
Except in this case, the pension funds got nothing in return — while the Russian mafia, a middle man and Daley’s very own DV Urban — got the gold.
And remember, papa Daley, while recently retired, is touring Russia to attract more oligarch investors. Of course, now that half of the teachers’ pension money with DV Urvban has been partly squandered in this so-called blighted property deal gone bad, there’s always our tax increment financing dollars, just there for the asking - if you got clout, of course.
Comments:
By: Kati Gilson
UPC caucus lies on its site
If you go to the UPC caucus website it lists on of their accomplishments with Marilyn Stewart as negotiating a 5 year contract with guarenteed annual raises. That was a lie since the raise was rescinded this year due to contract language inserted by Marilyn Stewarts's contract committee. As a teacher I do not want people who provide misleading information as my pension trustee. Not only that at the HOD meeting, Goff behaved like a four year old who was told she couldn't have a lollipop. She whined like one of my 3 year olds. Disgraceful.
By: Chris Rudzinski
UPC lies...
Ms. Gibson,
I was the first HOD member who presented a motion for censure against Marilyn. I was very upset because of lack of action . At this time I am more upset because the CORE leadership creates a perception of continuation the old modus operandi. Other word the sellout continues.
The other issue is Ms. Linda Goff. In spite of her association with the UPC, I will always value her experience and honesty. You should blame Mr.Ward, not her, for the past investments.
By: Kimberly Bowsky
To Chris
We're teachers. We value each other's commitments to children, and experience that costs yourself more pain and inconvenience than it would to others is worthy of anyone's respect. Those things are not questioned here, of Ms Goff or any other candidate running.
Who ever was around during the loss of $24,000,000 of $25,000,000 should answer. But in the press, in FirstClass, at the HOD and on their flyers, two in question are saying nothing. I believe I heard Mr. Ward explain himself months ago. "I wasn't there" and "No, I didn't" aren't going to help us. We're fighting for our professional lives and livelihood. It is now merely 4 days until the election. I will look to Substance to tell me what the persons won't.
By: Kimberly Bowsky
The Whole Truth
...and nothing but.