Penn. Pension Audit Fight Headed for Pause?

What a difference an election makes. Before last fall, Pennsylvanias Auditor General Robert Casey Jr. was concluding a two-year legal fight with the states two largest pensions. He won a lawsuit against the boards of the State Employees Retirement System (SERS) and the Public School Employees Retirement System (PSERS).

But Casey, who was sworn in as Pennsylvanias state treasurer in January after winning the post in the November election, now sits on the boards of SERS and PSERS. The two boards now want to reconcile the ongoing dispute with the auditor generals office.

Pennsylvania State Rep. Steven Nickol proposed a resolution that was passed unanimously last week that seeks reconciliation in hopes of reaching an agreement and staving off a protracted legal battle.

The resolution directs PSERS executive director and chief counsel to seek a settlement with the auditor generals office, now led by Caseys successor, Jack Wagner.

In an Oct. 15 ruling, the Commonwealth Court of Pennsylvania handed Casey the key victory in his fight to conduct a special performance audit on the two state retirement funds. The panel of seven judges, which had one dissenter in the ruling, found that the auditor generals office has the authority to conduct the performance audit. The court ordered the two funds to provide necessary documents and cooperate with the audit.

Both the PSERS and SERS boards voted to appeal the ruling and filed papers with the courts to do so. But the boards, meanwhile, also agreed to negotiate a settlement. Nickol, who was recently elected vice chairman of the PSERS board, says that the pension boards want to resolve potential legal issues that the Commonwealth Courts ruling opened up.

Political and legal battles over the right to audit SERS and PSERS have raged for more than two years. Casey began his quest to conduct an audit in August 2002 over the retirement systems use of 150 outside consultants and investment advisors.

PSERS manages approximately $50 billion and invests in Adams Street Partners, Spectrum Equity Investors, TA Associates, Madison Dearborn Partners and Landmark Partners. SERS manages approximately $25 billion and its portfolio includes Apax Partners, New Enterprise Associates, Summit Partners, Blackstone Capital Partners, Lexington Partners and HarbourVest Partners.