New York Bans Finders Amidst Kickback Investigation

Apr 23 2009 | 10:52am ET

As the investigation into an alleged kickback scheme at New York State’s pension plan, the Empire State is barring the use of placement agents.

Both the state and the city will no longer use finders to allocate pension fund assets, state Comptroller Thomas DiNapoli and city Comptroller William Thompson said. New York Gov. David Paterson has directed the state’s insurance superintendent to issue an emergency rule making the restriction permanent.

Four men have been indicted in the alleged kickback scheme, including two former top aides to ex-state comptroller Alan Hevesi and the former head of New York’s powerful Liberal Party. A Texas hedge fund manager has also been charged; he pleaded guilty as part of a plea deal. According to the Securities and Exchange Commission, firms paid some $30 million in “finder’s fees” to the men, who then arranged $5 billion in allocations from the $120 billion New York State Common Retirement Fund.

DiNapoli, who succeeded Hevesi after he resigned after an unrelated felony charge, said he has hired a law firm and independent consultant to review all of the pension’s investments with firms that have been identified in the investigation, which include such industry luminaries as The Carlyle Group and Pequot Capital Management. The comptroller is also calling for strict public campaign financing for future comptroller elections.

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