Ignorance is bliss

21 April 2009 By Lauren Silva

The New York attorney general has alleged the state pension fund’s former CIO and a political adviser were part of a kickback scandal. Now the state has banned the use of finders, or placement agents, when investment firms seek funds. But the buyout shops aren t out of the woods.

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Andrew Cuomo, New York's attorney general, has alleged the former chief investment officer of the state's Common Retirement Fund, David Loglisci, and a top political adviser, Hank Morris, were part of a kickback scandal involving placement agents in private equity fund raising.

New York state banned the use of placement agents, lobbyists or other paid intermediaries in investments by the state's pension fund. Carlyle also agreed to ban the use of placement agents, Cuomo said today.

"Our investigation has revealed that the system is fraught with peril and prone to abuse", the statement said. "We will be investigating whether improper or illegal action was taken by placement agents in connection with investments in the City pension system".

"Importantly, The Carlyle Group has also agreed with our office to ban the use of placement agents in connection with public pension funds. As one of the nation's largest private equity firms, Carlyle's decision to implement this reform sets an example that we hope others in the industry will follow".

Barrett Wissman, a hedge fund executive, pleaded guilty to securities fraud and is cooperating with Cuomo's investigation of corruption at the state's pension fund, the New York Times reported.

Wissman received millions of dollars in fees for acting as a middleman between the CRF and various investment firms.

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