State Senator Katie Muth (D., Montgomery), who became a member of the PSERS board this year, said on Monday that she asked the fund’s management weeks ago for information on the nonprofits and real estate investments in Harrisburg, but had never received responses. The response, she said, was, “We are still reviewing it. “
Late Tuesday, Muth made the unusual move to sue PSERS in Commonwealth Court in an attempt to force the fund to turn over the files.
In the lawsuit, his attorney, Terry Mutchler, along with Obermayer, Rebmann, Maxwell and Hippel, LLP in Philadelphia, said the fund was hampering the ability of board members to exercise oversight.
“To act in blind obedience, especially given the errors that precipitated this investigation, would be just unwise,” Mutchler wrote.
In its Monday statement, the pension system said it had created nonprofit organizations to own real estate as a buffer against lawsuits, “to limit legal risk.”
PSERS did not specify when it filed the revised forms. As The Inquirer and Spotlight previously reported, federal prosecutors requested information on Harrisburg real estate in subpoenas dated March 24. At a May 5 board meeting closed to the public and media, attorneys at law firm Morgan Lewis, one of three firms hired by PSERS to respond to the FBI investigation, informed the board of administration of the disclosure forms and said he was investigating whether staff were paid by the real estate company and whether the board even knew that nonprofits had been formed, sources said.
The fund has created about a half-dozen nonprofit organizations to hold the titles of its some 15 real estate investments across the country, according to IRS records. While Monday’s statement cites only one, public records from 812 Market Inc. show that the same flawed language is found in documents filed by two other PSER nonprofits, one for them. headquarters buildings and one for a shopping center in San Antonio, Texas.
Before the board issued its statement, reporters asked Charles Elson, a professor of finance at the University of Delaware and an expert in corporate governance, to review the documents, known as 990, named after their official IRS form number. He said they were either “poorly worded” or revealed a clear conflict of interest for PSERS.
“It puts these people on both sides of the deal,” Elson said. “You are an employee of the pension system, but why are you working and being paid by an entity that does business with the pension fund? “