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Exclusive: Pa. pension officer retires; hidden $3M loss alleged

The chief investment officer of the Pennsylvania State Employees' Retirement System speeded up his retirement after a whistle-blower said he had engaged in personal investment trades at work and withheld news about a $3 million loss in a pension-fund investment, documents obtained by The Inquirer show.

Anthony S. Clark. (Photo from
Anthony S. Clark. (Photo from more

The chief investment officer of the Pennsylvania State Employees' Retirement System speeded up his retirement after a whistle-blower said he had engaged in personal investment trades at work and withheld news about a $3 million loss in a pension-fund investment, documents obtained by The Inquirer show.

The material shows that the whistle-blower first raised the complaints in April about Anthony Clark - one of the state's highest-paid employees, at $270,000 a year - to her superiors in the legal staff about the $26 billion pension system and to at least one of the system's board members.

Six months later, after those complaints triggered no action - Clark's lawyer calls them unfounded - she met with top lawyers on Gov. Corbett's staff and again leveled her accusations.

After taking almost a month to hire the Philadelphia law firm Stradley, Ronon, Stevens & Young to assess issues, the Corbett lawyers briefed the pension fund's acting counsel. The council then informed the board's longtime chairman, Nicholas J. Maiale, on the allegations and recommended he not say anything yet to Clark.

Disregarding that advice, Maiale told Clark about the complaint and urged him to take a leave of absence after the Thanksgiving holiday, the documents say.

In an interview with The Inquirer, Maiale said he went to Clark to avoid having him remain in charge of state investments with a cloud over his head, a situation Maiale said "would have been surreal."

Maiale also said he had "locked down" Clark's access to state computers.

But after learning that Maiale had told Clark about the allegations, Corbett's lawyers rushed to preserve Clark's e-mail and computer records "to protect the agency from the potential consequences of your un-counseled notification to Mr. Clark," a top state lawyer told Maiale in a letter Wednesday.

That letter, obtained by The Inquirer, was given to the SERS board Wednesday in a closed-door executive session in Harrisburg.

The board was also given Stradley Ronon's report reviewing the allegations and assessing whether they should be reported to federal securities regulators or the state ethics board. In its 14-page assessment, obtained by The Inquirer, the law firm said there was no requirement to report the situation to authorities at that time and urged further investigation.

On Thursday, state Treasurer Rob McCord, a member of the SERS board, called upon Corbett to remove Maiale as chair. McCord cited Maiale's failure to act more quickly on allegations of "possible criminal or unethical conduct" by Clark.

McCord, an announced candidate for governor in next year's Democratic primary, also lambasted Corbett's lawyers for not acting sooner.

In a sign of a widening partisan fight, Corbett's Office of General Counsel issued a statement Friday suggesting that it was McCord and other board members who had dropped the ball.

"The real question now is what the fiduciaries to SERS, including the treasurer, knew and when they knew it," the statement read.

State Attorney General Kathleen Kane, a Democrat, has also requested documents related to the complaints against Clark. Her office declined all comment Friday.

Clark, 60, chose to retire early from the job after his talk with Maiale. He was hired in 2011.

In the interview, Maiale praised Clark and called him an assertive boss who pushed workers to perform and who may have made enemies on the staff.

"I think he did a fine job," Maiale said. "The investment program is a lot better. It's been repositioned. The returns are good."

The SERS whistle-blower alleged that Clark removed information from a report to the board, which would have showed the Tiger Keystone Partners hedge fund had lost $3 million and cost SERS $1 million in additional administrative fees.

Clark had advised the board that the $250 million Tiger investment was expected to yield $20 million to $30 million a year in profit for SERS, providing stocklike high returns with bondlike low volatility.

For Tiger to lose money, instead of meeting its projection, would be an extra embarrassment for Clark, who had strongly recommended the investment.

The whistle-blower told lawyers that staff members believed concealing the loss would make it hard to trust Clark on other investments he recommended.

Clark's attorney, Virginia Gibson, of the Hogan Lovells law firm in Philadelphia, said in a statement: "Mr. Clark was planning to retire in the near future, and when this arose, he chose the earlier date of Dec. 31," instead of waiting until next year.

She added: "He is looking forward to an early resolution of these unfounded allegations."

Maiale, a Philadelphia Democrat and onetime state representative, has chaired the politically appointed SERS board under Republican Gov. Corbett and four previous governors, both Republicans and Democrats.

On his watch, SERS has pursued a complex diversification strategy aimed at boosting pension assets while guarding against losses in declining markets.

Total SERS gains have exceeded the system's annual 7.5 percent target so far this year, but lagged behind the surging U.S. stock market.

Despite its outside managers, SERS has faced a growing gap between its assets and its expected pension payouts, which the state has had to meet by increasing taxpayer contributions to the system - about $1 billion in 2013, more than twice the level of two years ago. The taxpayer contribution is projected to increase to $2 billion by 2016. That has prompted Corbett to refer to SERS as "a tapeworm" in his budget.

The pension system paid at least $176 million in fees in 2012 to private money-management firms to invest slices of its portfolio.

The whistle-blower first alleged wrongdoing by Clark in April to SERS's top lawyer and board member Oliver C. Mitchell Jr., according to the Dec. 11 letter to Maiale by Corbett lawyer Jarad W. Handelman, first executive deputy general counsel.

The Inquirer has not been able to identify the whistle-blower, although the documents make clear she was a lawyer at the pension fund. Her name was blacked out in the material provided to the pension board.

Among other complaints, the woman said she believed Clark worked about three days a week, not the required full week, the documents say.

She also said that while she believed Clark engaged in personal "day trading," she did not allege he had traded in stocks held by the pension fund.

The Stradley Ronon lawyers, in their report to Corbett's office, said they would need to know what Clark was trading and whether he was using information from SERS or its hired managers.

Both the Handelman letter and the Stradley Ronon report recommended a more complete investigation.

SERS trustees voted at their meeting Wednesday to hire an independent law firm to investigate the allegations.

Asked about his prospects, Maiale said: "I've been there 22 years. I don't know how much longer I want to be there. I don't know how long [Corbett] wants me there. But I've done a good job."

215-854-5194 @PhillyJoeD