HELENA — Gov. Brian Schweitzer has ordered an investigation of the board overseeing Montana’s largest public employee pension fund, saying it may have violated state law when it hired a new director for the debt-ridden fund late last month.

Schweitzer has asked the Public Employees Retirement Board to rescind its offer to the new director and reopen the hiring process.

The board hired Terry Teichrow, a grant writer in the state Office of Public Instruction and a former president of the very board that hired him.

“My concerns as to the adequacy and quality of the (hiring) process are underscored by the fact that Montana’s public employees’ retirement system is facing a serious financial shortfall, and the proper fiscal management of the system is of utmost importance,” he wrote in a letter Thursday to the board’s president, Carole Carey.

Carey, of Ekalaka, who is clerk of District Court in Carter County, refused to comment Friday on the governor’s letter. She said the board will address it at a special meeting next Wednesday in Helena.

Schweitzer said the board might have had a flawed hiring process, and may have failed to properly advertise the position of executive director of the Public Employees Retirement Administration, which administers public pension funds worth $4 billion.

The largest of these funds the Public Employees Retirement System (PERS) has a potential deficit of more than $500 million.

“We have grave concerns that the recent selection process used by the (board) in selecting a new executive director was truly open, or impartial, or followed established hiring policies,” added David Ewer, the governor’s budget director.

Schweitzer said he has appointed Ewer and two state attorneys, Ann Brodsky and Vivian Hammill, to investigate the board’s hiring process. Brodsky works in the governor’s office and Hammill is an attorney for the state Department of Administration.

The governor said this three-person team will report back to him by the end of November, at which time he’ll decide whether to make any recommendations.

Schweitzer’s letter comes two weeks after the Public Employees Retirement Board voted to hire Teichrow as executive director. Teichrow works with federal education funds at OPI.

The board, which is appointed by the governor, oversees eight public pension funds. A majority of the board members were appointed by governors preceding Schweitzer.

Teichrow could not be reached for comment Friday.

The Schweitzer administration has made it a top priority to fix financial problems with PERS and the Teachers Retirement System, which is facing its own possible deficit of $900 million.

A combination of poor investment returns earlier this decade and ill-advised increases in benefits for retirees have caused the potential $1.4 billion shortfall.

In September, former Public Employees Retirement Administration Executive Director Mike O’Connor retired.

Ewer said Friday he met with the PERS board six weeks ago, telling members the administration wanted to help advise on the hiring of a new director.

“It is vital that the (board) have the best-qualified executive director,” he said.

A few weeks later, the board had chosen finalists for the job, and notified Ewer six days before it was holding a meeting at which finalists would be interviewed.

Ewer said he would be out of town for the meetings Oct. 27-28, and asked to have one of his deputies, Judy Paynter, attend the interviews. The board refused to allow Paynter to attend, he said and had told Ewer that if he attended, he could not ask any questions.

He said the administration was surprised to learn last week that the board had already decided to hire Teichrow.

Ewer contrasted the board’s action with that of the state Board of Investments, which recently used a national search and spent a year before deciding on a new chief investment officer.

Earlier this summer, Schweitzer brought together leaders of the Board of Investments, the PERS Board and the Teachers Retirement System Board, saying they need to work more closely together to solve the pension crisis and make sure it does not happen again.

The Board of Investments decides how to invest the public employee pension funds.

Schweitzer and Ewer said the Public Employees Retirement Board’s hiring process may have violated state open meetings laws, because the interviews sessions were not properly noticed, and that the board may have not properly applied rating standards and screening processes to the applicants for the job.

“We have concerns about the process and we have a very active investigation,” Ewer said.