Following months of controversy and amid ongoing federal investigations, Pennsylvania’s biggest pension fund on Thursday announced that its top two executives would be leaving their jobs and retiring.

With little explanation and after a board meeting largely closed to the media, PSERS’ leaders disclosed the coming retirements of executive director Glen R. Grell, 64, and chief investment officer James H. Grossman Jr., 54.

The board chose to accept the retirement of the fund’s top leaders without revealing anything to the public about their roles in the missteps that have shaken the $73 billion fund for the last eight months. It also issued statements praising them.

The departure comes as the board was facing a watershed moment in the scandal — the point when at last it might tell the public what had gone wrong at PSERS, the Public School Employee Retirement System. Two weeks ago, an outside law firm hired to scrutinize the fund said its probe was nearly complete and would be damaging to some on the fund staff.

A lawyer for the firm did not identify anyone who would face criticism and warned the board that it faced legal risks from upset staff if it aired any allegations harmful to their reputations. The PSERS board has yet to announce any plans to make the report public.

As a result of negotiations, Grell and Grossman will switch to paid consulting positions in the weeks ahead while keeping their same salaries, but both will have severed their relationships with the fund by May and go into retirement. That means they will be in line for lucrative government pensions. PSERS, however, will continue to cover their legal expenses connected to the ongoing probes.

Grossman has long been the highest-paid official in state government, with compensation reflecting his high-finance role. He makes $485,000 a year, more than twice the governor’s salary. His annual pension on reaching the retirement age of 60 would be about $170,000, less if he started taking it earlier.

» READ MORE: A probe of Pa.’s largest pension fund is nearly done, but taxpayers may never know the results

The executives’ tenure was marred by the fund’s admission in March that it had mistakenly adopted in December a false and inflated figure for investment performance, an acknowledgement that immediately triggered a continuing federal criminal probe as well as a civil inquiry by the U.S. Securities and Exchange Commission.

The 15-member volunteer board adopted a new, and lower figure for fund profits in April, an embarrassing reversal that forced it to increase payments into the pension plan from more than 100,000 working teachers and other school staff. This was driven by a state law that said teachers should share the pain when the plan’s performance falls short.

PSERS’ performance

The fund rebounded last fiscal year along with the world economy, posting a record return of 25%, a massive jump from the previous year’s nearly flat return of 1.1%.

Still, the plan performance trailed more than a dozen other public funds and was well beneath the S&P 500 stock index’s climb of 38%.

PSERS is among the nation’s 25 largest public pension funds. Every year, it sends out $6 billion in retirement checks to 250,000 former school employees. In the last fiscal year, it was supported by $5 billion in payments from taxpayers, $1.1 billion from school workers, and a record $12 billion in investment profits.

Despite ever increasing state aid, the plan has a $40 billion deficit to fund existing commitments. Retirees have not seen a benefit increase in nearly 20 years.

The state treasurer’s role

The deal that led to Thursday’s announcement was reportedly negotiated by state Treasurer Stacy Garrity, who has joined with other board dissidents since her election last year. Significantly, sources said, Garrity and other board members rebuffed suggestions from lawyers for Grell and Grossman that the men receive severance payments. The pair have also agreed not to sue the fund, the sources said.

State Sen. Katie Muth (D., Montgomery), perhaps the most outspoken board critic of Grell’s and Grossman’s, called their exits “a step forward,” but faulted the board for so far failing to make public the internal report that would review their leadership.

Without a public release, Muth said, “PSERS continues its bad habits of failing to be transparent.”

Charles Elson, an expert on corporate governance at the University of Delaware, saw the fund’s action as a classic “negotiated departure.”

Elson said such deals offer some dignity to the exiting executives while sparing an enterprise an ugly legal war with them that could be “extremely expensive, time-consuming and damaging to the operations of the business.”

The fissures on the PSERS board

The debacle of the botched calculation was accompanied by a growing schism on the board in which dissidents, including Pennsylvania’s current and former treasurers, castigated the investment strategy pursued by Grossman. The critics said his recommendations were too expensive, too illiquid, too opaque —and too unprofitable.

In June, the dissident bloc on the board tried and failed in an initial effort to oust Grell and Grossman, mustering six votes to fire them, two short of a majority. In a sign of the pair’s waning influence, though, the full board rejected the executives’ investment strategies in subsequent votes.

» READ MORE: PSERS pension chief makes big bets with his own money

Board critics also challenged and eventually reined in spending on luxurious travel by Grossman’s staff, who flew across the globe to check on fund investments. In an article in April, The Inquirer highlighted a series of ultra-expensive airfares and hotel stays by the staff. The trips were booked by investment firms that did business with the fund, with an understanding PSERS would pay them back.

The governor weighs in

Among the battery of law and financial firms hired by PSERS to deal with the scandal, the fund hired Womble Bond Dickinson, a big firm with offices in the U.S. and the United Kingdom, to conduct a parallel investigation into the matters under FBI scrutiny.

It was Womble’s point person on the probe, Claire J. Rauscher, who cautioned the board to tread carefully in making public the results of its internal probe. Transparency, she cautioned, may not be “the right answer.”

But Democratic Gov. Tom Wolf, who has three appointees on the board, came down on the side of disclosure.

”Making investigation results public increases transparency and improves the confidence of its retirees and current members,” Wolf said Thursday, reiterating a position he first took a day earlier.

In an interview, Ted Siedle, a former SEC lawyer who now represents dissident pension plan investors in Illinois and Ohio, also called on the board to make public the results of all investigations.

“It’s highly significant when two senior officials opt to leave in the midst of investigations,” Siedle said. “It’s an exceptional situation and for them to be retiring certainly suggests there are more problems here.”

Even after the departures, the board remains hung up on just how much to reveal to the public from the internal report. Rauscher pointed out that a key Pennsylvania court precedent gives people identified in investigations the right to challenge the findings.

Ever since news of the federal investigation broke, PSERS has said virtually nothing about it. Federal subpoenas, copies of which were obtained by The Inquirer and Spotlight PA, showed that prosecutors are exploring the recanted calculation and, in a seemingly unrelated issue, the fund’s purchase of industrial buildings and parking lots near its headquarters in the state Capitol.

In June, the fund admitted that Grossman and other members of his investment team had been listed on financial document as being paid by both the pension plan and the firm managing the Harrisburg real estate. The plan said that was another error and the forms would be amended.

As for the botched calculation, the board adopted an inflated figure in December last year that was just narrowly higher than the figure it needed to clear to spare teachers an increase in their pension payments. It later adopted a new lower figure that triggered a higher levy.

Although the board has not explained how the calculation error occurred, an outside consulting firm seemed to take the blame for it in internal documents obtained by The Inquirer and Spotlight Pa., citing a clerical error.

That said, the bad number was adopted after dissident board members, notably then-State Treasurer Joseph Torsella, raised concerns that Grell was using unaudited figures, in a break from typical procedure, to come up with investment returns.

At the time, board leaders brushed aside Torsella’s warnings.

“We did our due diligence,” Grossman said in December “We covered it. I’m not worried about it.”