Amid an FBI investigation, the mammoth PSERS pension plan has disavowed as poorly worded an official disclosure form that said its top investment staff was also being paid by a firm hired to manage its real estate in Harrisburg.
The fund said that, in fact, no one on its staff had received any “additional compensation,” even though the forms said they were paid employees of both the retirement plan and the realty firm. The $64 billion fund said it has filed replacement disclosures with the IRS “correcting this error.”
The plan’s announcement came in response to questions from The Inquirer and Spotlight PA — and after federal prosecutors had subpoenaed information about PSERS’s $1.6 million purchase of the former Harrisburg Patriot-News building at 812 Market St. near the plan’s office and purchases of other nearby properties.
PSERS said it has amended the required public disclosure forms for the nonprofit, 812 Market Inc., created in 2017 to hold the title to the Harrisburg real estate. Unamended, the forms say that PSERS’s chief investment officer, James H. Grossman Jr., and two of his staff are on an 812 Market Inc. board whose officers include top executives of PMI Property Management Inc., the Harrisburg-area company that looks after the real estate.
While the original forms say in one section that Grossman and the others received no money through their board membership, the records also say elsewhere that he and the others, deputy Charles Spiller and senior real estate manager William Stalter, work for PMI and are paid by it.
“The officers and directors of 812 Market Street Inc. are employees of PMI Property Management Inc. …, “ the filings say, in part. “PMI Property Management Inc., pays the officers of 812 Market Street Inc.”
Grossman is the highest-paid government employee of the state of Pennsylvania, making $485,421 a year. Spiller (and another Grossman deputy) are the second-highest, making $399,611. Spiller is the fund’s leader on real estate investments and briefs its board on such buys. Stalter, who is also a real estate expert, is paid $241,801.
Efforts to reach the three PSERS officials were unsuccessful. The PMI executives, Eric Kunkle and David Dyson, declined to comment. PMI was paid $30,000 yearly in the last fiscal year to manage the properties.
PSERS is short for the Pennsylvania Public School Employees’ Retirement System. One of the nation’s biggest pension plans, it sends out more than $6 billion in checks yearly to 265,000 former teachers and other retired staff from public schools. It is supported by its investments and by payments from working educators and taxpayers.
The image of the fund, which has faced growing criticism for its unremarkable investment returns, has taken a beating since news broke in March of the federal investigation. As The Inquirer and Spotlight PA have previously reported, federal prosecutors and the FBI are using a grand jury and subpoenas to investigate the Harrisburg real estate purchases, as well as the board’s adoption last year of a figure that falsely exaggerated its investment profits. The board later reversed course in April and said it would require more recent school employees to pay more for their retirement, starting July 1.
State Sen. Katie Muth (D., Montgomery), who became a PSERS board member this year, said Monday that she had asked the fund’s management weeks ago for information about 812 Market Inc. and the Harrisburg real estate investments, but had never received answers. The response, she said, was: “We are still looking into it.”
Late Tuesday, Muth took the unusual step of suing PSERS in Commonwealth Court in a bid to force the fund to turn over the records.
In the lawsuit, her lawyer, Terry Mutchler, with Obermayer, Rebmann, Maxwell and Hippel LLP in Philadelphia, said the fund was harming the ability of the board members to exercise oversight.
“To act in blind obedience, particularly given the errors that precipitated this investigation, would be nothing short of reckless,” Mutchler wrote.
In its statement Monday, the retirement system said it created nonprofits to own real estate as a buffer against lawsuits, “to limit legal risk.”
PSERS did not say when it filed the revised forms. As The Inquirer and Spotlight PA have previously reported, federal prosecutors sought information about the Harrisburg real estate in subpoenas dated March 24. At a May 5 board meeting closed to the public and the media, lawyers from the Morgan Lewis firm, one of three firms hired by PSERS to address the FBI probe, briefed the board about the disclosure forms and said it was looking into whether the staff was paid by the real estate firm and whether the board even knew that the nonprofits had been formed, sources said.