Wednesday, April 22, 2009

NYC Comptroller Bill Thompson Moves to Ban Placement Agents, Asks State Attorney General to Investigate Quadrangle Transaction

New York City Comptroller William C. Thompson, Jr, in the wake of continuing investment scandals involving the State pension fund, is calling for a ban on the use of placement agents in investments with the New York City Pension Funds.

Additionally, Thompson has referred to the New York State Attorney General the issue of whether the Pension Funds “were intentionally misled or deceived” as to the identities of any placement agents involved in an investment by the Funds in the Quadrangle Group.

The New York City Pension Funds invested $125 million in Quadrangle in 2005 and 2006, but at no time did the Pension Funds’ consultant ever identify Hank Morris or Searle & Company as a placement agent in that transaction. In fact, in a due diligence questionnaire issued by the Pension Funds’ consultant, Quadrangle identified Monument Group and Helix Associates Limited as the only placement agents.

“The recent indictment and felony complaint by the New York Attorney General and complaints filed by the Securities and Exchange Commission have called into question the conduct of certain entities and individuals that identified themselves or allegedly acted as placement agents in connection with investments made by the New York State Common Retirement Fund,” Thompson said.

“I am extremely troubled by the allegations and believe that such improper conduct underscores the need for broad and comprehensive reform nationally with respect to the activities of placement agents. At this time, the wisest course of action would be to immediately prohibit the use of such paid intermediaries in connection with our investments.”

Thompson has called a meeting with Pension Fund trustees – who ultimately must approve the prohibition on placement agents. “We need to prevent any recurrence of the type of egregious conduct detailed in the indictment and complaints,” he said.

“The Comptroller and the many other trustees of the New York City Pension Funds endeavor to invest with the highest quality managers, not just in terms of performance, but in terms of integrity and adherence to the highest ethical standards,” Thompson said. “We take any ethical lapses by our managers seriously and will consider any remedies available to investors, and would certainly view any confirmed instances of wrongdoing as a disabling factor in any consideration of future investments.”

Trustees of the Pension Funds include Mayor Bloomberg, his commissioners, and representatives and appointees from labor unions. The funds are the: New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and Board of Education Retirement System.

The Comptroller serves as a member of the Board of Trustees of four of the five Funds and is investment advisor to, and custodian of, the five. The Funds cover more than 237,000 retirees and beneficiaries and more than 344,000 City and City-affiliated employees. The Funds have combined assets of more than $82.5 billion as of December 31.

The Comptroller said the Pension Funds’ assets are invested for the benefit of the plan participants and their beneficiaries. All assets of the Pension Funds are managed by registered investment advisors.

Besides Thompson, the New York City Pension Funds’ trustees (chairs in bold) are:

New York City Employees’ Retirement System: New York City Finance Commissioner Martha E. Stark (Chair); New York City Public Advocate Betsy Gotbaum; Borough Presidents Scott Stringer (Manhattan), Helen Marshall (Queens), Marty Markowitz (Brooklyn), James Molinaro (Staten Island), and Acting Borough President Earl D. Brown (Bronx); Lillian Roberts, Executive Director, District Council 37, AFSCME; Roger Toussaint, President Transport Workers Union Local 100; and, Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Teachers’ Retirement System: New York City Finance Commissioner Martha E. Stark (Chair); Deputy Chancellor Kathleen Grimm, New York City Department of Education; and, Sandra March, Melvyn Aaronson and Mona Romain, all of the United Federation of Teachers.

New York City Police Pension Fund: Mayor Michael Bloomberg; New York City Finance Commissioner Martha E. Stark; New York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch, Patrolmen’s Benevolent Association; Michael Palladino, Detectives Endowment Association; Edward D. Mullins, Sergeants Benevolent Association; Thomas Sullivan, Lieutenants Benevolent Association; and, Roy T. Richter, Captains Endowment Association.

New York City Fire Department Pension Fund: Mayor Michael Bloomberg; New York City Fire Commissioner Nicholas Scoppetta (Chair); New York City Finance Commissioner Martha E. Stark; Stephen Cassidy, President, James Slevin, Vice President, Robert Straub, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; John Dunne, Captains’ Rep.; John J. McDonnell , Chiefs’ Rep., and James J. McGowan, Lieutenants’ Rep., Uniformed Fire Officers Association; and, Joseph Gagliardi, Marine Engineers Association.

Board of Education Retirement System: mayoral appointees Schools Chancellor Joel Klein (Designee, Kathleen Grimm, serves as co-chair), Alan Aviles, Philip Berry, David Chang, Tino Hernandez, Edison O. Jackson, Richard Menschel and Marita Regan; Patrick Sullivan (Manhattan), Wendy Gilgeous (Brooklyn), Joan Correale (Staten Island); and Dmytro Fedkowskyj (Queens); Anna Santos (Bronx); and employee members Joseph D'Amico of the IUOE Local 891 and Milagros Rodriguez of District Council 37, Local 372 (serves as co-chair).