July 26, 2020 Office of Regulations and Interpretations Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor 200 Constitution Avenue NW Washington, DC 20210 Attention: Financial Factors in Selecting Plan Investments Proposed Regulation. Document Citation: 85 FR 39113 Page: 39113-39128 (16 pages) CFR: 29 CFR 2550 RIN: 1210-AB95 Document Number: 2020-13705 Dear Sir/Madam: We understand that the U.S. Department of Labor announced a proposed rule that would “update and clarify” the Department of Labor’s investment duties regulation. According to the news release issued announcing this proposed rule, “Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan,” said Secretary of Labor Eugene Scalia. “Rather, ERISA plans should be managed with unwavering focus on a single, very important social goal: providing for the retirement security of American workers.” We are writing to provide comments on this proposed rule. Background The core idea behind the work of William Michael Cunningham at Creative Investment Research is the recognition that mainstream market-based solutions do not maximize social return. This leads to an underappreciation for the value of human life. We develop market-based innovations to counter this. The elevation of “Chicago-school” economic theories has led to a focus on celebrity and money worship. These magnify and worsen the misallocation of economic resources identified above. Our development of social return investment technologies and the subsequent rise of social entrepreneurs are the methods we have used in this effort. We have radically augmented the development of new investment theories that are the key, we believe, to a higher level of human development. [email protected] 1 While we continue these efforts, unfortunately, the nature of incompetence, discrimination and exclusionary practices based on race are so prevalent in the finance and investing industry that it translates into the type of proposal we are commenting on here. As we warned (see below) in 2003, 2006, 2010, 2011, 2012, and 2016: ”there is a significant and growing, risk that our (market) system will simply cease functioning.” Unless there occurs some undefined miracle, our 2020 forecast indicates this is now certain. Track Record On July 3, 1993, WMC wrote to SEC Commissioner Mary Schapiro to notify the Commission about a certain, specific investing scam, the "Nigerian letter scam." A timely warning was not issued to the investing public, members of the public were damaged, and the SEC launched retaliatory regulatory actions against Mr. Cunningham. On June 18, 1998, Mr. Cunningham opposed the application, approved by the Federal Reserve Board on September 23, 1998, by Travelers Group Inc., New York, New York, to become a bank holding company. In October 1998, in a petition to the United States Court of Appeals (Case Number 98-1459) concerning the Travelers Group Inc./Citicorp merger, Mr. Cunningham cited evidence that growing financial market malfeasance greatly exacerbated risks in financial markets, reducing the safety and soundness of large financial institutions. On June 15, 2000, Mr. Cunningham testified before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises (GSE’s). He suggested that GSEs Fannie Mae and Freddie Mac be subject to a Social Audit. A social audit is an examination of the performance of an enterprise relative to certain social return objectives. It includes a review of ethical practices. Had the GSE’s been subject to this audit, certain flaws in their operation, including ethical shortcomings, would have been revealed earlier, in a better market in which to make corrections. In 2001, Mr. Cunningham participated in the first wide scale home mortgage loan modification project. The Minneapolis-based effort helped 50 families victimized by predatory lending practices. See article, Property Flipping Remediation Yields Investment-grade Security. On December 22, 2003, we warned regulators that statistical models created by the firm using the proprietary Fully Adjusted Return® Methodology signaled the probability of system-wide economic and market failure See Page 6. In 2005, Mr. Cunningham served as an expert witness in a case against PMI Group, Fairbanks Capital Corporation, Select Portfolio Servicing, US Bank National Association, as Trustee of [email protected] 2 CSFB ABS Series 2002-HEI, et. al. The case sought to hold Credit Suisse First Boston, Fairbanks/SPS, Moody’s and Standard and Poor’s, US National Bank Association, and other parties legally responsible for supporting and facilitating fraudulent subprime lending market activities. Had this single case been successful, we believe the credit crisis would have been less severe. On April 11, 2005, Mr. Cunningham testified on behalf of investors before Judge William H. Paley III in the US District Court for the Southern District of New York at a fairness hearing regarding the $1.4 billion dollar Global Research Analyst Settlement. On February 6, 2006, we again warned regulators that statistical models we created using the proprietary Fully Adjusted Return® Methodology confirmed that system-wide economic and market failure was a growing possibility. We stated that: Without meaningful reform there is a small, but significant and growing, risk that our (market) system will simply cease functioning. This is, of course, exactly what happened. See pages 2 and 8. On September 28, 2008, we wrote to Richard Shelby, Ranking Member, Committee on Banking, Housing and Urban Affairs, United States Senate, to comment on the financial crisis rescue plan then under consideration by the US House and Senate. In the appendix, we provided a four step plan for dealing with the crisis. On December 9, 2013, Mr. Cunningham filed a "Friend of the Court" brief in the United States District Court, Central District of California. The Court recognized him as an interested party in a case concerning an action that the U.S. Department of Justice, acting on behalf of the United States of America (Plaintiff), brought against McGraw-Hill Companies, Inc., and Standard & Poor’s Financial Services LLC, et. al., (Defendants) under 12 U.S.C. § 1833a; 18 U.S.C. §§ 1341, 1343 & 1344. Our comments led to a significant change in enforcement strategy, including the first ever, albeit temporary, rating firm suspension. We stated, on February 5, 2015, in testimony to the Norwegian Ministry of Finance (http://www.creativeinvest.com/NorwayTestimonyFeb52015.pdf ) and on April 22, 2015 in testimony to the Government of the United Kingdom: “As the market value of environmental, social and governance factors continues to grow, companies and investment managers will engage in fraudulent practices related to these factors. These practices will range from simple falsification of environmental, social and governance records to more sophisticated, but no less fraudulent methods related to environmental, social and governance ratings.” On September 22, 2015 automaker Volkswagen admitted that “’defeat devices’ used to cheat emissions testing were installed in 11 million vehicles worldwide. We note the competence and accuracy of our performance by reference to the following: [email protected] 3 On June 11, 2016, our initial 2016 Election Fully Adjusted Return Forecast indicated that Donald J. Trump would win the election for the Presidency of the United States. https://www.linkedin.com/pulse/why-trump-win-william-michael-cunningham-am-mba/ As we forecast on December 26, 2016, "Under any conceivable scenario, the (election result) is very bad, and I mean toxic, for democratic institutions in general and for people of color specifically. Bottom line: our Fully Adjusted Return Forecast** indicates that, over time, things will get much, much worse....." See: https://www.linkedin.com/pulse/trumpism-william-michael- cunningham-am-mba/ We include by reference the following financial market malfeasance from 2003 to 2011: • April 28, 2003, every major US investment bank, including Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup, Credit Suisse First Boston, Lehman Brothers Holdings, J.P. Morgan Chase, UBS Warburg, and U.S. Bancorp Piper Jaffray, were found to have aided and abetted efforts to defraud investors. • May, 2003, the Securities and Exchange Commission (“SEC”) disclosed that several “brokerage firms paid rivals that agreed to publish positive reports on companies whose shares..they issued to the public.” • September 3, 2003, the New York State Attorney General “obtained evidence of widespread illegal trading schemes, ‘late trading’ and ‘market timing,’ that potentially cost mutual fund shareholders billions of dollars annually.” • September 4, 2003, Goldman Sachs, admitted that it had misused material, nonpublic information that the US Treasury would suspend issuance of the 30-year bond. • December 18, 2003, the SEC “announced an enforcement action against Alliance Capital Management L.P. (Alliance Capital) for defrauding mutual fund investors.. the Commission found that Alliance Capital breached its fiduciary duty to (it’s) funds and misled those who invested in them.” • October 8, 2004, the SEC “announced..enforcement actions against Invesco Funds Group, Inc. (IFG), AIM Advisors, Inc. (AIM Advisors), and AIM Distributors, Inc. (ADI) that required IFG to pay $215 million in disgorgement and $110 million