Feds accuse former state Treasurer Hafer of lying to agents

HARRISBURG — A federal grand jury on Thursday indicted former state Treasurer Barbara Hafer, a former Allegheny County commissioner, for allegedly concealing $500,000 in consulting fee payments in 2005 after she left the Department of Treasury.

Hafer, 72, of Indiana, Pa., served two terms as auditor general, the state's fiscal watchdog, from 1989 to 1997 and two terms as treasurer, the state's chief fiscal custodian and investment overseer, from 1997 to 2005.

Hafer's attorney, John Knorr, declined to comment. The Dickie McCamey law firm where Knorr works is expected to make a statement Friday.

U.S. Attorney Peter Smith said Hafer is charged with two counts of making false statements to federal agents when she was interviewed in May.

It's part of an ongoing FBI and IRS investigation of alleged “pay-to-play” activities in state government, federal authorities said.

Within weeks of Hafer leaving the treasurer's office, a financial firm associated with an individual identified only as “Person 1” began making payments to Hafer's firm, the indictment claims. For a year, Hafer's firm received $41,667 a month from the firm. Federal authorities said “Person 1” had a “financial relationship with multiple businesses and had relationships, including fee-sharing arrangements, with entities that provided asset management services to the Pennsylvania Treasury while Hafer served as treasurer.”

It's Department of Justice policy to name only defendants in indictments, the office said. It's done for varying reasons in federal and state indictments, ranging from protecting the identity of accomplices who might still be under investigation and security concerns to keeping names out of the news to prevent the person from being questioned, said William C. Costopoulos, a Lemoyne-based defense attorney not connected to the case.

Hafer denied to the FBI that “Person No. 1” helped with her consulting business. When shown a signed contract with Hafer & Associates LLC during an interview at the Ronald Reagan federal building in Harrisburg, Hafer denied receiving any payments, authorities said.

The indictment says “Person No. 1” donated $200,000 to support Hafer for treasurer. “Person No. 1” is believed to be Richard Ireland, 79, of Coatesville, who also was indicted by a federal grand jury. A news release on his indictment was issued 43 minutes after Hafer's. Dawn Mayko, a Smith spokesman, would not confirm it.

No one answered the door at Hafer's home in Country Club Estates, a neighborhood in White Township, Indiana County, with mature trees and well-kept lawns. The semi-detached brick, Tudor-style home is listed as the address of her financial consulting firm, Hafer & Associates LLC, which has four vice presidents, including her daughter, Bethany Hafer. Bethany Hafer could not be reached for comment.

Neighbors described Barbara Hafer as a nice woman but said they didn't really know her. One neighbor, who's renting a townhouse next door, said she introduced herself as “Barb,” but said he'd seldom seen her since he moved in.

Barbara Hafer is collecting a $48,423 annual state pension, according to the State Employees Retirement System.

In addition to the $500,000 in 2005 consulting fees, Hafer's firm received $175,000 in both 2006 and 2007, authorities said. The $500,000 represented 73 percent of her firm's revenue in 2005, federal authorities said.

As part of the pay-to-play probe, Ireland was indicted for making hundreds of thousands of dollars in secret campaign contributions to former Treasurer Rob McCord as part of a seven-year bribery scheme aimed at influencing investment decisions at Treasury and the State Employees Retirement System, federal prosecutors said.

McCord pleaded guilty last year to attempted extortion and has yet to be sentenced.

Ireland was accused of making “straw campaign contributions” to support McCord. Ireland and his related businesses reaped $10 million in fees, authorities said.

The charges against Ireland “are based on half truths, gross distortions of fact and innuendo by a desperate man,” said Ireland's attorney Josh Lock, in an apparent reference to McCord. “We look forward to bringing all the facts forward ... and the vindication of Mr. Ireland.”

Mayko, the spokeswoman for Smith, the U.S. attorney in Harrisburg, said she could not comment on whether there is a connection between the Hafer and McCord cases.

Pennsylvania Treasurer Timothy Reese issued a statement saying: “In light of the federal indictments implicating two former state treasurers, I want to reassure the public of the prudent management and safekeeping of all funds within Treasury's custodial care. While I will not comment on the ongoing legal proceedings, it is important to note that these indictments do not allege any improper use or mismanagement of public funds entrusted to Treasury.”

Hafer, a Republican at the time, unsuccessfully challenged the late Democratic Gov. Robert Casey in the 1990 governor's race. She was vilified by Casey's campaign consultants for predicting a $1 billion state deficit. The deficit turned out to be closer to $2 billion, and a massive tax hike was approved in 1991 to close the gap.

As auditor general, Hafer investigated and roundly criticized lawmakers' so-called “walking around money” for pet projects. She clashed on several occasions with Senate power broker Vincent Fumo, D-Philadelphia, who was convicted of corruption charges in 2009 for massive misappropriations of state and nonprofit funds.

In 2003, Hafer backed Democrat Ed Rendell for governor. She switched parties and became a Democrat in 2003.

Hafer previously served as an Allegheny County commissioner. She capitalized on former GOP commissioner William “Doc” Hunt calling her “the little nurse from McKeesport.” Hunt was defeated in that 1983 election. Although she worked at McKeesport Hospital, Hafer was from Elizabeth.

Hafer has been battling her stepchildren — John Pidgeon Jr., Regan Houser and Kelly Pidgeon — children of Hafer's late husband, John Pidgeon Sr., in Indiana County court since 2010. Pidgeon died in May 2008.

His children claim Hafer took advantage of their father's failing health to persuade him to remove them as beneficiaries on a nearly $875,000 TIAA/CREF retirement account, making her the primary heir. The suit claims Hafer transferred several state-managed college savings plans that John Pidgeon Sr. established for his grandchildren to her daughter, Bethany Hafer.

In court filings, she denied that her husband was in poor health when he made the beneficiary changes or that she exerted any undue influence.

The case is tentatively scheduled to go to trial March 6.

Brad Bumsted is the Tribune-Review's state Capitol reporter. Reach him at 717-787-1405 and bbumsted@tribweb.com. Staff writer Kari Andren contributed.