Key Takeaways
- • Four private-equity firms—Falconhead Capital, HM Capital Partners, Levine Leichtman Capital Partners, and Access Capital Partners—collectively agreed to return more than $4.5 million to New York's state pension fund to settle allegations in a pay-to-play corruption investigation.
- • The settling firms, which were not formally charged with wrongdoing, agreed to cease using placement agents to solicit public pension fund business and to adopt a code of conduct drafted by New York Attorney General Andrew Cuomo.
- • The New York pension fund investigation has expanded to multiple states and has produced two guilty pleas and criminal charges against four defendants, including Hank Morris, a campaign strategist and top political adviser to former state comptroller Alan Hevesi.
- • Falconhead Capital and HM Capital allegedly made payments to Morris through a broker-dealer in exchange for New York pension fund awards, according to an indictment issued earlier in 2009.
- • The settlement reflects regulatory momentum toward reforming public pension fund management practices nationally, with seven firms now settled, including private-equity giant The Carlyle Group.
Summary
Four private-equity firms have agreed to settle their involvement in New York state's pay-to-play pension fund corruption investigation, returning a collective $4.5 million to the state's pension fund. The firms—Falconhead Capital, HM Capital Partners, Levine Leichtman Capital Partners, and Access Capital Partners—were identified in the probe but not charged with wrongdoing. Under the settlement terms announced by New York Attorney General Andrew Cuomo on September 17, 2009, the firms committed to eliminating their use of placement agents to secure public pension fund business and to adopt a standardized code of conduct.
The investigation centers on allegations that investment managers paid kickbacks and bribes to public officials and their associates in exchange for lucrative awards to manage pension fund assets—a practice informally known as pay-to-play. Cuomo emphasized that while the practice remains widespread, the accumulating settlements signal growing momentum toward systemic reform of pension fund management practices beyond New York. The investigation has expanded into several states and has resulted in two guilty pleas and criminal charges against four defendants to date.
Among the charged defendants are Hank Morris, a nationally recognized campaign strategist who served as top political adviser to former New York state comptroller Alan Hevesi, and David Loglisci, a former aide to Hevesi. Both have pleaded not guilty. According to an indictment filed earlier in 2009, Falconhead Capital and HM Capital allegedly made payments to Morris through the broker-dealer where he worked in consideration for receiving New York pension fund awards. The settlement brings the total number of firms settled in the case to seven, including major private-equity firm The Carlyle Group, underscoring the investigation's scope and impact on institutional investment practices across the alternative asset management industry.
The investigation centers on allegations that investment managers paid kickbacks and bribes to public officials and their associates in exchange for lucrative awards to manage pension fund assets—a practice informally known as pay-to-play. Cuomo emphasized that while the practice remains widespread, the accumulating settlements signal growing momentum toward systemic reform of pension fund management practices beyond New York. The investigation has expanded into several states and has resulted in two guilty pleas and criminal charges against four defendants to date.
Among the charged defendants are Hank Morris, a nationally recognized campaign strategist who served as top political adviser to former New York state comptroller Alan Hevesi, and David Loglisci, a former aide to Hevesi. Both have pleaded not guilty. According to an indictment filed earlier in 2009, Falconhead Capital and HM Capital allegedly made payments to Morris through the broker-dealer where he worked in consideration for receiving New York pension fund awards. The settlement brings the total number of firms settled in the case to seven, including major private-equity firm The Carlyle Group, underscoring the investigation's scope and impact on institutional investment practices across the alternative asset management industry.
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