US - Four private equity firms have agreed to return over US$4.5m to the New York State Common Retirement Fund (CRF) to resolve their roles in the ongoing investigation on alleged pay-to-play practices at the scheme.
The firms are HM Capital Partners I, Levine Leichtman Capital Partners, Access Capital Partners and Falconhead Capital.
Attorney general Andrew Cuomo said those companies have also adopted his office's Public Pension Fund Reform Code of Conduct which bans investment firms from hiring, utilizing, or compensating third-party intermediaries to communicate or interact with public pension funds to obtain investments.
This is the latest in a series of settlements resulting from an investigation begun in Spring regarding the use of marketers and asset managers that allegedly made political contributions in exchange for pension fund business.
Other private equity firms who agreed to pay CRF in order to settle their role in the investigation include Carlyle, Riverstone Holdings and Pacific Corporate Group (Global Pensions, September 3, 2009).
Cuomo said: "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."
He added HM Capital and Falconhead hired Henry Hank Morris, the chief political aide to then-Comptroller Alan Hevesi, as a placement agent through his broker-dealer to obtain CRF investments, while both Levine Leichtman and Access hired finders who split fees with Morris, but without them knowing it.
HM Capital will pay $1.56m, Falconhead will pay $1.3m, Levine Leichtman will turn over $200,000 that it has recovered from its former placement agent, and Access will return approximately $1.6m in fees that it withheld from Barrett Wissman - a hedge fund manager who pleaded guilty to securities fraud charges for conduct related to CRF (Global Pensions, April 16, 2009).
HM Capital said: "We entered into this agreement as part of our longstanding commitment to greater public transparency with regard to how these pension funds are invested, and because we join the attorney general in believing that openness and honesty in the management of these funds is of critical importance both to the public and to the private equity industry."
Levine Leichtman said: "We endorse the attorney general's efforts to reform the public pension fund investment process and bring stronger standards of accountability and transparency to the private equity industry."
Access said: "We are pleased to adopt the attorney general's Code of Conduct today, which provides for greater transparency and accountability for private equity firms that solicit investments from public pension funds."
Falconhead Capital said: "Falconhead Capital has always been committed to openness and transparency, and it is with those goals in mind that we enter into this agreement today."
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