Home Hedge Funds Wall Street Secrets Pit Pension Plan Against Trustee

Wall Street Secrets Pit Pension Plan Against Trustee


Pennsylvania State Senator Katie Muth at the State Capitol in Harrisburg.

When State Senator Katie Muth joined the board of the Pennsylvania teachers’ pension fund last year, she knew she had a lot to learn: With a college degree in athletic training, her financial education consisted largely of paying off her student loans. But she saw the unpaid trustee position at the $75 billion Public School Employees’ Retirement System as a way to protect teachers and state taxpayers—and an extension of her job as a lawmaker.

Little did the 38-year-old know that she was about to get a crash course in high finance and sharp-elbowed pension politics. Or that she would be forced to sue her own fund to get access to internal documents.

The Pennsylvania teachers’ fund is a microcosm of the problems at many public pension plans—and why some retirement experts believe more bad news could be coming as markets continue their gyrations and pension plans try to amplify declining returns with riskier investments. The $5 trillion mountain of money in public pension coffers has enriched many a Wall Street firm. Yet millions of retired school teachers, firefighters, and other civil servants must get by on modest monthly checks that critics say are made even smaller by some asset managers’ hefty fees.

It was at Muth’s first board meeting in March 2021 when the pension system’s executive director revealed in a memo that the fund had erred in reporting its average investment returns over several years. The mistake, for which a consulting firm has accepted blame, turned out to be a small yet politically explosive overstatement. It meant nearly 100,000 educators would have to contribute up to several hundred dollars more into the fund annually.

Muth soon learned that the fund’s professional staff, without informing the board, had set up holding companies to acquire land near the fund’s Harrisburg headquarters. She was also troubled by reports that some staff had been taking what she considered lavish trips arranged by money managers who competed to invest the pension fund’s assets.

Two months after Muth joined the 15-member panel, the retirement system confirmed it was the subject of a public-corruption probe by the U.S. Justice Department, first reported by the Philadelphia Inquirer. In September, the Securities and Exchange Commission (SEC) opened its own inquiry. Both probes are ongoing. Neither the fund nor any current or former officials have been accused of wrongdoing.

As one of the few trustees who wasn’t around when the incidents under investigation occurred, Muth considered it her duty to get answers. And that’s when she discovered how secretive and dysfunctional the public pension system really is.

“The reaction has been horrifying,” said Muth. “They treat me like a little girl who needs to watch her Ps and Qs, but transparency is important here. People’s lives are on the line. It’s their retirement security, for crying out loud.”

The fund’s spokesperson, Evelyn Williams, said a board-directed investigation by an outside law firm, paid for by the retirement system, found no wrongdoing by the fund or any of its current or former officials. She said the staff travel was necessary for a pension fund with global investments and didn’t violate any laws or policies in place at the time. The fund board last year adopted new travel rules. The board and staff, Williams said in an email, are “committed to encouraging and fostering a culture” of transparency and accountability.

Glen Grell, the retirement fund’s former executive director, informed the board and other top officials of the performance reporting error promptly after learning of its implications, said his lawyer, Marc Raspanti, in a letter. Grell, who retired in February, cooperated fully with the internal investigation and “has earned his stellar reputation after honorably serving the citizens of Pennsylvania for decades in various roles,” Raspanti said.

Source link

Previous articleGCC (Wisdomtree commodity strategy fund) calling for higher commodities
Next articleWhat Leaders Should Know About Alternative Investments


Please enter your comment!
Please enter your name here