Compliance September 1, 2003

PA Auditor General Subpoenas Public Pension Funds

January 9, 2003 (PLANSPONSOR.com) - Pennsylvania's Auditor General has issued subpoenas to the chairpersons of two state public-employee pension funds; a move he says is necessary to proceed with audits of the funds' contracts with investment firms, according to the Dow Jones story.

Reported by

Eric Hazard

The subpoenas went to officials of the State Employees’ Retirement System and the Public Schools Employees’ Retirement System. Auditor General Robert Casey, saying that the funds “arrogantly refuse” to cooperate with audits he has tried to conduct since August, held they now have until January 17 to turn over all documents he has requested or risk being sued in Commonwealth Court.

Casey said his office informed the funds in August that of his intention to conduct special audits. After the notification, he said his staff tried for months to work with the funds to plan the audits, but the funds informed Casey that they would not supply any documents related to 18 categories of requested material.

The refusal to provide the documents came in the form of a tersely worded letter from an attorney at the Akin Gump Strauss Hauer & Feld LLP law firm. The letter challenged Casey’s authority to independently audit the funds, notified the Auditor General that the firm had been retained to represent the funds and refused to provide the requested documents, according to the auditor general.

Keystone Capers

“Truly independent audits of the funds haven’t been conducted in decades and are especially appropriate now given the funds’ recent investment losses and higher support being demanded of taxpayers to keep the funds solvent,” Casey said. He went on to state, “the beneficiaries of these funds, indeed all taxpayers, have a right to know how the funds select and monitor the firms that help manage approximately $60 billion in public employees’ retirement assets.”

According to aPhiladelphia Inquirer report last month, the two funds have lost almost $30 billion over the past two-and-a-half years. The newspaper also reported that Pennsylvania Governor-elect Ed Rendell has appointed former Goldman Sachs municipal-bonds chief Michael McCarthy and Kathryn Engebretson, formerly of Lehman Brothers and the current head of the William Penn Foundation, to chair a transition committee examining state retirement systems.