Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, June 11, 2009

Riverstone Settles Pay-to-Play Charges with New York AG

New York Attorney General Andrew M. Cuomo today announced an agreement with private equity firm Riverstone Holdings LLC (“Riverstone”) to reform the public pension fund investment system and to resolve Riverstone’s role in Cuomo’s investigation of corruption involving the New York State Common Retirement Fund (“the CRF”). Under the terms of today’s agreement, Riverstone will adopt Cuomo’s Public Pension Fund Code of Conduct and pay $30 million in restitution to the CRF.

Attorney General 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 would also bar 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 of the fund for personal gain.

Riverstone is the second company to sign on to Cuomo’s Code of Conduct and will pay $30 million in restitution to the CRF. This brings to $50 million the total amount collected by Attorney General Cuomo on the Carlyle/Riverstone investments. The Carlyle Group (“Carlyle”) signed onto the code last month and paid $20 million to the State of New York to resolve its role in the Attorney General’s ongoing investigation.

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