Wednesday, July 30, 2014

RI treasury Candidate Seth Magaziners misrepresentations exposed

                                                        Seth Magaziner Revealed

    It really shouldn’t be this hard to verify the claims of a Candidate for any State Office. It’s especially important that claimed performance and track record be verified for the office of Treasurer. We want a candidate who has a track record and experience and most importantly tells us the truth about their experience and record. 

   Unfortunately one candidate for Rhode Island treasurer , Seth Magaziner, has made a series of claims ,exaggerations and misrepresentations neither he nor Trillium Asset Management his employer  can explain. So we have had to put our detective hat on and get to the bottom of this.
   So because Magaziner refused to identify any particular money management function we’ve had to deduce that he was an “ANALYST” for one of several Funds Trillium runs. So we can follow this all together, at this point you should download the small/ mid cap core Fact Sheet

 Trillium Asset Management

download small/mid cap Core fact sheet  (second one down)
The investment process begins with sector allocation based on economic outlook, benchmark allocation, and risk/return expectations for each sector. Within these sector guidelines, the strategy seeks stocks with superior earnings growth prospects and environmental, social, and governance (ESG) records, but which are available at a reasonable price. A team of fundamental, sector focused analysts conduct bottom-up financial analysis including a rigorous integrated review of financial and ESG factors. The Investment Management Committee, comprised of portfolio managers and analysts, meets periodically to review and approve recommendations to the buy-list recommended by the analysts. A strategy team, headed by the lead Portfolio Manager, rebalances the portfolio on at least a quarterly basis to identify the best sub-set of names from the buy-list at that particular point of time. The team leverages an optimization process that helps monitor and control portfolio characteristic exposures while overweighting companies based on a proprietary alpha score that includes an analyst rating, an ESG rating, and technical, valuation, and momentum inputs. In this sense, the strategy is fundamentally driven, but quantitatively assisted.
Investment Performance % (as of 3/31/2014)
                                             QTR      1-YR        3-YR        5-YR      GIPS Inception
Gross of Fees
Net of Fees
S&P 1000

You can now recognize this above section of the fact sheet so readers who haven’t downloaded the fact sheet can follow along.

Each of the claims below are direct quotes from  Seth Magaziner on WPRI Treasury Debate   or
There are also multiple reports of outlandish claims at a Laurel mead debate.I don’t have a tape or transcript.

   Magaziner Quote and claim                                     Fact Finding
..."at the same time I have made strong investment returns for my clients. I look forward to doing the same for the State when I am treasurer"
There is no evidence of returns produced individually by Seth for any client at any time…
He was an research analysts on a team lead by Portfolio manager Laura McGonagle
"the biggest factor in Rhode Island under funding problem, I think, is poor investment returns. Now at Trillium, the firm that I work at in the private sector, we have outperformed the market. We have beaten the market 5 out of the last 7 years. We made north of 30% last year."

The above table from Trillium shows underperformance against the benchmark s&p 1000 for both the 3 yr and 5 yr time frame…

Last 12 month return was 27.8% for small cap not 30% and Seth  didn’t manage it

The SEC and Finra and the CFA are kind of picky Dear Seth, you don’t claim you are the manager ,when you are one of several analysts on a team that also has portfolio managers,(which you were not and you don’t approximate or exaggerate returns
“We need to elect a treasurer who has a track record of producing strong investment returns. That's why I am running for treasurer. That's what i want to deliver to the people of Rhode Island.”

Again Seth has no track record

And that’s what he would bring to the people of Rhode Island
”The most important thing we can do to bring “colas” back to the workers and strengthen the pension system  is to make strong investment returns and My track record as an investor is second to none in this race.”

Not only does he brag about a record he doesn’t have.. he then compares it to the other candidates records which he hasn’t investigated.
I have no comparable periods which to compare any of them
" I have delivered strong returns in the private sector. I will do the same in the public sector for our State."

Again he has not and there is no record of him ever managing any money or fund..he was a RESEARCH ANALYST
"I really cannot stress enough the importance of strong investment returns. The rest is really academic if you dont make good returns."
While we agree…we see no record of him managing money and producing returns of any type ..good , bad   or neutral
" The most important thing when looking at someone’s track record is how they have done relative to their peers. Now, relative to our peers at Trillium, relative to other equity funds, we have outperformed. We have outperformed while I have been there. We've outperformed in two areas that I "oversaw" . I was in charge of all of  "our" investments in financial Services and energy Companies, about $100 million in investment positions." We" outperformed in those sectors and outperformed relative to our peers
This is clearly wrong for the fund he was a part of a team of research analysts the above table shows the underperforming the benchmark over the last 3 years producing 13% vs the benchmark 14.2%. Seth claims hes been there managing money for 3 years. Outr take is that he may have been there , but he didn’t manage money and they underperformed. The end of this comment shows some new claims…he oversaw all investment in Financial Service companies and energy companies for the entire 1.5 billion dollar fund. He specifically managed 100 million in investment positions/ This role is a new revelation that again we have been unable to confirm. We don’t have any record of job title or performance.
"My record as an investment professional is unmatched in this race .I have taken on the responsibility of managing funds for church groups and non profits and retirees. And I have delivered . I look forward to doing the same thing for this state"
Its not clear what he is referring to here. Is he referring to clients of trillium that he specifically manages portfolios or money for in separate accounts? He just needs to tell us which portfolios and how they performed on their own under his management and how he performed compared to peers. It also brings up how is small cap growth analyst style fits with retirees and non profits. Is trillium or Seth placing retirees in  unsuitable investments?

 Seth Magaziner
So those are the claims and the problems with those claims listed in a table . Those statements were made in just one debate. Seth has had similar claims in ads and in print and apparently also  spoken in public at a Laurel Mead Debate. This behavior  is a real issue for Trillium as they cannot allow an employee of whatever status to purposely mislead the public and  investors about their returns and his role in those returns. Most of the Trillium  Investment professionals on the website are CFA designated and the firm compliance director is as well. I know from my CFA ethics classes that Seth has violated several areas of the code. Trillium and Seth need to apologize and fess up and not pretend that Seth Magaziner has either the experience or record he portrays.


1) Seth is a research analyst not a money manager or portfolio manager nor has ever managed money professionally.

2) Seth has zero Investment professional accreditation or licenses (series 65,66.7,CFP,CFA,ChFC etc)

3) Seth has no track record. His firm does and his team might but he does not.

4) Seth mislead about the performance of his firm in addition to making up his own performance.

5) Seth repeatedly makes investment claims to the public for which he has no evidence. Almost all money managers and portfolio managers have specific track records. Seth is a research analyst perhaps that’s why there is no record. That being the case these statement are known as lies  and that’s not a good sign for Treasurer but probably a great sign for a long political career in Rhode Island.

Wednesday, July 23, 2014

Why does Providence Financial Condition Matter?

    I have written before about the legislative mistake /gift on the last day of the Rhode Island legislative session about a month back. In order to answer the growing complaint by some observers that the media and candidates Gina Raimondo , Angel Taveras and other candidates are far too focused on Providence . The refrain goes like this  "the Governor represents the entire state of Rhode Island  not just Providence"  while that is normally true , in this particular 2014 race, the next Governor will very likely have to deal with Municipal Bankruptcy(receivership) of several towns including Providence.
    Some might say "so what I live in a town that has no unfunded liability and is well run, I don't care what happens in Providence" .  My concern and why I believe the Providence financial condition and any prescription is critical for the Governors race,  has been heightened by General assembly Activity on the last day of the last session. This  is the bill that went through:

Senate Bill No. 2332  SUB A as amended
Chapter 358
BY  Crowley, Metts, Pichardo
ENTITLED, AN ACT RELATING TO TOWNS AND CITIES - RETIREMENT OF MUNICIPAL EMPLOYEES IN CENTRAL FALLS (Provides that the state would appropriate sufficient funds to the city of Central Falls for payments to Central Falls' city retirees of seventy-five percent (75%) of their base pension benefit.)
I believe this was a gift to unions and inappropriate and dangerous.

My warning  is as follows , every State Taxpayer now is at risk for Providence going under,.It is now clearly RI  legislative intent to use taxpayer dollars without citizen  consent to bailout the worst managed Towns in Rhode Island. For example , people in Towns with a volunteer or low cost Fire Department may likely be bailing out poorly funded towns or plans  like Johnston Rhode Island Fire Pension plan for a few hundred million dollars. Can you imagine being a volunteer fireman in South Kingston and being told you have to pay for or "pitch in " Johnston Firemen  retirements of $100,000 thousand a year for life? On what planet is that fair and just?
        There fore ,it is a fair question to all gubernatorial Candidates to ask if they will veto any attempt to use state taxpayer dollars to bailout any municipality or fire district or school district in order to pay retirements of those districts.

Here is an article I wrote previously on this issue:

Friday, July 18, 2014

Providence RI vs Stockton CA in bankrupt cage match

net assets
 annual Budget
Unrestricted Governement Net Assets(liabilities)
Current Property taxes

Stockton Ca
$32 Million

Providence RI

Moodys Adjusted  2013
New Unfunded Liability
Pension + Opeb

Pension Funded Ratio


Providence RI


The facts above are meant to Compare Bankrupt Stockton California with  Providence, Rhode Island. Mayor Angel Taveras declared a Category 5 fiscal Hurricane upon taking office in 2010 from Congress man David Cicilline . In 2011 he formed a commission to fix the problem. I n late 2012 he used collective bargaining  that he said was necessary to avoid Bankruptcy.Here is a recent press release as Taveras has repeatedly claimed:

Mayor Taveras' FY2015 Budget Focuses on Key Investments, Lasting Fiscal Stability

 Delivering his Fiscal Year 2015 Budget Address to a packed City Council Chamber, Mayor Angel Taveras this evening outlined his fiscal priorities for the coming year: holding the line on taxes, making key investments in education, public safety, infrastructure, and community resources, and continuing to build lasting financial stability in Rhode Island's capital city.

Mayor Taveras recounted the steps taken to pull the City back from the brink of bankruptcy as his administration worked with the City Council to turn a $110 million structural deficit into an operating surplus last year.
"Many people whispered bankruptcy was unavoidable," Mayor Taveras said. "But we were committed to doing whatever was necessary to save our City from financial ruin, and we got to work. The work of saving Providence from bankruptcy has not been easy - we all know that; we lived through it. It has taken tough choices and shared sacrifice by every stakeholder in our City. To them I say, thank you."

This very misleading view of Providence Fiscal Status can not go unchallenged, just as Mayor Cicillines lies should not have gone unchallenged four years ago. My contention is that Mayor Taveras , David ortiz and Finance Director Mancini have been systematically and purposefully misrepresented the true financial condition of the city of Providence to voters , taxpayers and bondholders. These men should be held accountable and we have laws to take care of this inexcusable fraud on the public by Government Officials.

Municipal Disclosure has become a major focus of the SEC as well it should.Over the last several years  warnings and actual sanctions I have been delivered to Miami , Chicago and others. Recently the SEC gave a final warning that sounds awfully similar to tax amnesty programs.  Here is that May 2014 warning.
The Securities and Exchange Commission urged municipal borrowers and underwriters to voluntarily report violations, allowing them to avoid steeper penalties after an investigation.
The regulator today said it created an enforcement program providing standardized settlements for borrowers and banks that report running afoul of the law. For states and cities, it would let them avoid financial penalties.
“We encourage eligible parties to take advantage of the favorable terms we are offering,” Andrew Ceresney, director of the SEC’s enforcement division, said in the statement. “Those who do not self-report and instead decide to take their chances can expect to face increased sanctions for violations.” 

So Providence Officials should be concerned. They have literally made up an asset of $57 million dollars and claimed it was in the Pension Plan.  They did this in all four years.They signed documents claining accuracy and disclosure. I called them out on this in late 2013. In late January 2014 the Auditor Segal and Co said Providence Pension Asset accounting was not sound and told them to stop. In other words, $57 million dollars that Providence claimed were assets in the Pension Fund simply do not exist. Not only did the officials and the Mayor not react to this , they didnt tell anyone. They did not DISCLOSE to anyone. I did , over and over again and finally in June when they needed to borrow money they issued bonds. But whoops! I read that offering and again no disclosure. Kate Nagle at Go Local wrote a story about the offering and I pointed out they were violating securities disclosure law. Apparently the lawyers thought so also and a last minute addendum to the offering was made disclosing Segal's finding and report to Providence in January. Only then did Providence officials address this in Public with a dizzying display of arrogance and deception. Here is an excerpt from WPRI Ted Nesi report a few weeks back:

'An initial bond document dated June 19 didn’t mention Segal’s concerns, according to a filing with the Municipal Securities Rulemaking Board. Six days later – and following vocal public criticism from Michael Riley, a Narragansett investment manager and one-time congressional candidate – the city filed a revised version of the document with the board that acknowledged the actuary’s concerns.
In response to questions from, Taveras spokesman David Ortiz said the city revised the bond document “to clarify” what its actuary had suggested. He said counting the October pension contribution ahead of time in June “was the city’s practice for many years before Mayor Taveras took office.”
Providence’s controller was unable to say precisely which mayoral administration began the practice of counting an October pension contribution the prior June, Ortiz said. “The controller’s office confirmed that the city has made payments in the fall dating back to at least 2003, and anecdotally we believe that the practice goes back further,” he said.
Ortiz said investors appeared to have no concerns about the pension numbers reported June 25. “The bonds went to market the next day and demand was so high that the city was able to save more than $1.57 million in interest payments,” he said. “This demand and the recent ratings agency reports show that investors know the city is on the right track.” '

Not only has Taveras et al been caught lying about assets he and his associates have been massively deceptive about the Unfunded Liabilities and their liberal/ sleazy use of accounting. That is going away by law  because whether Taveras or any other Official likes it or not Providence follows GASB and GASB 68 goes into effect now. That change alone will cause Providence Unfunded liabilities to sore from the lie of $880 million to over $2 billion dollars. Has that been disclosed ? Do citizens, tax payers and bond holders know this?
   The liabilities will also have to be shown on the balance sheet taking away the off balance sheet slushfund that mayors and unions have used for years to fatten compensation and win elections. Once thios liabilities hit the sheets Providence will get squeezed due to its debt ratios and they will be forced to curtail spending , raise taxes or go into receivership. This has been my warning all along and the liars and deceivers have run out of hiding places. The jig is up and I expect that had alot to do with Taveras pressing the early ejection seat button from the burning plane that is Providence and declaring for Governor where it will take a bit longer  for the state to meltdown.
The table above shows the problems ..Stockton is yet again headed for Bankruptcy but when you compare Providence you can see that it is Providence that is up the creek. Providence property  taxes  ten times Stockton. $350 million versus $32 million. Providence population is about half of Stocktons. You don't need to be a genius to figure that taxes per citizen are 20 times larger in Providence Rhode Island than they are in Bankrupt Stockton California.
    Providence pension and OPEB debt is 2.5 times as large as bankrupt Stockton California, which  again, has half the population of Providence. How could Providence possibly be 2 and a half times more in debt with half the population and while taxing 10 times as much? Good question. One hint would be to look at the cost of services . Public Safety costs are the same in both towns despite Stockton's much larger size. Additionally annual public safety expense does not reflect the cumulative debt and cost of Providence retirement plans and lack of funding.
    After reviewing the Data in the tables and the history of deception by Taveras and Officials its very clear that not only is Providence not fixed , its in Critical Status and this administration is more misleading and deceptive about the financial condition of the city than any other city of its size in my research universe. If the SEC has a "watch list" I guarantee Taveras is on it.