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09-19-09
Albany, NY
Special Report
Four leading NY private equity firms to adopt code of
conduct and eliminate pay-to-play
Attorney General Andrew Cuomo
announced that four leading private equity firms, HM Capital
Partners I (“HM Capital”), Levine Leichtman Capital Partners
(“Levine Leichtman”), Access Capital Partners (“Access”),
and Falconhead Capital (“Falconhead”) have adopted Cuomo’s
Public Pension Fund Reform Code of Conduct to reform the
public pension fund system and to end pay-to-play practices
nationwide. Under the terms of the agreements announced
today, the firms will return over $4.5 million associated
with New York State Common Retirement Fund (“CRF”)
investments. These funds will be returned to the CRF for the
benefit of the pension holders.
“With
seven firms now having signed our Code of Conduct, momentum
is building in the industry to make our Code the national
standard to eliminate pay-to-play in public pension funds
across the country,” said Attorney General Cuomo. “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.”
Cuomo’s
Code of Conduct bans investment firms from hiring,
utilizing, or compensating placement agents, lobbyists, or
other third-party intermediaries to communicate or interact
with public pension funds to obtain investments. To avoid
pay-to-play schemes, the Code prohibits investment firms
(and their principals, agents, employees and family members)
from doing business with a public pension fund for two years
after the firm makes a campaign contribution to an elected
or appointed official who can influence the fund's
investment decisions.
This
provision also bars all firms currently doing business with
the pension fund from making such campaign contributions.
Investment firms must also disclose any conflicts of
interest to public pension fund officials or law enforcement
authorities, to increase transparency and avoid abuse in the
management of public pension funds.
Of the firms signing today,
two of them, HM Capital and Falconhead, hired Henry (“Hank”)
Morris, the chief political aide to then-Comptroller Alan
Hevesi, through his broker-dealer to obtain CRF
investments. Both Levine Leichtman and Access hired finders
who split fees with Morris unbeknownst to Levine Leichtman
or Access.
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