Investment Fund Fined $20M For Role in Pension Scheme

THOMAS P. DiNAPOLI: Investment reforms continue.

State Attorney General Andrew M. Cuomo has reached an agreement with The Carlyle Group under which the private equity firm will pay $20 million and overhaul its business practices, a step forward in the prosecutor's on-going probe of corruption in the state pension fund.

The New York Times reported last month that state and Federal officials were looking into whether the international investment group illegally paid "placement agents" in return for their help in securing pension fund investments.

Can't Make Political Contributions

The settlement incorporates several initiatives State Comptroller Thomas P. DiNapoli has established in the state pension system. The deal with the firm states that it may not use placement agents and its executives will be barred from making political contributions to state officers or people running for those offices that oversee the pensions system.

"Since I took office two years ago, we've taken a series of steps to reform the fund," Mr. DiNapoli said in a statement. "Last month, we banned the use of any form of paid intermediaries in fund investments. Last week, I urged the [Securities and Exchange Commission] to ban campaign contributions for investment professionals."

In March, Mr. Cuomo charged that Hank Morris—former State Comptroller Alan Hevesi's political consultant and close personal friend—with the assistance of the Comptroller's Chief Investment Officer, David Loglisci, and other unnamed officials steered pension investments to firms that paid sizable fees to himself and other political allies of Mr. Hevesi "as kickbacks or rewards for political favors." Among those criminally charged besides Mr. Morris and Mr. Loglisci was former Liberal Party leader Ray Harding.

Mr. Hevesi resigned shortly after he was re-elected in November 2006 because he improperly used a state worker as a chauffeur for his seriously ill wife.

"The Attorney General's investigation continues to peel away layer upon layer of Hevesi-era abuse and misconduct," Mr. DiNapoli said.