Rhode Island General Treasurer Gina Raimondo came out swinging after a union-backed forensic report called on federal securities regulators to investigate her management of $7 billion in pension funds.

"This is clearly another political propaganda piece aimed at discrediting the treasurer and the state's pension reforms," Raimondo said in a statement Thursday night.

Benchmark Financial Services of Ocean Ridge, Fla., and Rhode Island Council 94 of the American Federation of State, County and Municipal Employees on Thursday released a report titled "Rhode Island Public Pension Reform: Wall Street's License to Steal." Benchmark founder Edward Siedle, a frequent critic of Raimondo and a former Securities and Exchange Commission whistleblower, authored the report.

"None of this innuendo-filled report presented today seems new or different from the claims made in the past by Ted Siedle, who is being paid by AFSCME," said Raimondo, whom public-sector unions have targeted for having shepherded passage of a 2011 pension overhaul law that cut benefits for state employee unions.

Nationally, public pension systems have come under fire as municipalities cope with budgetary strain.

Pensions have been front and center in bankruptcy filings in Detroit and Central Falls, R.I., the latter exiting in September 2012 after a 13-month stay. In Chicago, legislation filed by Mayor Rahm Emanuel has drawn fire from several angles. Pennsylvania has received warnings of future bond-rating agency downgrades for its inability to overhaul its pension system amid a $45 billion unfunded liability.

The Benchmark report said "a sinister pall of secrecy" surrounds Rhode Island's pension system and has enabled hedge-fund managers to keep the state in the dark about how its assets are being invested. Raimondo, 42, co-founded the venture capital firm Point Judith Capital before running for office.

Benchmark said serving as state treasurer has presented Raimondo "an opportunity to enrich herself and her hedge-fund backers at the expense of the state's pension fund," which officially is called the Employee Retirement System of Rhode Island.

"Hypocrisy is not limited to Washington. Here you have state officials slashing pensions, then using pension funds as political patronage. It happens everywhere," said Mark Schwartz, a Bryn Mawr, Pa., bankruptcy attorney and former bond banker and investment banker. Schwartz represented the Harrisburg, Pa., City Council in its failed attempt two file under Chapter 9 two years ago.

According to Raimondo, "the biggest innuendo is the false accusation that the treasurer is using her position to enrich herself or that the state pension fund is not well-managed. These false personal and political attacks are red herrings intended to undermine pension reform."

Raimondo is widely mentioned as a possible Democratic candidate for governor. Incumbent Gov, Lincoln Chafee will not seek re-election.

The far-reaching package, which drew praise from rating agencies, created a hybrid plan merging conventional public defined-benefit pension plans with 401(k)-style plans. It also included a suspension of cost-of-living adjustment increases for retirees and raises the retirement age for employees not yet eligible for retirement.

Rhode Island has expected to cut its unfunded pension liability to $4.3 billion, a 41% reduction, and raise the funding level for its defined benefit plan to 59.8% from 48.4%.

Public-sector unions sued and mediation talks are in progress under an order from Rhode Island Superior Court Judge Sarah Taft-Carter.

"The treasurer is proud of the work of the General Assembly did to provide retirement security for hardworking public employees and retirees. She also stands by the State Investment Commission strategy of maintaining strong long term returns, while working to minimize risk, by diversifying the portfolio," Raimondo said. "Critics of the reform who cannot accept the math that the pension system was in crisis are like the climate change deniers who dispute basic scientific facts.

"The hypocrisy of this political attack is overwhelming. The city of Providence, the state's second largest public-pension fund, has also suspended cost-of-living-adjustments, has a higher percentage of its pension fund invested in hedge funds and publishes less information than the state about the fees, investment portfolio, and investment commission actions.

"Despite all this, Ted Siedle is not being paid tens of thousands of dollars to criticize the city of Providence's fund. The reason for this is clear: this isn't about investment strategies, it's about attacking the treasurer and pension reform."

Providence Mayor Angel Taveras, also a possible Democratic gubernatorial hopeful, compromised on pension benefit reductions for municipal employees. He said the deal helped keep Rhode Island's capital city out of bankruptcy.

Poll results for a Raimondo-Taveras primary have fluctuated wildly.

"It is time to stop using pensions as a political football and instead put the best interests of our valuable state employees and teachers first. The political temptation is to go backwards, but let's move forward to avoid hurting people, just as they were hurt in Central Falls when pension checks were cut in half," Raimondo said.

Central Falls, a 19,000-population city, filed for bankruptcy in August 2011, citing an $80 million pension liability. It emerged 13 months later after cutting pension benefits for police and fire retirees by as much as 55%.

Raimondo also said she fought to always keep a defined-benefit pension, and always respected collective bargaining, and that the measure passed overwhelmingly in a Democratic-controlled General Assembly. She also cited "countless hours" of labor-attended advisory group meetings, legislative hearings and town hall-style meetings she attended that included Chafee.

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