Pension Fund’s Plan to Buy Home Held Illegal

A State Teachers’ Retirement System board plan to purchase former pension chief C. Michael McLaren’s Minnesota home was illegal, a state auditor general’s report disclosed Tuesday.

The highly critical audit said the retirement board ordered the drafting of what would have been an illegal contract to buy McLaren’s home but was stopped when state Controller Ken Cory referred the matter to the attorney general.

McLaren was fired from his $73,500-a-year job last month amid allegations of expense account irregularities, just three months after he took over as chief of the $13-billion teachers’ pension fund.

The proposed contract called for the State Teachers’ Retirement System to reach an agreement with a home relocation company to purchase McLaren’s home with the understanding that the state would reimburse the firm for any expenses involved in maintaining and selling the home, as well as making up the difference for any loss incurred in the sale of the residence.

Plans Abandoned The audit report said that the retirement system board scrapped its plans after receiving an opinion from the attorney general’s office that it would be improper.

The state Department of Personnel Administration is the only agency given the authority to authorize payment of travel or moving expenses and “under no circumstances” would the department permit the purchase of a home, the audit report said.

“Although there are no circumstances in state law authorizing a state agency to purchase an employee’s residence, the board acted upon its belief that this was an investment-related decision not subject to the jurisdiction of the state’s control agencies,” said the report drafted by Auditor General Thomas W. Hayes.

Hayes said the retirement board also bypassed the Department of General Services, which normally reviews and approves consulting contracts, in giving McLaren a controversial $15,000 consulting contract.

Judith Powell, State Teachers’ Retirement System board president, did not dispute the audit report findings, but said that she relied on advice from pension fund lawyers in making the initial decision to write a contract to purchase McLaren’s home.

State Reimbursed In other findings, the audit report said that McLaren was reimbursed for three trips he did not take, although he subsequently reimbursed the state the $2,539.07 cost of the trips.

The 52-page report recommended that the state withhold $6,800 in expense claims submitted by the former chief executive officer in connection with three other out-of-state trips he took.

Hayes said during an interview that he did not think criminal intent was involved in any of the irregularities uncovered in the audit. He said some problems were due to a breakdown in administrative procedure, while others were due to errors in judgment.

Sen. Wadie P. Deddeh (D-Chula Vista), one of several legislators who requested the audit, said he planned to introduce legislation to address some of the problems raised in the audit.