N.Y. Pension Officials Move to Ban Placement Agents

Officials overseeing the pension systems of New York State and New York City took steps to ban the use of placement agents in the wake of criminal indictments by the state's attorney general for alleged pay-to-play schemes.

State Comptroller Thomas DiNapoli, who is the sole trustee of New York's $122 billion pension system, imposed a ban on the involvement of placement agents, paid intermediaries, and registered lobbyists in investments by the state Common Retirement Fund.

New York City Comptroller and mayoral candidate William Thompson Jr., who is the custodian of the city's five pension funds and a trustee on four of the funds, called for a similar ban.

Attorney General Andrew Cuomo has indicted two former officials who served under former state Comptroller Alan Hevesi - Henry "Hank" Morris and David Loglisci - for allegedly orchestrating a scheme to extract kickbacks on investments by the state pension fund. He has also charged Raymond Harding with taking kickbacks in the form of placement fees for political favors.

Cuomo applauded Thompson and DiNapoli's actions as positive actions and said he would expand his investigation of the state pension system to cover the city's as well.

"Our investigation has revealed that the system is fraught with peril and prone to abuse," Cuomo said in a press release. "We will be investigating whether improper or illegal action was taken by placement agents in connection with investments in the city pension system."

Cuomo also said that the Carlyle Group has agreed to ban the use of placement agents on public pension fund transactions.

The announcements came as revelations surfaced that the Quadrangle Group, the former firm of Steve Rattner, an adviser to President Obama on the auto industry, paid a placement fee to Morris.

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