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Guilty Plea in NY’s Pension Scandal Highlights Corruption Concerns Elsewhere

A former New York State comptroller pleaded guilty today to one felony corruption charge for his connection to a pension kickback scandal, according to The New York Times.

The guilty plea from Alan Hevesi makes him the seventh individual — and the highest-ranking state official  —convicted in the scandal, which involves the state of New York's $125 billion pension fund. Hevesi oversaw the fund from 2003 to 2006.

We’ve reported on the pay-to-play scandal in New York and other states, flagging issues with donations and bribes to officials from investment firms angling for state business, as well as the lack of transparency surrounding the payment of placement agents —middlemen who help investment firms get access to decision makers. 

As we’ve noted, some of those same players tied up in the New York pension scandal had also done business in other states, including California. Responding to the scandal, New York’s pension banned the use of placement agents, and California’s biggest pension fund, CalPERS, implemented rules limiting pay and requiring more disclosure.

Meanwhile, as the St. Petersburg Times reported today, the payment of middlemen is also an issue with Florida’s public pension fund.

In August, the Securities and Exchange Commission opened an “informal inquiry” into the millions paid to placement agents who helped drum up business for investment funds hoping to manage Kentucky’s pension fund for state and county retirees.

The SEC voted unanimously in June to ban investment managers seeking to manage public pension funds from making donations to the politicians overseeing those funds. But the SEC stopped short of a proposed measure that would have banned the use of placement agents altogether. Instead, it required that placement agents register with the SEC or the Financial Industry Regulatory Authority, FINRA.

For more background on the pension kickback scandals, read one of our earlier explainers.

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