Carlyle Group resolves N.Y. pension investigation for $20M

Private-equity giant Carlyle Group has agreed to pay $20 million and make several reforms to resolve its role in a corruption investigation of the New York state pension fund that has sparked related inquiries nationwide.

Announcing the deal Thursday, New York Attorney General Andrew Cuomo said Carlyle won't face any action in his investigation of alleged improper payments made by private firms to win New York public pension system investments.

The agreement also covers Carlyle's work with other public pension plans nationally, Cuomo said.

Under the deal, Carlyle agreed to adopt a Cuomo-crafted code of conduct designed to bar investment firms from hiring lobbyists, placement agents or others who use political connections to help the firms win lucrative pension fund deals.

The code also bars firms from doing business with public pension funds for two years after making campaign donations to government officials with influence over the funds' investments.

Aimed at stopping pay-to-play schemes, the contribution ban applies to principals of investment firms, as well as their relatives, company agents and employees. It also applies to firms that currently do business with public retirement systems.

Investment firms must also disclose their contributions and any conflicts of interest to public pension fund officials or law enforcement authorities.

Cuomo said the deal would "help eliminate the conflicts of interest and corruption inherent in a system that allows people to buy access to those holding the pension fund purse strings."

He voiced hope that Congress or the Securities and Exchange Commission— which previously announced plans to weigh similar restrictions on campaign giving — applies the rules nationally.

Carlyle said it supports Cuomo's efforts to reform the pension fund investment process.

Carlyle also announced plans to file a lawsuit seeking $15 million in damages from Hank Morris, the intermediary it hired as it sought New York pension fund work, as well as Searle & Co., the Connecticut broker-dealer that employed him.

Morris was the top political adviser to former New York state comptroller Alan Hevesi, who, by law, was the sole trustee of the state's pension fund. Morris has been charged with receiving millions of dollars in illegal kickbacks for arranging pension fund investments. He has pleaded not guilty.

After hiring Morris, whose similar dealings in other states are being investigated, Carlyle received about $730 million in New York pension fund business, Cuomo said. Carlyle said it was "unaware of any improper conduct" by Morris or Searle.