Two Pa. treasurers — one current, one former — agree giant pension fund is suppressing information
Treasurer Stacy Garrity, a Republican, and Joe Torsella, the Democrat whom Garrity defeated, have come together to support a third dissident on the board.
Pennsylvania Treasurer Stacy Garrity and Joe Torsella, whom Garrity defeated in last year’s election, have joined legal forces to challenge the leadership of the state’s biggest public pension plan, saying that the leaders had wrongly cut off information from a dissident board member.
In taking what they call an “extraordinary step” against an agency where they sit on the board, the pair on Friday filed a “friend of the court” brief in state Commonwealth Court to back an earlier lawsuit by Sen. Katie Muth (D., Montgomery) in which she seeks investment contracts, real estate documents, and other information that the managers of the PSERS pension plan have refused to provide.
Garrity, a Republican, and Torsella, a Democrat who Gov. Tom Wolf reappointed to the board after Garrity’s narrow win, say the fund’s command has improperly denied Muth documents guaranteed to any board member under Pennsylvania law.
However, the fund maintains that PSERS already makes enough appropriate information available to its 15-member volunteer board.
One of the nation’s top public pension funds, the $73 billion PSERS — the Public Employees’ Retirement System — is a taxpayer-supported plan that sends out $6 billion yearly to 250,000 former teachers and other retired educators. Torsella was often a lonely voice of protest when he sat on the board by dint of his prior post as treasurer, but now he, Garrity, and Muth lead a growing band of dissidents challenging the fund.
PSERS has had a rough year. In the spring, the FBI launched an investigation into the board’s mistaken adoption of an exaggerated figure for its investment returns and, in a seemingly unrelated matter, its purchase of real estate near its headquarters in Harrisburg. Last month, news broke that the U.S. Securities and Exchange Commission was looking into whether any of the fund’s investment staff had pocketed gifts from vendors, a banned practice.
The board’s error regarding returns had a serious impact. Under state law, its later adoption of a correct, but lower figure meant that 100,000 working teachers had to pay more into the fund.
PSERS has hired a bevy of law firms to deal with the FBI and conduct an internal investigation. Still, Muth, a firebrand who is the most outspoken among the three leading board dissidents, has said she wants to make her own inquiries into the areas under federal scrutiny.
Beyond those issues, she, Garrity, and Torsella have also criticized PSERS’s top staff for backing expensive and underperforming investments. They were among the leaders in June of a failed bid to oust the fund’s executive director and investments chief.
Spokespeople for PSERS did not immediately reply Friday to a request for comment.
A pending pleading to have Muth’s suit tossed was filed in July on the fund’s behalf by newly hired lawyers from the Morgan, Lewis & Bockius firm in Philadelphia and the Pillsbury Winthrop Shaw Pittman firm in New York City. Their brief said Muth had no authority to carry out “her own personal investigation,” as the job had been delegated in-house to a board committee. Muth had voted twice to give that role to the panel, the lawyers wrote.
They dismissed Muth as someone attempting to run a “freelance” probe that could boomerang to harm her and the fund itself. Muth’s lawyer has described the legal attacks as an attempt to paint her as “an inept Nancy Drew.”
The filing by Garrity and Torsella said that the fund’s management was engaged in a power grab that would limit the rights of directors at a wide variety of Pennsylvania boards.
Their brief was drafted by a team headed by the Treasury Department’s chief counsel, Christopher Craig. It says the fund’s executive leadership was seeking to “impose for the first time in the Commonwealth” restrictions on the ability of board directors to obtain information. This, the brief said, would blind “all Pennsylvania corporations” from proper oversight.
The filing also says the plan never sought Garrity’s or Torsella’s approval for arguments made in court purportedly on the entire board’s behalf.