Carlyle settles in pension scandal

NEW YORK | The Carlyle Group, one of the nation’s largest private equity funds, has agreed to pay $20 million and make other reforms to resolve its role in an influence-peddling scandal at New York’s public pension fund.

The settlement will bring an end to the possibility that the company, its executives or employees would face charges in the case, New York Attorney General Andrew Cuomo said.

Under the deal announced Wednesday, Carlyle would effectively ban its employees from making campaign contributions to public officials who have sway over pension fund investment decisions. The company also reiterated its previous pledges to stop hiring politically connected middlemen to help get government pension fund business.

Mr. Cuomo said the rules would limit the possibility that corrupt officials overseeing government investment funds would try to shake down the company for money in exchange for business.

“It ends pay to play. It bans the selling of access. It puts the political power brokers out of business,” he said.

Carlyle was one of several firms whose conduct was questioned during a two-year investigation of investment decisions at New York’s public employee retirement fund during the tenure of former state Comptroller Alan Hevesi.

Mr. Hevesi’s longtime political consultant, Hank Morris, was indicted in March along with the pension fund’s former chief investment officer, David Loglisci, on charges they demanded huge kickbacks from companies that wanted access to pension fund investment dollars.

Carlyle paid $13 million to Mr. Morris for his help in influencing the fund, which ultimately invested more than $730 million with the company.

Carlyle has consistently denied any criminal wrongdoing or knowledge of any inappropriate dealings between Mr. Morris and pension fund officials.

It released a statement Thursday saying it had been “victimized by Hank Morris’s alleged web of deceit.” The company said it intends to sue Mr. Morris and a company he was formerly affiliated with for $15 million “for the harm their wrongful actions have caused Carlyle.”

The firm said it had agreed to abide by a code of conduct, advocated by Mr. Cuomo, that would “usher in a new era of transparency and accountability into the pension fund investment process” and “set a new standard for ethics in the industry.”

The investigation has so far led to criminal charges against six people, including the former head of New York’s defunct Liberal Party and several politically connected financial executives who did business with the pension fund.

Mr. Morris and Mr. Loglisci have pleaded not guilty. Mr. Hevesi has not been charged and has denied any wrongdoing.

The Carlyle Group, which is based in Washington and manages $85 billion in assets invested in a wide range of industries, has long been known for its ties to powerful politicians.