BUYOUTS-NYC pensions expand ban on placement agents

Fri Jun 13, 2014 4:07pm EDT

* Ban stems from pay-to-play scandal

* Started with PE placement agents

* Comptroller Scott Stringer announces ban

By Steve Gelsi

NEW YORK, June 13 (Reuters-BUYOUTS) - The $150 billion New York City Pension Funds approved a measure to expand a ban on placement agents from private equity funds to all investment classes, in a move that traces its roots to the pay-to-play scandals of the late 2000s.

New York City Comptroller Scott M. Stringer, elected in November on the ticket with Mayor Bill de Blasio, called the new measure "an ironclad ban on placement agents for all transactions" involving the New York City Pension Funds, a measure he said was overdue. The city's private equity portfolio is valued at more than $17 billion.

"Ending the involvement of intermediaries in pension funds' transactions will ensure that the integrity and independence of our investment decisions are beyond reproach and without conflict," he said in a prepared statement.

The New York City Pension Funds system includes five retirement pools: New York City Employees' Retirement System, Teachers' Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and the Board of Education Retirement System. The original ban on private equity placement agents dates back to April 2009.

New York State Governor Andrew Cuomo led a probe of corruption at the New York State pension system while he was attorney general. Eight people pleaded guilty in the scandal, including Elliott Broidy, founder of Markstone Capital Partners, the Los Angeles-based private investment firm.

Many of the details of the pay-to-play scandal emerged in 2009, after alleged kickbacks were paid in return for contracts to manage state pension money. Cuomo filed a 123-count indictment in March of that year in New York State Supreme Court.

Separately, New York City has yet to replace Barry Miller, former head of private equity for the Big Apple pension system, after he joined Landmark Partners last year.

(Buyouts Magazine is a Thomson Reuters publication. Editor: david.toll@thomsonreuters.com. www.buyoutsnews.com)

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