UPDATE 1-NY Cuomo: 4 firms OK pay-to-play ban for pension

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By Joan Gralla

NEW YORK, Sept 17 (Reuters) - Four private equity firms adopted an anti-graft code of conduct that bars them from using politically connected middlemen to win business from the New York state pension fund, state Attorney General Andrew Cuomo said on Thursday.

HM Capital Partners I, Levine Leichtman Capital Partners, Access Capital Partners, and Falconhead Capital, who all signed the agreement, will also return $4.5 million to the state's public pension fund, Cuomo said.

The Democratic attorney general has spent more than two years probing how investment firms won business from the $116 billion state pension fund under former state comptroller Alan Hevesi.

The probe, and a parallel investigation by the U.S. Securities and Exchange Commission, has swept up high-profile firms, including the Carlyle Group [CYL.UL] and Quadrangle, the firm co-founded by Steven Rattner.

Rattner left his post as head of the U.S. government's auto task force in July after Cuomo intensified his probe of Quadrangle.

HM Capital and Falconhead had hired Henry Morris, Hevesi's top political advisor, through Morris's broker-dealer, Searle & Co. Morris and David Loglisci, the former top pension investment officer, in March were charged with securities fraud, bribery, money laundering and other crimes.

Lawyers for both men have said they are innocent and Cuomo told reporters on a telephone call no trial date had been set.

Levine Leichtman hired Los Angeles-based broker-dealer Wetherly Capital Group as a placement agent to help it win business managing the New York pension. But Wetherly broke its agreement with Levine Leichtman and hired Morris, Cuomo said.

Access Capital hired former hedge fund manager Barrett Wissman, who in April pleaded guilty to a felony in the probe. Wissman secretly paid Morris without telling Access, the attorney general said. (Editing by Padraic Cassidy)