SEC widens kick-back probe to examine pensions, financial firms

Goldman, Credit Suisse, UBS and Merrill Lynch are reportedly among the firms from which the US financial regulatory agency has requested information about work done in exchange for fees.

The US Securities and Exchange Commission has asked more than two dozen pension fund managers, placement agents and financial firms for information on fees related to the placement of funds with public pensions.

“The requests are part of our broader ‘pay-to-play’ investigation,” SEC spokesman John Nester said in a statement.

The Wall Street Journal has reported some of the financial firms included in the information request include Goldman Sachs, Credit Suisse, UBS and Bank of America Merrill Lynch.

“The SEC is interested in finders' fees and other payments, and the work done in exchange for those payments,” a spokesman told the Wall Street Journal.

Andrew Cuomo, New York’s attorney general, subpoenaed more than 100 investment firms and their placement agents in early May in a hunt for evidence of illegal brokering of public pension capital.

The SEC and Cuomo have ramped up their investigation at a time with the US federal government has also joined in on the hunt.  The US attorney’s office in Albuquerque, New Mexico, issued a subpoena at the end of April for documents relating to the investment activities of the New Mexico State Investment Council, an $11.8 billion endowment with ties to the pay-to-play scandal. New Mexico SIC has not been accused of wrongdoing.

While none of the investment firms named in complaints relating to the scandal are accused of wrongdoing, The Carlyle Group agreed to pay $20 million and sign on to a code of conduct created by Cuomo to “resolve its role” in the scandal.

Cuomo has indicted six people in connection with the scandal, including the alleged ringleaders Henry Morris, a former associate of former New York comptroller Alan Hevesi, and David Loglisci, former chief investment officer of the $109 billion New York State Common Retirement Fund.

Loglisci would allegedly strong arm investment firms into paying sham finder’s fees to Morris and others involved in the scheme in exchange for commitments from the pension. One firm, Aldus Equity, allegedly was hired to manage a multi-million dollar emerging managers’ fund for New York Common as long as it kicked-back fees to Morris and his associates. Aldus’ founder, Saul Meyer, has been arrested and indicted in the scheme but has denied any wrongdoing.