Under the terms of the agreement, PCG Corporate Partners Advisors II, an affiliate of PCG, will also return over $2 million in proceeds associated with a New York State Common Retirement Fund investment to the pension fund for the benefit of the pension holders, a Cuomo news release said. The agreement resolves PCG Corporate Partners Advisors II’s (PCGCP) role in Cuomo’s investigation of corruption involving the fund.
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, the news release explains.
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.
The Attorney General’s investigation revealed that PCGCP was a minority partner in a joint venture known as Strategic Co-Investment Partners, along with New York-based hedge fund manager the Clinton Group and Barrett Wissman, a hedge fund manager and friend to the Common Retirement Fund’s then-Chief Investment Officer David Loglisci. A New York grand jury indicted the former comptroller’s fund-raiser, Henry Morris, and Loglisci on corruption and fraud charges (see New York AG Gets Delay in SEC Pay-to-Play Civil Case ).
Riverstone Holdings and Carlyle Group have also hashed out agreements with Cuomo since he began his probe into the use of placement agents for public pension funds (see Riverstone Pays $30M, Agrees to New Conduct Code ).
According to the Cuomo news release, the Attorney General's Public Pension Fund Reform Code of Conduct:
- Bans Placement Agents: Investment firms are prohibited from using Placement Agents, Lobbyists, or any other third-party intermediary to communicate or interact with Public Pension Funds for any purpose. The prohibition does not apply to the use of consultants and investment banks to otherwise directly assist investment firms by, for example, preparing marketing materials or performing due diligence;
- Bans "Pay to Play": 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 any elected or appointed official who can influence a public pension fund's investment decisions. The prohibition also applies to candidates for such positions, but does not apply to contributions of $300.00 or less to elected officials or candidates for whom the person making the contribution can vote;
- Increases Transparency: Requires rigorous, ongoing disclosure of information relating to campaign contributions, the identities, responsibilities and qualifications of investment fund personnel and any payments by investment firms to third-parties in connection with public pension fund matters. Also requires investment firms to promptly publish such information on their Web sites;
- Imposes Higher Standard of Conduct: Holds investment firms to a higher, standard of conduct that avoids even the appearance of impropriety. The Code prohibits (1) improper relationships between pension fund officials and an investment firm's personnel or agents, (2) "revolving door" employment by investment firms of former public pension fund officials and employees, and (3) improper gifts by investment firms to public pension fund employees and officials;
- Enhances Conflicts of Interest Policies: Investment firms are required to promptly disclose and cure any actual, potential and apparent conflicts of interest to public pension fund officials or law enforcement authorities where appropriate.
- Ensures Ongoing Compliance: Investment firms must certify annually to the Office of the Attorney General (and any public pension fund that asks) that they are in compliance with the Code of Conduct. Violations of the Code constitute grounds for either termination of an existing investment, disqualification from doing further business with the public pension fund for up to ten years, or both.
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