October 8, 2010

USA: "Stop giving one person the power to invest New York State's $125 billion pension fund"

NEW YORK, NY / The New York Times / Opinion /October 8, 2010

The Opinion Pages: 
New York’s Pension Scandal

Alan Hevesi, former comptroller, has provided the best argument to stop giving one person the power to invest New York State’s $125 billion pension fund.

Mr. Hevesi pleaded guilty on Thursday to a felony corruption charge for accepting more than $1 million in travel expenses, sham consulting fees and campaign contributions. In return, Mr. Hevesi allowed his benefactor to earn more than $18 million in management fees for investing $250 million of the state’s pension fund.

Attorney General Andrew Cuomo, in his announcement of Mr. Hevesi’s plea, accused him of indulging in a “culture of corruption.” Mr. Hevesi, who is now cooperating with the broad pension investigation, could serve up to four years in jail, which would make him the highest-ranking elected official in New York State to go to prison in recent memory. In 2006, Mr. Hevesi resigned rather than go to jail for misusing state resources.  Pool photo by Skip Dickstein

New York’s comptroller alone determines how to invest the third-largest pension plan in the country, one of the biggest portfolios in the world. From January 2003 to December 2006, anyone who wanted to invest any of the state’s pension funds needed to negotiate a way past Mr. Hevesi’s political gatekeepers. In return for contributions or other rewards, Mr. Hevesi then handed out millions to their firms to invest and make millions in fees and expenses.

Two major reforms are needed to clean up this scandal and prevent it from recurring.

First, the comptroller’s office should have a board of directors whose sole duty would be to protect and increase state pension assets, and it would have to approve the awarding of investment contracts. New York is one of only four states that give one official the power to invest pensions. Albany’s lawmakers should also adopt public financing for comptroller campaigns, rather than forcing candidates to troll for money from lawyers or financial interests.

Mr. Hevesi was the seventh person to enter a guilty plea after an investigation by Mr. Cuomo and the Securities and Exchange Commission. Repayments of $138 million have been made to the fund. Mr. Hevesi’s longtime political consultant, Hank Morris, is fighting 76 charges that he profited by controlling the lucrative contracts for managing pension investments.

With the Hevesi announcement, Mr. Cuomo’s office also made it clear that the current comptroller, Thomas DiNapoli is not under investigation. But that news does not relieve him and Mr. Cuomo of pushing state lawmakers in Albany to provide more control over pension investing and to create public financing of campaigns.

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