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New York makes ‘pay-to-play’ ban permanent

New York state will enforce a permanent ban on elected officials, lobbyists and all placement agents, whether paid or unpaid, from doing business with New York’s giant pension fund.

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Governor Andrew Cuomo has directed New York’s insurance department to issue permanent regulations banning placement agents, lobbyists and elected officials from conducting business with the state’s $140 billion pension fund. The new regulations also will contain new provisions that will permanently ban “pay-to-play” at the pension fund.

The new regulation will prohibit improper relationships between pension fund officials and an investment firm's personnel, “revolving door” employment by investment firms of former public pension fund officials and employees and improper gifts by investment firms to public pension fund employees. The regulation also will ban investment firms that directly or indirectly make campaign contributions, charitable contributions, or gifts to the comptroller.

Previously, the insurance department issued temporary regulations as a result of Cuomo's investigation of the state pension fund as attorney general. The temporary regulations will be made permanent.

“It is long past time that we learned the lessons of the [Alan] Hevesi case and made permanent changes to our system that will stop the culture of corruption,” Cuomo said in a statement. “The pension fund should be kept pure, and money belonging to taxpayers should not be the play-thing of elected officials.

Former state comptroller Alan Hevesi recently was sentenced to up to four years in prison for taking part in an elaborate scheme, where he admitted to receiving campaign contributions and free trips in exchange for helping a money manager get a $250 million pension fund commitment. He resigned in 2006.

Hevesi worked with his chief political advisor Henry Morris to facilitate the approval of certain proposed alternative investments to generate fees for Morris or individuals chosen by Morris. Through this scheme, Morris promoted more than $5 billion worth of public pension fund securities that brought him millions in fees.

Morris was sentenced in February to 16 months to four years after pleading guilty in November to a felony. Morris forfeited $19 million and is banned permanently from the securities industry in New York.