Cuomo Builds Western Ny Support For Legislation To Reform State Pension Fund
CHEEKTOWAGA, N.Y. (November 2, 2009) - Attorney General Andrew M. Cuomo, along with Senator Bill Stachowski, Senator Dale Volker, Senator George Maziarz, and Assemblymembers Dennis Gabryszak, Sam Hoyt, Francine DelMonte, Mark Schroeder, Joseph Giglio, and Jack Quinn, today announced local, bipartisan support for the Attorney General’s sweeping pension reform bill, which would replace the sole trustee at the New York State Common Retirement Fund with a board of trustees and eliminate pay to play in state public pension funds.
The legislation, entitled, “Taxpayers’ Reform for Upholding Security and Transparency” (“T.R.U.S.T.”) would institutionalize Cuomo’s Public Pension Fund Reform Code of Conduct, announced earlier this year, and provide additional civil, criminal and administrative penalties and sanctions to ensure firms and individuals are held accountable for violations of the new law. The Common Retirement Fund, last valued at $116.5 billion, is the state’s largest pool of money.
“The extensive bipartisan support for T.R.U.S.T. that we’ve built across the state underscores the absolutely crucial reforms and protections this legislation promises," said Attorney General Cuomo. “The bill will fundamentally change the way our public pension fund operates and in doing so will bring trust and accountability back to a broken system.”
Senator William T. Stachowski said, “This legislative proposal is another example of Attorney General Cuomo’s unwavering commitment to the people of New York. We must reform and improve how the state pension system is managed in order to ensure that the abuses he uncovered never happen again. I am proud to support Attorney General Cuomo’s legislation.”
Senator Dale M. Volker said, “Attorney General Cuomo’s investigation into conflicts of interest in the state pension system has shown that wide reform is needed in order to protect taxpayers. His measure will implement important oversight and accountability into the system and I am proud to support this legislation.”
Assemblyman Dennis H. Gabryszak said, “Lifelong public servants depend on the state pension system. It must be kept free and clear of corruption. Attorney General Cuomo’s TRUST proposal is a positive piece of legislation that shows how government can effectively work together to protect taxpayer dollars. I applaud Attorney General Cuomo’s effort and I am proud to support the measure.”
The legislation would increase the rigor, integrity and transparency of the investment process by eliminating campaign contributions by firms investing public pension money and banning the use of intermediaries paid to open the door to public pension fund investments. The legislation would also strengthen enforcement by adding misdemeanor and felony provisions and authorizing the Attorney General to commence civil actions to enjoin ongoing violations and impose civil penalties.
- Creates a New Employees’ Retirement Fund Board (“Board”): To manage the Common Retirement Fund, the sole trustee will be replaced with a Board of Trustees composed of 13 members. The Comptroller would chair the Board and serve alongside six members appointed by the Governor, Attorney General, Temporary President of the Senate, Speaker of the Assembly, the Senate Minority Leader and the Assembly Minority Leader. The Board’s other six members are to be selected by the members of CRF. Specifically, one active member of the retirement system shall be selected by active members in the retirement system; one retired member shall be selected by retired members; one county employee shall be selected by county employees in the retirement system; one local government employee selected by local governmental employees in the retirement system; and one police or fire employee selected by the New York State and Local Police and Fire Retirement System. All members of the Board must have investment expertise and shall not have been employees of the retirement system for three years.
- Bans Placement Agents: Investment firms are prohibited from using placement agents, lobbyists, or any other third-party intermediaries to communicate or interact with public pension funds for any purpose. The prohibition does not apply to the use of consultants and investment banks to otherwise directly assist investment firms by, for example, preparing marketing materials or performing due diligence.
- Bans “Pay to Play”: Prohibits investment firms (and their principals, agents, employees and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to any board member. The prohibition also applies to candidates for such positions, but does not apply to contributions of $300.00 or less to elected officials or candidates for whom the person making the contribution can vote.
- Increases Transparency: Requires rigorous, ongoing disclosure of information relating to the identities, responsibilities and qualifications of investment fund personnel and any payments by investment firms to third-parties in connection with public pension fund matters. Also requires investment firms to promptly publish such information on their websites.
- Imposes Higher Standard of Conduct: Holds investment firms to a higher standard of conduct that avoids even the appearance of impropriety. The legislation prohibits (1) improper relationships between pension fund officials and an investment firm's personnel or agents, (2) “revolving door” employment by investment firms of former public pension fund officials and employees, and (3) improper gifts by investment firms to public pension fund employees and officials;
- Enhances Conflicts of Interest Policies: Investment firms are required to promptly disclose and cure any actual, potential and apparent conflicts of interest to public pension fund officials or law enforcement authorities where appropriate.
- Ensures Ongoing Compliance: Investment firms must certify annually that they are in compliance with key disclosure requirements.
- Strengthens Enforcement: T.R.U.S.T. institutes comprehensive and tough enforcement provisions. History teaches that self-policing is an ineffective means to safeguard State pension funds. An effective enforcement model and deterrent is imperative. TRUST provides such a model and deterrent. It creates tough new civil, criminal and disciplinary penalties and sanctions, and requires licensed professionals to report to law enforcement evidence of violations of the law. It also provides as a basis of criminal prosecution the theft of property and honest services from the retirement system, and extends the statute of limitations for a person acting in concert with a public servant.
T.R.U.S.T. would codify the Public Pension Fund Reform Code of Conduct created by Cuomo and his Office earlier this year. To date, seven firms have signed onto the Code: The Carlyle Group, Riverstone Holdings, Pacific Corporate Group, HM Capital, Falconhead Capital, Levine Leichtman Capital Partners, and Access Capital Partners. These firms collectively have agreed to return nearly $60 million associated with New York State Common Retirement Fund (“CRF”) investments; these funds will principally be provided to the CRF for the benefit of the pension holders.
For years, establishing an independent board of trustees for the Common Retirement Fund has been supported by policymakers and organizations across New York. For instance, as an Assemblyman, Comptroller Thomas DiNapoli voted in favor of a 1993 Assembly bill to create a 17-member board to oversee the CRF. Likewise, other associations with beneficiaries in the system have pushed for a board of trustees.
The legislation stems from a two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and the CRF, conducted by Attorney General Cuomo’s Office. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends.
Attorney General Cuomo’s investigation into corruption at the CRF has led to a number of criminal charges to date, including charges against Henry (“Hank”) Morris and David Loglisci, former Liberal Party Chair Ray Harding, and investment advisor Saul Meyer. Meyer, Harding, hedge fund manager Barrett Wissman, and Julio Ramirez, an unlicensed placement agent associated with Wetherly Capital, have pled guilty to Martin Act securities fraud charges for conduct related to the pension fund. Morris and Loglisci are presumed innocent until they are proven guilty in court.
Cuomo also issued subpoenas in May to over 100 investment firms and agents after his investigation found that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.
In July, the United States Securities & Exchange Commission proposed new pay to play rules that would institutionalize Cuomo’s Code of Conduct nationwide.
Buffalo-area lawmakers supporting the reforms include:
Senator George D. Maziarz said, “The Attorney General’s TRUST proposal is a positive reform measure that will increase accountability and transparency in our state pension system. I applaud Attorney General Cuomo for his efforts on this measure and I support the much-needed legislation.”
Assemblyman Sam Hoyt said, “Attorney General Cuomo’s ongoing commitment to restoring trust in state government underscores the need to reform the way the state pension system operates. We must change the environment that allowed pay-to-play politics to thrive in a taxpayer-funded system. I applaud Attorney General Cuomo’s legislation and I look forward to helping usher it into law.”
Assemblywoman Francine DelMonte said, “Thanks to Attorney General Cuomo and his foresight, we now have a proposal that will improve how our state pension system operates. I support the TRUST legislation and hope to see it enacted into law.”
Assemblyman Mark J. F. Schroeder said, “Attorney General Cuomo has once again proposed an effective solution to restore trust in state government. I am proud to endorse this legislation, as it will get rid of the pay-to-play politics that have no place in our state’s pension system.”
Assemblyman Joe Giglio said, “I applaud Attorney General Cuomo’s efforts to remove corruption in the New York State pension system. I look forward to working with the Attorney General and my colleagues in state government to continue to protect those who depend upon the pension system for their economic survival.”
Assemblyman Jack Quinn said, “The state pension system represents New York’s greatest fiscal challenge, for too long it has gone poorly managed with insufficient oversight at great cost to hardworking taxpayers. It’s refreshing to see Attorney General Cuomo taking the lead on this issue and putting forward these desperately needed reform measures.”
Cheektowaga Town Supervisor Mary Holtz said, “I am honored to host Attorney General Cuomo and our state legislators to promote this important piece of legislation. We must all continue to work together to make sure that taxpayer funds are protected. I thank Attorney General Cuomo for coming to Cheektowaga today.”