Review says pension fund scandal issues resolved

ALBANY -- An outside review of New York's $150 billion pension fund for public workers showed yesterday that it fixed the ethical problems that led to a "pay-for-play" scandal.

The three-year review by Michigan-based Funston Advisory Services said the Common Retirement Fund's 2009 decision to ban paid placement agents, which are used by other pension funds, does not appear to have kept it from accessing qualified outside investment managers.

New York Comptroller Thomas DiNapoli, the fund's sole trustee since the 2007 scandal, is meeting all applicable ethical and conflict-of-interest standards and is acting solely for the benefit of its 1 million workers and beneficiaries, Funston said in the 161-page report.

However, the review noted the fund is thinly staffed for its size and complexity, depending more on external consultants, and needs better computer infrastructure including a centralized document management system.

"Investment-related practices are robust and appropriate," Funston reported. "The comptroller manages the fund in accordance with the applicable ethical, professional and conflict-of-interest standards."

DiNapoli said the review, the first of the outside reports now required every three years, validated reforms that followed the scandal and confirmed the in-house feeling that banning placement agents didn't close out many investment options.

"So much of what went wrong under the prior administration had so much to do with that relationship," DiNapoli said. "My feeling was the only way to be sure that kind of corrosive relationship won't happen again is to not do business with placement agents."

Former Comptroller Alan Hevesi was paroled in December after 20 months in prison for a felony conviction of official misconduct. An attorney general's investigation showed that pension fund officials and cronies, including Hevesi political adviser Henry "Hank" Morris, got fees and favors from financiers seeking chunks of the fund to manage.