(Reuters) – The New York State Teachers Retirement System said on Thursday it adopted pay-to-play curbs in a conduct code the state attorney general devised in a settlement with The Carlyle Group [CYL.UL].
The state teachers’ pension fund has recently been revalued at $68 billion, down from a previous asset total of $75 billion earlier this year.
Democratic State Attorney General Andrew Cuomo, who is investigating millions of dollars of kickbacks he says investment firms paid to politically connected placement agents to win pension contracts, wants all such middlemen banned, and is seeking stricter limits on campaign contributions.
About 41 percent of the $85 billion of the assets Carlyle invests is for global public pensions. A week ago, on May 14, the private equity fund reached a $20 million settlement with Cuomo for its role in his pension probe.
Carlyle had hired Henry Morris, one of the principal figures in the investigation, who has been indicted. Morris was the former Democratic state comptroller’s fund raiser. Morris’ attorney has said his client is innocent.
The private equity fund also agreed to apply Cuomo’s reforms throughout the nation, but so far, few of Carlyle’s peers or other pension funds outside of New York state have announced they will follow the attorney general’s new rules.
The New York state teachers’ fund said in a statement that after a “thoughtful review,” it was adopting “applicable” rules from Cuomo’s code, noting that, for example, it is run by an independent board that does not include elected officials.
FOR POLITICOS, A TWO-YEAR BAN
The attorney general’s new rules bar companies from doing business with public pension funds for two years after making a campaign contribution to any official who could influence the funds’ investment decisions.
“Our position is fully consistent with the attorney general’s efforts to strengthen transparency and eliminate potential conflicts of interest in dealings with potential investment officers,” the New York teachers fund added.
Thursday’s decision by the New York fund follows by two days New York City Democratic Comptroller William Thompson’s pledge to urge the five city pension funds he helps oversee to also adopt Cuomo’s code.
New York state’s separate $122 billion pension fund, which is run solely by the state comptroller, has already banned placement agents. A spokesman was not immediately available to say if it would follow the lead of the teachers’ fund.
Cuomo’s pension probe, which was joined by the U.S. Securities and Exchange Commission and at least 36 other states, has turned up the heat on the complex ties among lobbyists, lawyers and media consultants and the elected officials who manage nearly $3 trillion of public pensions in the United States.
Private equity funds have long used placement agents to open the doors to pension funds for them, but Cuomo has said these funds can still hire marketing consultants.
“You can get all the advice or technical assistance” needed, he said in a telephone call with reporters earlier this month. “There is no bona fide service in selling access.” (Additional reporting by Ciara Linnane; Editing by Jan Paschal)