New York Pension Funds: Pay to Play Fun

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Here is how state pension funds work in America. Large state pension funds with billions of dollars in assets use placement agents. These placement agents try to get investment managers business with the state pension funds. This is a perfect set up for bribes, graft, kickbacks, and corruption. A state pension fund with billions of dollars in assets should be able to evaluate investment managers themselves. There is no need for placement agents except for political contributions and bribery.

There is legislation pending that would regulate placement agents. Regulation is not needed. The large state pension funds need to do their job and meet their fiduciary responsibilities. Evaluate investment managers yourselves.

Here is a real world example. Andrew Cuomo, the New York Attorney General, has reached settlements with nine investment firms. These nine investment firms agreed to return $90 million to the New York State Common Retirement Fund. No one was sentenced to jail.

In addition, Hank Morris, a political advisor, has been charged with selling access to the New York State Common Retirement Fund. The New York Common Retirement Fund has $126 billion is assets.

What does this mean to you? State governments are open for business. Your business can buy access to any services or contracts in any state for the right price. If you have money, you can get states to do your bidding. Those caught providing kickbacks just pay a fine. They don’t go to jail. That way that can continue to pay kickbacks to politician. Are employees with funds in state pension funds angry? Of course not. Americans understand that corruption rules the day. This is how business is now done in America.

Source: WSJ February 18, 2010