Legislative Support For Attorney General Cuomo's Pension Reform Bill Continues To Grow
BABYLON, NY (October 22, 2009) - Attorney General Andrew M. Cuomo and twenty-two Long Island Senate and Assembly members today announced increasing bipartisan support for Cuomo’s proposal to replace the sole trustee at the New York State Common Retirement Fund with a board of trustees and eliminate pay to play in the state’s public pension funds.
The legislation, entitled, “Taxpayers’ Reform for Upholding Security and Transparency” (“T.R.U.S.T.”) would also 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.
“District by district, bipartisan support for these necessary reforms keeps building as Island taxpayers grow increasingly fed up having to dig ever deeper into their wallets to cover the costs of corruption in the public pension system,” said Attorney General Cuomo. “For decades, the current system has been feeding the whims of some politically connected individuals. It’s like having one old easily-breakable lock for all of Fort Knox. It stops now. The Long Island delegation gets it. And with this reform package made into law, state workers and New York taxpayers can be confident the public pension system will be the most secure in the nation.”
Senator Brian X. Foley, Chairman of the Senate Banking Committee, said, “I am proud to partner with Attorney General Cuomo in taking on a pension system that is in dire need of reform. As the sponsor of this critical legislation, I look forward to working with my colleagues and leaders across the state in making fundamental changes that ban “pay to play” and create a more open and secure system that truly safeguards the pensions of hard-working New Yorkers from Niagara Falls to Montauk Point.”
Senator John J. Flanagan said, “The residents of New York State deserve to have a system they can have faith in and today’s announcement is a great step towards restoring the integrity that taxpayers need and rebuilding the system to protect the investment of our retirees. By proposing this legislation, Attorney General Cuomo has provided everyone in state government with a great starting point in the fight to restore the public’s trust in our pension system. I look forward to working with him on finding a solution that will get the support of both the Senate and the Assembly.”
Assembly Member and Deputy Speaker Earlene Hooper said, “Attorney General Cuomo’s groundbreaking reform legislation, T.R.U.S.T., will protect the State pension fund from unscrupulous individuals. I will work with the Attorney General to make sure this important bill becomes law.”
Senate Republican Leader Dean Skelos said, “Legislation is needed to reform the oversight of the pension system, strengthen accountability and prevent the kind of abuses that have put the fund at risk. The people who depend on the fund need to have trust and confidence in the integrity of the pension fund and know that it will not be jeopardized in the future.”
Additional statements in support from the Long Island delegation can be found below.
The T.R.U.S.T. Act 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.
Under the legislation, board members would be subject to stringent guidelines. They each would have fiduciary responsibilities regarding the fund, would be subject to strict conflict of interest policies, and would be banned from service if they had a financial relationship with any investment firm doing business with the fund. Moreover, board members, investment firms, and licensed professionals that violate the legislative regulations could be subject to criminal prosecution.
• 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.
T.R.U.S.T. 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 Morris and 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.
Long Island lawmakers supporting the reforms include:
Senator Owen H. Johnson said, “I applaud Attorney General Cuomo’s efforts to remove corruption and malfeasance in the New York State pension system that existed under the former State Comptroller’s administration. I look forward to working with the Attorney General, Comptroller Tom DiNapoli and my colleagues in the Senate to enact a law that will protect the hard working pensioners who rely upon the pension system for their economic survival.”
Assembly Member Robert K. Sweeney said, “Attorney General Cuomo’s proposal is a step in the right direction. I look forward to helping to usher through much needed reform.”
Senator Kenneth P. Lavalle said, “Trust is exactly what is needed to assure people that their retirement funds are secure and protected. That is why the T.R.U.S.T. initiative being put forth by Attorney General Cuomo makes perfect sense. This measure establishes prohibitions that will safeguard our public pension funds, increase transparency of the investment process, and protect the funds from fraud and abuse.”
Assembly Member Harvey Weisenberg said, “I support the concept of the legislation because we found many problems that exist. Working with Attorney General Cuomo and Comptroller DiNapoli we will help better protect and provide more integrity in the pension system.”
Senator Kemp Hannon said, “Confidence in the management of the pension system must be achieved. Transparency and accountability have been too easy eluded. The process of investment decision needs to have checks and balances instilled throughout.”
Assembly Member Fred W. Thiele, Jr., said, “It is imperative that public trust be restored at all levels of State government. The state pension fund is paramount in that regard. The Attorney General has proven his effectiveness in rooting out corruption wherever he finds it. His T.R.U.S.T legislation is just the latest example of his commitment to good government. I look forward to working with him and the State Comptroller to gain passage of this meaningful reform.”
Senator Carl L. Marcellino said, “To his credit, Attorney General Cuomo has led the charge to uncover costly abuse in our current Pension system. His new legislation is an outstanding first move in an overdue effort to safeguard New York taxpayers from corruption and fraud. It is imperative that we work together to ensure the integrity of the retirement system and protect the fund for all current and future retirees.”
Assembly Member Thomas W. Alfano said, “People have lost faith with government on all levels. For that reason alone, we need to bring increased accountability and transparency to government. This is a great step in doing just that. That's why I’m standing with Attorney General Cuomo in a bipartisan coalition to push for the enactment of T.R.U.S.T. that will reform our pension systems now.”
Senator Charles J. Fuschillo, Jr., said, “I am supportive of Attorney General Cuomo’s efforts to create better safeguards of the State retirement system. Investigations conducted by the Attorney General’s Office found numerous examples of corruption and pay-to-play within the pension system under former Comptroller Alan Hevesi’s administration. Improving transparency, preventing pay-to-play through new disclosure requirements from investment firms doing business with the retirement system, and creating a board of trustees to manage the retirement fund are all steps that will better protect the integrity of the State’s pension fund. I thank the Attorney General for introducing this legislation.”
Assembly Member Patricia A. Eddington said, “I applaud Attorney General Cuomo for pushing forward so badly needed pension reforms. I look forward to working with my colleagues in the Legislature, Comptroller DiNapoli, and other partners in government to make sure it becomes law.”
Senator Craig M. Johnson, Chairman of the Senate Committee on Investigations & Government Operations, said, “This is a bold step toward ending corruption in the public pension system. Strong reforms, such as those offered by Attorney General Cuomo and my good friend Senator Foley, will bring much needed transparency and accountability to protect one of the largest pension funds in the world. I look forward to working with Attorney General Cuomo and my colleagues in the Legislature to make sure this important legislation becomes law.”
Assembly Member Philip R. Ramos said, “I want to congratulate Attorney General Andrew Cuomo for his leadership on this issue. I look forward to working with my colleagues to reform the state’s pension system and rebuild our trust in a system that looks out for the betterment of everyone involved.”
Assembly Member Joseph S. Saladino said, “Clearly, reform in Albany is the priority of the day. I compliment all efforts to bring reform to our State, boost the confidence of taxpayers and push to make New York a more affordable place to live. As Attorney General Cuomo pushes for reform, I believe all leaders in Albany should join forces and make compromises to help taxpayers.”
Assembly Member Ginny A. Fields said, “Thanks to Attorney General Andrew Cuomo’s leadership, we will strengthen our laws to protect the State’s public pension fund. Working with my colleagues in government, I will fight to make sure these important reforms become law.”
Assembly Member Rob Walker said, “This ongoing fraud of the State pension fund must be stopped. I will work with Attorney General Cuomo to enact legislation that will help end the practice of corruption.”
Assembly Member Charles D. Lavine said, “I have no doubt that Attorney General Andrew Cuomo and Comptroller Tom DiNapoli will work together to guarantee the integrity and protection of our state retirement fund and I look forward to working with them to accomplish that goal.”
Assembly Member Philip M. Boyle said, “This bipartisan legislation will go a long way toward protecting the hard-earned pensions of our New York State employees. The Board of Directors overseeing the fund will bring much needed investment expertise during difficult economic times such as these, while the strengthened ethics laws will punish those who would enrich themselves at the expense of our state workers and taxpayers.”
Assembly Member Michael Fitzpatrick said, “Increasing penalties for wrongdoing and ending the pay to play culture is a big step in the right direction. I look forward to working with my colleagues and the Attorney General to make sure we enact the toughest law possible.”
Town of Babylon Supervisor Steve Bellone said, “Attorney General Cuomo’s commitment to protecting all New Yorkers is commendable. I am proud that he has come to Babylon today to discuss how we can reform and improve our state pension system in a bipartisan way.”