Pay-to-Play Shadows Political Donations

The New York state pension kickback case may be winding down, but its effect is expected to last. Pay-to-play investigations are low hanging fruit for prosecutors, says Christopher Coniff of law firm Ropes & Gray LLP.

Hedge fund and private equity managers need to be aware of who they can give money to and who they can’t give to, he said at a conference organized by the New York State Society of Certified Public Accountants. He suggests that if a state or local government official has some kind of responsibility in making pension investments, then managers should not contribute to that official. 

Mr. Coniff worked as a defense attorney in the New York pension scandal that touched a number of private equity firms and high-level individuals. One of the accused, the Obama administration’s former Car Czar Steven Rattner, reportedly reached a deal with the Securities and Exchange Commission but is still negotiating with the office of New York attorney general – and now governor elect – Andrew Cuomo.

Mr. Rattner’s former firm, Quadrangle, has already settled with the SEC and the attorney general. Ex-state comptroller Alan Hevesi pleaded guilty last month to charges that he took campaign contributions from a manager seeking pension investments. Whether Mr. Hevesi will go to prison is unclear.

Mr. Coniff  says the public corruption case around Mr. Hevesi has changed the rules of the game very significantly and things that once seemed OK are now taboo. His recommendation: money management firms should put a policy in place quickly to address pay-to-play regulation.

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