Pennsylvania Pension Sued by Board Member Over Disclosure
(Bloomberg) -- A board member of Pennsylvania’s largest pension is suing the fund for access to documents she says have been withheld amid a federal investigation, intensifying the imbroglio at the state school employees’ retirement plan.
State Senator Katie Muth is demanding the Pennsylvania Public School Employees’ Retirement System turn over papers relating to the fund’s day-to-day operations, decision-making processes and investment information. Muth says she cannot properly serve as a fund trustee without access to the documents, and her suit asks the Pennsylvania Commonwealth Court to compel production of the documents.
“While I have only been on the PSERS Board as a Trustee since February, I have time and time again been denied access to documents and information regarding PSERS investments, practices, and management,” Muth said in a statement on Tuesday. “While at first this was just frustrating, once news that the Department of Justice was investigating PSERS, it became incredibly concerning.”
In a statement posted to its website, the pension called Muth’s lawsuit a waste of time. “We are aware of and disappointed by Senator Muth’s unnecessary action in filing her meritless lawsuit,” according to the statement. “This lawsuit diverts valuable time, energy, and resources from what we believe is in the best interests of the beneficiaries, which should be the primary directive as we respond to the investigations.”
The litigation is another headache for the $64 billion pension plan for teachers and other full-time school staff in the state. PSERS, as the fund is known, disclosed in March it misstated its returns for the nine years ended June 2020. The subsequent revision amounted to a difference of just 0.04 percentage point, but it was enough to force some employees that pay into the pension to boost their contributions starting in July.
The pension fund is the subject of a U.S. grand jury investigation into what went wrong, as well as its own internal probe. The Federal Bureau of Investigation is looking for evidence of kickbacks or bribery, according to the Philadelphia Inquirer. Prosecutors are also looking into the pension’s purchase of real estate near its headquarters in the state capital of Harrisburg, the newspaper reported.
The federal inquiry has spurred the fund to hire outside counsel to help it respond, said Evelyn Williams, the pension’s communications director, before the lawsuit was filed. That counsel has advised the pension to limit access to documents, Williams said, adding that “federal grand jury proceedings are confidential and secret proceedings and it is critical that PSERS not compromise that investigation.”
Muth earlier this year hired a transparency lawyer to help her access documents that the pension had denied her access to. That included investment information, building plans, contracts, board meeting materials and other information from before her tenure.
In the lawsuit filed Tuesday, Muth said that she and other board members are being asked to vote on about $1 billion of investments this week. The board has a public board meeting scheduled on June 10 and 11.
“Yet attempts to obtain information, data and documents that in her view could better inform that decisions surrounding these votes have been rejected,” according to the lawsuit. “Senator Muth is deprived of records to review, compare and make an informed decision.”
According to the suit, the counsel for the board told Muth through counsel that it was “ill-advised for ‘Board Members to seek to educate themselves’ beyond the information provided by the PSERS’ staff or beyond the pace of the investigation.”
The Pennsylvania branch of the American Federation of Teachers, which represents 36,000 educators, says it has not received any response to a May letter requesting more information and accountability. It asked for the resignation of all board members except for Muth, current state Treasurer Stacy Garrity, who joined in 2021, and former Treasurer Joe Torsella, who abstained from voting to approve the pension’s figures in December, and had raised questions about the numbers earlier.
After the pension plan disclosed in the first quarter that its figures were inaccurate, it said in April that its fund had gained 6.34% for the period in question, rather than the 6.38% it had previously reported. The revised return figures brought it below a threshold of 6.36%, which forces employees to boost contribution rates: Some members will now have to pay between 0.5% and 0.75% more of their annual salary into the pension, bringing required contribution rates to 5.25% to 10.8%.
ACA Group, the auditing firm hired to verify the performance numbers that were later deemed inaccurate, has said it had been given bad data to begin with.
The pension is currently conducting an internal probe and has hired multiple law firms and an outside consultant to provide oversight and advice while it deals with the investigation.
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