Securities Law Prof Blog

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

Thursday, September 17, 2009

New York AG Announces 4 Private Equity Firms Agree to End Pay-to-Play Practices

New York Attorney General Cuomo announced that four leading private equity firms, HM Capital Partners I (“HM Capital”), Levine Leichtman Capital Partners (“Levine Leichtman”), Access Capital Partners (“Access”), and Falconhead Capital (“Falconhead”) have adopted Cuomo’s Public Pension Fund Reform Code of Conduct to reform the public pension fund system and to end pay-to-play practices nationwide. Under the terms of the agreements announced today, the firms will return over $4.5 million associated with New York State Common Retirement Fund (“CRF”) investments. These funds will be returned to the CRF for the benefit of the pension holders.

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 also bars 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 in the management of public pension funds.

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