The Carlyle Group, one of the nation’s biggest and most prominent private equity funds, will pay $20 million to resolve accusations of pay-for-play ties to a New York state pension fund. In addition to the $20 million settlement, Carlyle employees are banned from making any campaign contributions to public officials who have clout over pension fund investment decisions.
D.C.-based Carlyle Group is one of several firms linked to a two-year investigation by New York Attorney General Andrew Cuomo over possible illegal payments to influence investment decisions of the New York State Common Retirement Fund. In March, Hank Morris, the top political aide to former New York State Comptroller Alan Hevesi, was indicted, as well as the pension fund’s chief investment officer David Loglisci, on charges the duo asked for and received kickbacks from companies that sought access to public pension fund investment dollars.
Carlyle paid $13 million to Morris for his help in influencing the New York State Retirement Fund, which ultimately invested more than $730 million with the equity fund.
As reported May 18 by Bloomberg, Carlyle’s settlement makes it the first money manager to adopt what NYAG Cuomo calls a new “code of reform” for the municipal-pension market. The code, which is designed to create greater transparency and accountability over the pension fund investment process, prohibits money managers from conducting business with a public pension plan for two years after making political donations to officials who have influence over the fund’s investment decisions. A similar idea was proposed by the Securities and Exchange Commission (SEC) in 1999, but went nowhere following opposition from politicians and investment industry insiders.
Carlyle’s May 18 settlement takes the legal heat off in terms of possible criminal charges, since the company and its executives will not be subject to any criminal liability. Cuomo is, however, continuing to investigate Riverstone Holdings LLC, a New York private equity firm that has a joint venture with Carlyle. Funds managed by Carlyle alone or with Riverstone received about $730 million in investment commitments from the New York fund, according to Bloomberg.
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