Team 4 Investigation Update: Pa. Pension Workers Taking Lavish Trips

State Auditor General Responds

POSTED: 5:39 pm EDT May 14, 2009
UPDATED: 6:50 pm EDT May 14, 2009

PITTSBURGH -- Pennsylvania Auditor General Jack Wagner responded on Thursday to a Team 4 investigation uncovering state pension fund employees taking lavish trips to cities like London, Paris and Monte Carlo, with $500-per-night hotel bills.

Team 4's Paul Van Osdol reported that Wagner says the pension funds need to be more fiscally responsible, especially after losing nearly one-third of their value last year.

Wagner is also concerned about the potential conflict of money managers paying for trips by pension fund employees who are supposed to be monitoring those same money managers.

"It doesn't pass the smell test," Wagner said.

Team 4 found pension fund employees staying at hotels like the Four Seasons in Paris, where rooms start at $975 a night, the London Marriott, at $596 a night, and the Monte Carlo Bay in Monaco, at $490 a night.
Video: Watch Van Osdol's Team 4 Investigative Report

Most if not all of the costs were paid by money managers who themselves are paid millions by the state and school employee pension funds.

Wagner questions whether state employees can really keep a close watch on billions of investment dollars when money managers are pampering them in expensive hotels.

"How might your judgment be tainted if you're staying in these fancy resorts?" Van Osdol asked.

"Well, the question is, is there independence? And it is a question, and it should be a question, because it does create the perception of a conflict," Wagner said.

Pension fund officials say employees are not influenced by their ritzy digs, and they say they need to be there because these are unusual investments.

"The best way to know about what's going on with these investments is to be at the meetings," said Robert Gentzel, of the Pennsylvania State Employees' Retirement System. "You can't open the Wall Street Journal, you can't flip on a TV at night, because they're not publicly traded companies."

Wagner said the work "can be done without traveling today, number one. And number two, I don't know why some of these conferences can't be held in America, in Pennsylvania."

Wagner said he's especially concerned about the financial health of the pension funds because of a spike in benefits that is coming in two years that will add more than $2 billion in costs -- money that taxpayers will have to cover if investments do not improve.