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Review finds NY pension fund cleaned up after pay-to-play scheme
February 19, 2013 / 9:17 PM / 5 years ago

Review finds NY pension fund cleaned up after pay-to-play scheme

Feb 19 (Reuters) - New York state’s $150 billion public pension fund, the third largest in the United States, has mostly bounced back from a corruption scandal that ousted its former trustee, according to an outside review.

The fund is well-run, transparent and ethically sound, according to Funston Advisory Services. The firm’s report was dated Feb. 4 but released on Tuesday.

“This review is a clear validation that we’re on the right path,” New York State Comptroller Thomas DiNapoli said in a telephone call. As comptroller, DiNapoli is the sole trustee and manager of the New York State Common Retirement Fund, which has more than 1 million members.

DiNapoli was tasked with taking over the comptroller’s office after his predecessor, Alan Hevesi, resigned in 2006 and later pleaded guilty for his role in the pension “pay to play” scheme.

Hevesi admitted accepting nearly $1 million in benefits from a Los Angeles-based money manager who got $250 million in pension fund money to invest. Hevesi went to prison in April 2011 and was paroled this past December.

After the scandal, DiNapoli banned placement agents and took other measures to clean up the fund, including a new ethics program, new standards for conflicts of interest and monthly public disclosure of investment transactions.

Still, the fund lacks staffers in several areas, the review found. It needs more investment staff for certain asset classes, and the risk and compliance functions are also understaffed, the review found.

DiNapoli said the fund has been running a lean operation as the economy recovers.

The fund also lost some employees due to turnover after the corruption scandal, but it is planning on boosting staff levels now that new Chief Investment Officer Vicki Fuller is in place, DiNapoli told Reuters.

The two largest U.S. public pension systems are the $254 billion California Public Employees’ Retirement System and the $154 billion California State Teachers’ Retirement System.

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