Cuomo seeks to convert NY Common to board model

New York Attorney General Andrew Cuomo has introduced legislation with a group of state senators to convert New York’s single trustee system into a system using a 13-member board of trustees.

The legislation, called “Taxpayers’ Reform for Upholding Security and Transparency”, would also codify Cuomo’s code of conduct that bans placement agents from soliciting New York’s $116.5 billion pension system for commitments to their investment firm clients.

“The model has allowed pay-to-play to flourish in a system meant to protect the retirement accounts of thousands of hard-working public employees,” Cuomo said in a statement. “To put it simply – the model doesn’t work. It’s about as sensible as having a single lock on Fort Knox.” Connecticut also uses a single trustee system.

A move to a board of trustees model would require extensive analysis to make sure the conversion is done right, and to make sure such a change would be constitutional, according to New York Comptroller Thomas DiNapoli, who is in charge of New York Common, said he supports the change.

“There are any number of issues that have to be resolved, including the make-up of a board, how board members would be selected, what is the fiscal impact and cost of the new system, and perhaps most significantly, the constitutionality of this kind of change,” DiNapoli said in a statement.

New York State Common Retirement Fund has been embroiled in a pay-to-play scandal since March. Cuomo announced a wide-ranging investigation into the scheme that allegedly involved a state political operative, Henry Morris, and the pension’s former chief investment officer David Loglisci, along with at least four other people.

The people charged in the scheme are accused of wrangling phony finder’s fees from investment firms looking for commitments from the New York pension. The investigation has spread to New Mexico and California.

Saul Meyer, founder of private equity advisor Aldus Equity, pleaded guilty earlier this week to charges that he participated in the scheme. He faces four years in prison. Other accused people who have pleaded guilty include former New York Liberal Party chairman Ray Harding, hedge fund manager Barrett Wissman and Julio Ramirez, an unlicensed placement agent once employed by the Park Hill Group and Wetherly Capital.

Also, seven private equity firms have returned about $60 million to the retirement fund for the benefit of pension holders. The firms are The Carlyle Group, Riverstone Holdings, Pacific Corporate Group, HM Capital, Falconhead Capital, Levine Leichtman Capital Partners and Access Capital Partners.

The legislation would create an Employees’ Retirement Fund Board made up of 13 members. The comptroller would chair the board and serve alongside six members appointed by the governor, attorney general, temporary president of the senate, speak of the assembly, senate minority leader and the assembly minority leader. The other six members would be selected by the retirement fund.

The rules would ban placement agents from interacting with the pension on behalf of investment firms, and would prevent investment firms that have made political donations to any board member from doing business with the pension.