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The Securities and Exchange Commission has filed a 150 fine against consultant Aon Investment USA Inc., accusing the Chicago company of misleading the Pennsylvania Public School Employees Retirement System (PSERS) about errors that caused it to overstate profits in 2011. It imposed a $10,000 fine, restitution and interest. -2020.
This miscalculation was the subject of two federal investigations. He was also involved in a dispute on the board over the agency’s investments, which led to the retirement or resignation of PSERS executives in 2021 and the board’s withdrawal from private investments.
After correcting the error, PSERS had to increase the payroll deduction from 100,000. Public school employees who contributed to retirement plans to cover poor performance. PSERS manages approximately $70 billion worth of investments to help pay pensions to 500,000 current and retired public school employees.
“Investment advisers must be meticulous and honest with their clients,” LeeAnne G. Gaunt, director of the SEC’s Financial Abuse Division, said in a statement. “Pension funds and other local governments should be able to trust that their investment advisers are telling the truth.”
In 2020, when the data Aon provided to PSERS for calculations from 2011 to 2020 did not match quarterly profits published by PSERS in some periods, State Treasurer Joe Torcella I asked executives for an explanation. To Aon’s relief, his PSERS leaders convinced the board to approve his report in December anyway.
According to the SEC, when PSERS “repeatedly asked questions” about the discrepancies, Claire P. Shaughnessy, an Aon partner who oversaw Aon’s PSERS return calculations, “failed to properly investigate the discrepancies.” ”, and instead gave inaccurate reasons that Aon already knew. The SEC said she denied Aon’s error “even though she did not actually know the reason for the discrepancy.”
This miscalculation, along with the purchase of unassessed real estate by PSERS, was investigated by a federal grand jury in Philadelphia, which ended with no charges in 2022. A separate SEC investigation focused on this miscalculation as well as the possibility that PSERS advisers exchanged gifts with the United States. A money manager who tried to be hired by PSERS.
PSERS said in a statement Thursday that the SEC informed PSERS that the investigation will not result in any enforcement action against the pension plan. SEC and PSERS officials would not comment on whether the agency is still investigating PSERS’ outside consultants or money management companies.
“We are pleased with today’s SEC developments and equally excited to share such positive news with our members,” PSERS’ new board chair Richard Virg said in a statement.
Under federal law governing nonprofit organizations, Aon’s error forced PSERS to recalculate its revenue. Under the National Pension Law, when slightly worse new revenues are announced in spring 2021, the agency will increase salary deductions from 100,000 mainly young teachers and other junior employees to compensate for the poor results. I was forced to do that. Based on previous incorrect data, PSERS had announced that there was no need for an increase.
The surcharge, which used to be taken from 50 cents to 75 cents per $100 of affected employees’ paychecks, is scheduled to end in July due to improved revenue from 2020 to 2023. Most teachers will return to spending 8% of their annual salaries, or more than $1 billion, on the plan next school year. PSERS also collects more than $5 billion annually in state and local taxes and varying amounts from investment returns.
In addition to the fine against Aon, Shaughnessy was fined $30,000. Under the terms of the settlement, neither party was required to admit wrongdoing. Shaughnessy will leave Aon at the end of 2022 to join another national financial consulting firm. Aon declined to comment on his resignation or other aspects of the settlement.
Aon is also facing a PSERS lawsuit in Philadelphia Common Pleas Court, seeking restitution from the company to PSERS for at least $8.8 million it has spent on attorneys, advisors and consultants since the miscalculation was revealed. . The case is scheduled for trial later this year.
PSERS said it is reviewing the SEC’s settlement against Aon. Neither company would comment on the impact of PSERS on litigation.
Aon argued in court that it did not have to pay PSERS damages because it followed accepted procedures, and that PSERS’ additional costs were due to reasons unrelated to the miscalculation.
PSERS hired Aon to create investment data starting in 2010. Aon’s board of directors agreed to terminate its most recent five-year, $3.4 million contract with Aon in 2022 and prepare for a lawsuit, but Aon will continue to advise PSERS as it did last year and use its data to continued. When calculating investment returns.
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