Amid a growing corruption scandal, New York's comptroller on Wednesday barred investment firms soliciting business from the state pension fund from employing lobbyists known as placement agents.
The move comes about a month after state and federal investigators accused two top aides to former comptroller Alan Hevesi of using their positions to pressure investment firms into paying millions of dollars to politically connected placement agents.
Prosecutors said the payments amounted to illegal kickbacks. The state probe has already led to three indictments and one guilty plea.
There is nothing illegal or necessarily unethical about companies hiring salesmen with political ties to help drum up business, but New York Comptroller Thomas DiNapoli said banning those lobbyists from involvement in future pension fund investments "will help restore integrity and trust in this office.
The ban is the latest fallout from Attorney General Andrew Cuomo's two-year investigation into alleged "pay-to-play" politics at the state pension fund during Hevesi's tenure.
The probe has snowballed in recent days with new revelations about the investment firms that had been paying multimillion dollar placement fees to Hevesi's top political consultant, Hank Morris, who was indicted in March.
A Securities and Exchange Commission court filing revealed that one of the companies that had paid hefty fees to Morris in exchange for his help getting fund business was the Quadrangle Group, an investment firm run until recently by Steven Rattner, who is now an auto industry consultant to the Obama administration.
New York City's comptroller is now reportedly looking into whether Quadrangle also used Morris as a placement agent on deals involving the city's huge pension fund.
A lawyer for the placement agency formerly affiliated with Morris, Searle & Co., told reporters that Morris was paid a fee in connection with an $85 million investment that the New York City Employees Retirement System made with Quadrangle several years ago.
The probe has also prompted a review of pension fund investments in New Mexico.
Copyright 2009 The Associated Press.