Corliss Law Group Estate Planning Law Corporation: Exclusive: Pa. pension officer retires

Corliss Law Group Estate Planning Law Corporation: 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.
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."