A federal investigation into Pennsylvania's largest pension fund has come into focus.

The U.S. attorney's office in Philadelphia has issued subpoenas to several high-ranking officers of the Pennsylvania Public School Employees Retirement System as part of an investigation into possible "honest services" fraud and wire fraud, Spotlight PA reports. The investigation has focused on an inconsistent financial performance report from the end of last year and several real estate purchases around PSERS' headquarters in Harrisburg.

PSERS spent $13.5M starting in 2017 on real estate in the immediate vicinity of its headquarters, which is also a short walk from the Pennsylvania Statehouse and Harrisbug's Amtrak station. Three million dollars of that total went into the acquisitions of the properties themselves; the rest was spent on a combination of management fees, demolition of a former newspaper plant on one of the properties and undisclosed ends. None of the executives subpoenaed have been formally charged with wrongdoing, Spotlight PA reports.

In order to charge PSERS or its executives with "honest services" fraud, prosecutors would need to prove that some form of illegal payment, whether a bribe or kickback, occurred with money invested by the public school teachers and staff into the fund for their pension, Spotlight PA reports. Wire fraud refers to the use of email or phones to conduct fraudulent business.

The pension fund's year-end report for 2020 contained an inflated number for its investment performance, one that barely cleared the threshold of preventing additional payments from current public school employees to cover pension payments, Spotlight PA reports. After state officials questioned the figures, PSERS adjusted the numbers downward in March.

PSERS has hired three law firms over the investigation, including Philadelphia-based Morgan, Lewis & Bockius, and has spent $1M of taxpayer money in legal defense fees. In documents reviewed by Spotlight PA, Morgan Lewis attorneys warned of "catastrophic consequences" of the investigation, while D.C.-based Pillsbury Winthrop Shaw Pittman attorneys warned the PSERS board that an internal source could be feeding information to the FBI. Pillsbury also told PSERS that the FBI could be investigating a potential coverup.