“The pension fund should be kept pure, and money belonging to taxpayers should not be the plaything of elected officials,” said the freshman Democratic governor. As state attorney general, Cuomo investigated how the selection of the $132 billion pension fund’s investment managers was corrupted.
New York’s pension funds have one trustee — the state comptroller — and the former comptroller, Alan Hevesi, on April 15 was sentenced to as long as four years in jail for accepting luxury trips from a California venture capitalist seeking to manage some of the state pension fund.
The investigation by Cuomo sparked similar probes around the United States and prompted a crackdown on placement agents or brokers, who were often able to exploit political allies to reap millions of dollars of fees from investment firms, including prominent hedge funds and private equity firms.
Cuomo ordered the state insurance department to strengthen and make permanent the temporary rules it had issued as a result of his investigation, which led to eight guilty pleas and the recovery of $170 million for taxpayers.
The new rules aim to require a “higher standard of conduct,” Cuomo said in a statement, by barring improper relationships between pension fund officials and an investment firm’s employees or agents.
Further, the rules will prohibit the so-called revolving door, which allows pension fund officials to immediately begin working for investment firms, and prevent investment firms from making improper gifts to pension officials.
The list of individuals who pleaded guilty includes Henry Morris, who was Hevesi’s top fund-raiser. The former comptroller, also a Democrat, got the benefit of $500,000 in campaign contributions from the pension kickback scheme and Cuomo’s new rules will ban investment firms that directly or indirectly make campaign contributions, charitable contributions or gifts to the state comptroller.
A Cuomo spokesman was not immediately available to say whether law firms were excluded from the new rules. New York’s comptrollers, like many trustees of large public pension funds, sometimes bring major lawsuits against corporations, seeking to recover taxpayer money lost due to wrongdoing.
Ethics watchdogs say trustees should not accept campaign contributions from law firms seeking to lead law suits for public pensions.
Cuomo also proposed ending pension benefits for any state employee or elected official convicted of a felony “in relation to their office.” Several notable New York politicians — including Hevesi — currently are still able to collect their pensions.
(Reporting by Joan Gralla; Editing by James Dalgleish)