ALBANY, N.Y. – New York Attorney General Andrew Cuomo is trying to develop a nationwide investigation with his counterparts in 35 other states to root out what he calls corruption and abuse of public workers' pension funds nationwide, a state official said.
Cuomo is seeking to create a process to investigate well-paid, sometimes politically connected, often unregistered agents who secure investments for pension funds. He calls them "middle men" and says they sometimes secure investments for their companies that might not have been in the best interest of a fund or its retirees.
Cuomo said he has issued subpoenas to more than 100 investment firms and their "middle men" as part of his probe of an influence-peddling scandal affecting some of the nation's biggest public pension funds.
Five people have been charged in a two-year probe led by Cuomo into allegations that investment companies paid millions of dollars in kickbacks to political figures to get pension fund business.
A New York official familiar with the call to 100 government officials said Friday that Cuomo told his colleagues that if it's happening in New York, it is probably happening in other states because there is too much money to be had in the scheme.
He is also talking with law enforcement authorities from states including California, New Jersey, New Mexico, North Carolina and Illinois, said the official, who talked on condition of anonymity because he wasn't authorized to speak for Cuomo.
Cuomo, a Democrat, pledged to soon turn over the details of his investigation to the other states. Although no firm commitments were made, there was strong interest, the official said.
"You can't put a price tag on a breach of public integrity," Cuomo told reporters before the meeting with other states' officials. "That's when people lose faith; that's when people become skeptical and cynical about their government, and government without trust is powerless."
He said as many as half of the agents trying to land investments for public pension funds weren't federally registered. The registration offers levels of accountability and transparency that could have disclosed — and perhaps prevented — the dealings Cuomo said might have illicitly raised investment costs or reduced returns for public worker pension funds and taxpayers.
State Comptroller Thomas DiNapoli last week banned "middle men" — both registered and unregistered. His office had been including the intermediaries' activity in monthly reports on investments from the state fund, which stood at almost $154 billion on March 31. The office had also examined the middle men and their roles in previous deals, said DiNapoli spokesman Dennis Tompkins.
New York City Comptroller William Thompson also agreed to ban placement agents from soliciting business for the city's public pension funds, which, as of late December, controlled about $82 billion in assets. The office has also disclosed its list of placement agents.
Cuomo said those disclosures alone will help ensure that pension investments are made on the merits of a deal, not on influence peddled to public officials.
Cuomo said he suspects many of the unregistered placement agents will try to argue that they fit a federal exemption to registration. To do so, they would have to prove they were acting as political consultants or lobbyists, or in some other role not subject to registration, to be involved in the deal.
"People will try to be very creative," Cuomo said. "They are going to argue they didn't need to be registered, (that they) structured the relationship around that."
If the unregistered agents can't prove they fit an exception, they could be subject to business fraud statutes under state law or federal securities laws and regulations, Cuomo said.
Cuomo called the exception a "loophole extraordinaire" that needs to be closed as part of changes he will seek as a result of his continuing investigation.
"No regulation, no requirements, no disclosure," he said. "That would really make this the Wild West of government relations and financial brokers."