Private equity firms join Cuomo's pension reform code

John O'Brien Sep. 17, 2009, 3:00pm


NEW YORK (Legal Newsline) - Four private equity firms have agreed to return $4.5 million and adopt New York Attorney General Andrew Cuomo's code of conduct.

HM Capital Partners, Levine Leichtman Capital Partners, Access Capital Partners and Falconhead Capital will return the money to the New York State Common Retirement Fund. Seven such firms have now signed Cuomo's code.

The Securities and Exchange Commission in July proposed making Cuomo's code nationwide.

"(M)omentum is building in the industry to make our code the national standard to eliminate pay-to-play in public pension funds across the country," Cuomo said.

"By signing on today, these four firms have shown their leadership in the alternative investment community. Today's announcement demonstrates that our reform agenda continues to ripple across the industry, and represents an important next step in ridding public pension funds of corruption and conflicts of interest."

The code of conduct bans campaign contributions to those who control public pension funds.

It also bans investment firms from using placement agents, lobbyists or other third-party intermediaries.

HM Capital and Falconhead had hired Hank Morris. Cuomo started his investigation by digging into former Comptroller Alan Heyesi and his chief political aide, Morris.

Both agreed to pay morris through a company with which he was affiliated, Searle & Co., to obtain investments totaling more than $100 million for the pension fund, then Morris pocketed much of the payments to Searle, Cuomo said.

Criminal charges have been filed against Morris.

Levine Leichtman retained a broker that agreed to pay Morris 40 percent of any placement fees the broker retained. Access hired Barrett Wissman as a finder for the CRF, then Wissman secretly agreed to pay Morris 45 percent of any fees he might earn on a CRF investment, Cuomo said.

The Carlyle Group, a private equity firm first to sign, agreed to pay $20 million, while Riverstone Holdings agreed to pay $30 million.

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