New York City Comptroller William Thompson said last week that he will urge New York City pension funds to adopt the code of conduct announced earlier this month by New York Attorney General Andrew Cuomo.
Cuomo’s code bans investment firms managing pension funds from hiring placement agents, lobbyists, or other third-party intermediaries to help hire investors for the funds. The conduct stems from an alleged pay-to-play scandal involving the New York State Common Retirement Fund. A probe into the alleged scandal has resulted in the Securities and Exchange Commission filing charges against advisory firm Aldus Equity Partners and Saul Meyer, the firm’s founding principal.
“I have carefully reviewed the attorney general’s code of conduct that was recently released, and fully support the principles set forth in the code,” Thompson said.
Earlier this month, The Carlyle Group adopted the code of conduct drafted by Cuomo to resolve an investigation into its role in the alleged pay-to-play scandal. Washington, D.C.-based Carlyle also agreed to pay $20 million to the state of New York as part of the agreement.
The code, which Cuomo wants other private equity firms to adopt, also blocks a firm from managing pension money for two years if the firm, its principals, employees or family members make political contributions to elected or appointed officials who have sway over investment decisions.
According to Cuomo, before Carlyle hired Hank Morris, a former adviser to former New York State Comptroller Alan Hevesi, Carlyle had only “limited success” in getting chosen to invest part of New York Common’s $122 billion public pension fund. But after Carlyle retained Morris on the advice of a partner, New York’s pension fund committed to invest $730 million with Carlyle.
The firm then allegedly paid nearly $13 million to the Connecticut-based broker dealer Searle & Co. that worked with Morris, and Searle paid “the lion’s share” of the fees to a shell company that Morris controlled, Cuomo said.
Following the New York Common scandal, a number of pension funds nationwide have said they plan to review the use of placement agents by PE firms seeking pension fund capital. In May, the California Public Employees’ Retirement System, the nation’s largest pension fund, adopted a new policy that requires fund managers to disclose fees and other information about the placement agents they hire to seek investments from CalPERS. —Tom Ryan, Reuters and PE Week staff