PSERS wrestles with Womble’s secret investigative report

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This is a developing story and will be updated.

In a secret session and after a controversial non-disclosure agreement airs, the board of directors of Pennsylvania’s beleaguered teachers’ pension fund finally learns the results of a months-long internal review of its retirement figure. exaggerated profit and questions about his purchase of real estate in Harrisburg.

For three months, the 15-member board of directors of the $73 billion PSERS pension plan nervously and cautiously debated when to hear the potentially explosive report from a law firm hired by the fund, repeatedly pushing back. the date to do so. On Monday morning, the board of directors met behind closed doors in Harrisburg to be briefed on the report.

It’s still unclear when and how much the public will learn about the company’s review. Lawyers at the law firm Womble Bond Dickinson, who have so far received nearly $500,000 for their investigation, put the board on edge in November citing the strong legal rights of those criticized in its review and suggesting that the fund might only release a censored abstract or document.

READ MORE: Board members of Pennsylvania’s largest pension fund asked to sign confidentiality oaths

To keep the report secret for now, the PSERS – the Public School Employees Retirement System – has asked board members to sign a very detailed four-page non-disclosure agreement that prohibits the disclosure of anything. either of the examination to unauthorized persons or to “any member”. medias.’ Signatories must agree that their disclosure of information would cause “irreparable harm” to the board.

Several board members lambasted the NDA and said they would refuse to sign it. Governor Tom Wolf and other political leaders called for the so-called Womble Report to be made public. After several days of debate over the NDA, the pension fund clarified that members would not be required to sign it.

READ MORE: State lawmakers mull pension reforms as PSERS remains under scrutiny

At least three of the board’s 15 volunteer members — Nathan Mains, executive director of the State School Boards Association, state treasurer Stacy Garrity and state senator Katie Muth (D., Montgomery) — have publicly stated that they will not sign the NDA.

“It is regrettable,” Main wrote to the board over the weekend, “that the actions of a few have over-complicated a process that should have been simple – to conduct a thorough investigation, present the findings to the entire Board of Directors and allow the public to understand what happened through transparent publication of the report.

“I urge my fellow administrators to act unanimously to direct that the findings of the internal investigation be made available to the public as fully and expeditiously as possible,” Mains added. “Annuitants and the public are entitled to nothing less than immediate and transparent disclosure following the Womble briefing.”

The fund called on Womble, along with two other outside law firms, as it learned that federal prosecutors, the FBI and the U.S. Securities & Exchange Commission had subpoenaed information about the adoption by the board of directors of a false and unduly high figure for investment returns. Federal investors also looked at the fund’s $5 million credits to buy real estate near its offices and suggestions that PSERS staff wrongfully accepted gifts from vendors.

Federal authorities have said nothing about their investigations. Their completion, whenever it happens, is sure to be another watershed event for the massive pension fund, which sends $6 billion a year in retirement checks to former teachers and other former school workers.

PEERS also remained silent on the matters under investigation. In a leaked document obtained by The Inquirer and Spotlight Pa, one of the fund’s top consultants, Chicago-based Aon, appears to blame part of the problem, saying investment performance data had been corrupted by “mistakes.” involuntary writing at a given time”. data entry level.

Other leaked documents suggested the fund erred by using unaudited figures in its initial calculation of performance earnings.

PSERS hired Womble in March to review “the circumstances leading up to and following” PSERS’ “misreporting of investment performance” in a key vote in December 2020. The board incorrectly said the performance was just above a target that would have forced 100,000 new hires over the past decade to pay 8% of their salary to fund the system, up from 7.5% previously.

In April, that’s exactly what happened when the board admitted the number was wrong. It adopted a new lower number that forced increased payments by practicing teachers and their colleagues.

But before the error was apparent, the higher figure was celebrated in an exchange between then-PSERS executive director Glen Grell and James Vaughan, executive director of the influential Pennsylvania State Education Association, whose members hold five seats on the PSERS Board of Directors. Their email exchange was recently obtained by The Inquirer by filing a request under the state’s right to know law.

“Watch out,” Grell wrote to Vaughan on Dec. 3, 2020, the day before the board meeting at which the initial earnings report was made public.

Teachers would not face any increases, Grell wrote. He said the PSERS narrowly exceeded the figure that would have triggered the payout hike.

“Now that’s fantastic news right there!” the union leader responded.

He added: “I bet more than a few are celebrating this. wow! Is it close.

“AND this is someone’s last board meeting!!” Grell added.

It was a blow to a board member, then state treasurer Joseph Torsella, who was leaving the board, after losing his ex officio seat to his re-election loss. the preceding month. Torsella had been a persistent critic of fund management. The union has been a persistent ally.

Torsella’s departure would also prove short-lived: he soon returned to the board as a representative of Wolf, where he renewed his efforts for investment reforms. As for Grell, he suddenly announced his retirement in November.

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