Do Campaign Contributions Help Win Pension Fund Deals?

Cuomo's investigation so far has produced two guilty pleas and criminal charges against four defendants. The suspects include Hank Morris, a nationally known campaign strategist who was the top political adviser to former New York state comptroller Alan Hevesi, and David Loglisci, a former Hevesi aide at the nation's third-largest public pension fund. Both have pleaded not guilty.

The probe also is examining private investment firms' hiring of placement agents, intermediaries who at times use political connections to help win pension fund business. Several funds have recently banned the practice.

Cuomo said the alleged illegality and separate ethics issues uncovered in New York are part of "a nationwide problem."

Prominent givers

USA TODAY's analysis focused on private firms mentioned but not charged with wrongdoing in the pay-to-play cases filed by Cuomo and the SEC. The analysis, based on campaign financial disclosure data collected by the National Institute on Money in State Politics, found many contributions to pension officials in New York and elsewhere.

Prominent givers included David Rubenstein, co-founder of the Carlyle Group. He contributed $48,000 since 2002 to Hevesi's election bids, records show.

Carlyle manages nearly $1.5 billion for the New York state pension fund and received about $38.6 million in management fees since the state's 2004 fiscal year, said Robert Whalen, a spokesman for Thomas DiNapoli, New York's current comptroller.

Carlyle executives or employees also gave at least $114,375 to 18 pension fund officials or office seekers in 10 states since 1998, the campaign records show.

Those donations included at least $28,750 in California, where records of the state's main pension fund, the nation's largest, show it has committed more than $4.1 billion to investments in 28 Carlyle funds since 1996.

Carlyle surfaced in the New York investigation via its energy-related joint venture with Riverstone Holdings, a smaller private-equity firm. In 2003, a Riverstone executive learned the venture could get a New York pension fund management deal by retaining Morris "as a finder," according to the SEC's court complaint.

Carlyle agreed to the hiring even though it already "had its own in-house marketing operation and was spearheading the marketing efforts" for the joint venture, the SEC alleged.

Although the Carlyle-Riverstone team had previously managed only one small energy fund, the joint venture got a $500 million pension fund investment after hiring Morris. He was paid $4.75 million in fees on the deal, according to the SEC complaint.

In a June agreement with Cuomo's office, Riverstone agreed to pay a $30 million settlement and end its use of placement agents in seeking pension fund work.

In May, Carlyle agreed to pay $20 million and enact reforms to resolve its role in the New York case. The reforms included adoption of the Cuomo code of conduct, which bars investment firms from doing business with a pension fund for two years after making a campaign contribution to an official able to influence the fund's investment decisions.

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