Do Campaign Contributions Help Win Pension Fund Deals?

Carlyle backed Cuomo's bid "to implement reforms that usher in a new era of transparency and accountability into the pension fund investment process." The firm said in a news release that it would file a lawsuit seeking $15 million in damages from Morris and the brokerage where he worked "for the harm" they caused Carlyle. Company spokesman Christopher Ullman declined to say whether the lawsuit has been filed.

Commenting on the campaign donations, Ullman said, "These contributions were given by Carlyle employees on their own behalf and were properly disclosed to the public." The firm now has a $300 limit on contributions to state or local officials, said Ullman, who added that the giving must be pre-approved by Carlyle's compliance officer.

Blackstone contributions

Officials of the Blackstone Group have similarly contributed to pension fund incumbents and candidates. The firm's chairman is co-founder Stephen Schwarzman, a former Lehman Bros. executive. Co-founder Peter Peterson retired as Blackstone's senior chairman in 2008.

Campaign finance records show Schwarzman; his wife, Christine; and Peterson gave a combined $30,000 to three candidates who ran in 2002 to succeed H. Carl McCall as state comptroller. Hevesi, the winner, got the most, $21,000. Separately, McCall received $25,000 from Christine Schwarzman for his unsuccessful bid for governor.

Blackstone has received about $1.74 billion in private equity- and real estate-related investments from the New York pension fund since 1993 and has been paid about $20 million in fees, said Whalen, the state comptroller's spokesman.

The firm has not been accused in the New York investigation.

Stephen Schwarzman gave $11,000 to Pennsylvania Gov. Edward Rendell's races in 2002 and 2006, campaign finance records show. Pennsylvania's governors by law appoint six of the state pension board's 11 members.

Blackstone's relationship with the Pennsylvania pension fund dates to at least 1994 and includes more than $2.8 billion in private-equity, real estate, stock and other investments, a state summary shows. The deals have paid about $129 million in fees.

Blackstone declined to comment directly on the Pennsylvania contributions. Spokeswoman Christine Anderson said the firm adopted a policy more than three years ago that required Blackstone's general counsel to approve campaign giving.

The policy "banned outright contributions to candidates for office with direct, day-to-day oversight" of public pension funds, Anderson said.

As the New York investigation expanded this year, Anderson said Blackstone "proactively" tightened the policy to include governors and others in pension funds' command chains.

Tightening regulation

The Quadrangle Group is a global private investment firm founded by Rattner, a chief architect of the federal bailout of Chrysler and General Motors.

In 2005, the firm sought an investment from the New Mexico State Investment Council, which manages the $12 billion state endowment created by oil, gas and natural resource extraction fees.

The nine-member council, chaired by Gov. Bill Richardson, approved a $20 million Quadrangle investment in November 2005, state records show. The award has generated about $1 million in fees for Quadrangle so far, said council spokesman Charles Wollmann.

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