UPDATE: How Pa.'s $25B pension system struggled with allegations

UPDATE: Read more about how Pennsylvania's pension system struggled for months with complaints about its chief investment officer, until longtime chairman Nicholas Maiale, against his own lawyers' advice, tipped Anthony Clark about the conflict-of-interest complaints against him by his staff, in Sunday's Philadelphia Inquirer here. (Not an Inquirer subscriber? Use code B89T this week to access the story online. Then subscribe: We write about this kind of thing a lot: it's your money that's at stake.)

EARLIER: Anthony S. Clark, the chief investment officer at the $25 billion asset Pennsylvania State Employees' Retirement System who was locked out of his office and chose early retirement after staffers raised questions about investment practices on his watch, "did a fine job," Nicholas Maiale, chairman of the SERS board of trustees, told me. (As I reported here in today's Philadelphia Inquirer, sixth item.)

Asked about elected state Treasurer Rob McCord's demand that Gov. Tom Corbett replace Maiale, the chairman, a former state rep who's held the job since 1991, noted that McCord "wants more say" in hiring managers. (McCord is still an investor in Novitas Capital, a fund he used to manage, which also manages money for SERS and the Pennsylvania teachers' pension fund. McCord says his investment is held in a blind trust and he collects no fees. Revised.)

Does Maiale think his long term is up? "I've been there 22 years. I don't know how much longer I want to be there. I don't know how long the Governor wants me there. But I've done a good job. And the majority of the board supports me," he added, noting trustees voted 7-4 against McCord's proposal to stop hiring new managers until an external investigation is complete.

"The investment program is a lot better" after Clark's three-year tenure, Maiale added. "It's been repositioned. The returns are good." SERS profits are running ahead of the system's 7.5 percent yearly target this year, though it has lately trailed the surging U.S. stock market, since the investments SERS has accumulated in bonds, hedge funds and other investments on Maiale's long watch aren't returning as much as the S&P 500.

Even with its investment profits, the system's accumulated assets are more than $17 billion below its expected longterm liabilities, which means state taxpayers are paying more to keep SERS going each year -- a problem common to other pension funds, especially in slow-growing communities like Pennsylvania where retirees and dependents will soon outnumber the workers still paying into the fund.

More on McCord's fund: Novitas Capital collected $88,000 in fees, each: from SERS and the teachers' fund last year, according to state records. SERS' 2003 $10 milllion investment had repaid $8.95 million as of last year and was still worth an estimated $3 million for possible future payback.