Cuomo
NEW YORK (Legal Newsline) - Private equity firm The Carlyle Group has decided to pay $20 million and adopt New York Attorney General Andrew Cuomo's code of conduct to settle corruption allegations.
The settlement is part of a multi-state investigation into the handling of public pension funds. Cuomo has been joined by at least 36 states, and his code of conduct bans campaign contributions to those who control pension funds.
"Our code of conduct will help eliminate the conflicts of interest and corruption inherent in a system that allows people to buy access to those holding the pension fund purse-strings," Cuomo said.
"By banning campaign contributions to those who have sway over pension funds and eliminating the third-party intermediaries that have become dens of corruption, we will ensure reform. I commend Carlyle for being the first to embrace the Reform Code and leading the industry toward critical change of the public pension investment system."
Cuomo said Carlyle retained Hank Morris s a placement agent in 2003 to obtain investments from the New York Common Retirement Fund. Morris was the chief political aide to then-Comptroller Alan Heyesi.
Carlyle obtained approximately $730 million in investment commitments from the CRF, and the company paid Searle & Company, the broker-dealer associated with Morris, nearly $13 million in placement fees, Cuomo said.
The "lion's share" of those fees were paid to a company controlled by Morris, Cuomo said.
Other aspects of Cuomo's code of conduct ban placement agents and pay-to-play scenarios.
"Carlyle was victimized by Hank Morris's alleged web of deceit," the company said in a statement.
"Carlyle intends to file a suit seeking more than $15 million in damages against Searle & Co. and Mr. Morris for the harm their wrongful actions have caused Carlyle. This amount reflects fees paid to Searle & Co. and other damages."
From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.