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Cuomo Orders Permanent ‘Pay-To-Play’ Ban for N.Y. Pension

April 26 (Bloomberg) -- New York Governor Andrew M. Cuomo directed the state Insurance Department to issue permanent regulations banning placement agents, lobbyists and elected officials from any pension-fund business.

The order follows the April 15 sentencing of former state Comptroller Alan Hevesi, who will spend as long as four years in prison for giving preferential treatment to a Los Angeles-based money manager in exchange for almost $1 million in gifts. The comptroller is the sole trustee of New York’s $140.6 billion pension fund, the nation’s third-biggest.

“It is long past time that we learned the lessons of the Hevesi case and make permanent changes to our system that will stop the culture of corruption,” Cuomo said in a news release.

The regulations contain provisions that will permanently ban so-called pay-to-play. The term refers to a practice whereby government contractors paid politically connected middlemen or made campaign contributions in exchange for winning business.

Cuomo, 53, a first-term Democrat, spent four years as state attorney general investigating corruption at the fund and vowed during his campaign to bolster New York’s ethics rules. He told lawmakers he would form a commission to investigate them if they didn’t approve more ethics oversight, and said he would veto their drawing of new district lines if they protected incumbents or favored one party.

Sham Fees

Hevesi, a Democrat, pleaded guilty in October to receiving a reward for official misconduct. He admitted approving $250 million in pension-fund investments with Markstone Capital Partners in exchange for $75,000 in travel expenses, $380,000 in sham consulting fees for a lobbyist and more than $500,000 in campaign contributions.

The new rules will ban, for the first time, the involvement of elected officials in any pension-fund business. The regulations would also end “revolving door” employment of former pension-fund officials at firms that do business with the retirement plan. It would also ban firms that directly or indirectly make campaign donations, charitable contributions or gifts to the comptroller, the release said.

Previously, the Insurance Department had issued temporary regulations banning pay-to-play at the state fund. Current Comptroller Thomas DiNapoli, who banned placement agents in 2009, said in a statement today that he welcomed the regulations.

Cuomo’s investigation led to the conviction of Hevesi and seven others and the recovery of $170 million, according to the governor’s news release.

To contact the reporters on this story: Steven Fromm at Martin Z. Braun in New York at

To contact the editor responsible for this story: Mark Tannenbaum at

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