(October 15, 2009) – With placement agents firmly in their place, New York Attorney General Andrew Cuomo has turned his gaze toward the sole trustee structure of the Empire State’s Common Retirement Fund.
Cuomo has proposed replacing the head of the fund—an elected politician who is sole trustee of the pension—with a board of trustees, headed by an elected official. Currently, the $116 billion fund—recently racked by scandal when two of former Comptroller Alan Hevesi’s close associates were accused of taking kickbacks from investment management firms—is one of only four states with sole trustees at the helm. The other three are North Carolina, Connecticut, and Michigan.
The move, Cuomo believes, would make it much harder for firms to unduly influence the investment manager selection process. While some say that the sole trustee creates a more accountable system, the trustee system has come under fire as of late—including in the pages of ai5000, which has attacked the SEC regulation of placement agents as misguided —for lacking appropriate checks and balances that can help avoid bribery and favoritism.
According to Reuters, Cuomo is suggesting that a 13-member board—made up of political appointees and representatives of different pension constituencies—replace the current structure. Reports indicate that the measure has bipartisan support from the State legislature.
“For decades, the state pension fund has been weakened and corrupted by the sole trustee model,” Cuomo is quoted as saying. “The model has allowed pay-to-play to flourish in a system meant to protect the retirement accounts of thousands of hardworking public employees. To put it simply: The model doesn’t.”
According to reports from Reuters, current State Comptroller Thomas DiNapoli, a Democrat like Cuomo, believes that Cuomo’s initiative is a step in the right direction and in line with reforms DiNapoli himself is undertaking.
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