Updated Feb. 17, 2010
Ares Management and Freeman Spogli agreed to adopt New York state's Public Pension Fund Reform Code of Conduct to settle an ongoing investigation into the pay-to-play scandal at the $126 billion New York State Common Retirement Fund, Albany.
Andrew Cuomo, state attorney general, announced the agreements in a news release today.
Both private equity managers retained placement agent Wetherly Capital Group to secure investment contracts from the state pension plan during the tenure of the former state Comptroller Alan Hevesi, according to Mr. Cuomo's release.
The pension plan invested $50 million with each private equity firm. According to Mr. Cuomo's release, neither firm was aware that Wetherly agreed to split placement agent fees with Henry “Hank” Morris, who was a political adviser to Mr. Hevesi.
Mr. Morris faces a state indictment for allegedly accepting kickbacks in exchange for placing investments with the state pension fund. Wetherly Capital settled with Mr. Cuomo's office by agreeing to return $1 million to the fund (P&I Daily, Feb. 8).
Neither Ares nor Freeman Spogli was required to return assets to the state fund, unlike eight of the nine firms connected with the pay-to-play scandal that previously settled with Mr. Cuomo’s office for a total of $90 million.
“Ares' support of the NY Attorney General's … goal of promoting greater transparency in the fundraising process and avoiding conflicts of interest before public pension funds is consistent with Ares' general business and investment management practices … the (New York) attorney general found that Ares was not aware of improper activities or relationships involving its placement agent and terminated its investigation. The agreement with the attorney general did not include any finding that Ares had violated the law,” according to an Ares statement.
“We are pleased to endorse the attorney general's efforts to bring greater transparency to the pension fund investment process by adopting his Public Pension Fund Reform Code of Conduct,” Freeman Spogli officials said in Mr. Cuomo's release.
William M. Wardlaw, general partner at Freeman Spogli, said he did not have more to add to the firm's official statement.