Private equity manager Paladin Homeland Security Holding will cut its management fees paid by the $132.8 billion New York State Common Retirement Fund, Albany, as part of a settlement in a state investigation of “pay to play” involving pension fund investment business.
Paladin Homeland Security also will abide by New York Attorney General Andrew Cuomo's code of conduct, which includes a ban on using placement agents to solicit investments from public pension funds.
The firm also “will waive certain management fees otherwise payable to Paladin” related to the pension fund's investment in a Paladin fund, and it won't seek to recoup its waived fees through any insurance policy, according to the settlement agreement.
Paladin neither admitted nor denied any wrongdoing, according to the settlement agreement.
In a news release from Mr. Cuomo's office, Paladin in 2003 hired former New York Liberal Party Chairman Raymond Harding at the recommendation of Henry “Hank” Morris, chief political adviser to then-state Comptroller Alan Hevesi, to secure investment business from the state pension fund. The state comptroller is the fund's sole trustee.
Paladin's Homeland Security Fund received a $20 million investment from the New York pension fund in 2004, and it paid $300,000 in fees to Mr. Harding, according to Mr. Cuomo's news release.
Mr. Cuomo's investigation “showed that Paladin initially sought to retain Morris as a placement agent to obtain an investment” from the pension fund, the news release said. “Morris instead referred Paladin to Harding. Morris's intention, undisclosed to Paladin, was to reward Harding for his prior years of political loyalty to Hevesi.”
The news release also said that in late 2005, Mr. Morris “solicited Paladin for campaign contributions for Hevesi's re-election campaign, and Paladin partners contributed a total of $25,000 in early 2006.”
Messrs. Hevesi, Morris and Harding, along with five others, have pleaded guilty to charges stemming from Mr. Cuomo's investigation.
Among the private equity firms that have previously agreed to follow Mr. Cuomo's code of conduct are Quadrangle Group, Access Capital Partners, HM Capital Partners; Falconhead Capital and Levine Leichtman Capital Partners.