NY Comptroller Bans Placement Agents

NEW YORK (Reuters) – New York State Comptroller Thomas DiNapoli on Wednesday said he has banned placement agents, paid intermediaries and registered lobbyists from playing any role in winning business for the $122 billion state pension fund.

“The Hevesi administration violated the public trust,” DiNapoli said in a statement, referring to former state comptroller Alan Hevesi.

New York State and the U.S. Securities and Exchange Commission are in the midst of a probe of Hevesi’s administration for allegedly accepting kickbacks from money managers.

DiNapoli said he has appointed law firm Day Pitney LLP, which specializes in pension issues, and Pension Consulting Alliance, an independent consulting firm, to help with a review of the fund’s investments with entities that are part of the probe.

The investigation is being led by New York Attorney General Andrew Cuomo and SEC officials.

“We’ve worked to implement reforms that will help restore integrity and trust in this office,” said DiNapoli. “Banning placement agents and lobbyists from involvement in investments is the next step, and it’s a big step.”

The comptroller also said he is drafting legislation to codify reforms of pension fund placement policies that he has implemented since taking office in 2007.

DiNapoli said he is further pushing lawmakers to support his bill for public campaign financing for the state comptroller race in 2010.

“We can take pay-to-play out of the equation by drastically limiting what donors can contribute,” he said.

The first criminal charges in the pension fund probe were brought last month by Cuomo, who accused Hank Morris, Hevesi’s top fundraiser, and David Loglisci, pension investment chief from 2003-2006, of taking million-dollar kickbacks from money manager firms.

The two men, whose lawyers say they are innocent, also face civil charges from the SEC.

More than 20 investment deals made by the state’s pension fund were “tainted” by the kickbacks, New York Attorney General Andrew Cuomo said at the time. The list of companies involved includes The Carlyle Group CYL.UL and other private funds.

Last week, hedge-fund manager Barrett Wissman pleaded guilty to a felony for “his role in the pay-to-play scheme” and agreed to forfeit $12 million and serve as a witness in the continuing investigation. Criminal charges were also filed against the former head of New York’s Liberal Party, Raymond Harding, who was charged with taking more than $800,000 in illegal fees. See [ID:nN17338042]

Harding’s lawyer has said he is innocent.

On Tuesday, New York City said it is probing whether private equity fund Quadrangle “intentionally misled” it about placement agents used to win business from the city pension funds. For more, see [ID:nN21481237].

Quadrangle was formerly led by Steven Rattner, who is now the U.S. auto bailout chief.

(Additional reporting by Joan Gralla and Megan Davies in New York) (Reporting by Ciara Linnane; Editing by Theodore d’Afflisio)