Hevesi Donor’s Selection Spotlights Pay-to-Play at Pension Fund

[Joanne98]

July 18 (Bloomberg) -- EnTrust Capital Inc., a hedge-fund firm whose founders contributed to the campaign of New York Comptroller Alan Hevesi, received millions of dollars of pension money to invest while he was running the state retirement fund, public records show.

Hevesi’s staff suggested the state use EnTrust to invest its money, according to Consulting Services Group LLC, a company hired to vet and choose firms. EnTrust was one of 50 firms recommended by the fund in 2006 and 2007 to CSG and one of 15 firms chosen, said a person familiar with the matter. EnTrust’s vetting was a priority, a person familiar with the process said.

Hevesi, comptroller from 2003 to 2006, and CSG are being investigated by U.S. regulators and New York’s attorney general over corruption at the fund, valued at $140 billion in 2006. To show criminality or liability, it must be established that the parties involved had the intent to trade a kickback or a campaign contribution for state business, lawyers said.

“Pay-to-play is absolutely at the core of all this,” said John Coffee, Columbia University securities law professor. “Underlying is an unwritten norm of reciprocity. If you want money, you have to contribute and, if you do contribute, you can expect that money will be given to you for investment.”

Coffee said it’s harder to prosecute contribution-related deals for state business than kickbacks paid as fees. “You have to be able to show a specific quid pro quo,” he said.

Hevesi received campaign donations from 46 percent of the hedge fund and private-equity managers he picked to manage state money for the first time, according to state records.

Hevesi Defense

Investment managers were selected by staff and independent advisers “solely on the basis of whether the funds are good investments,” David Neustadt, Hevesi’s then-spokesman said when the statistics were disclosed in 2006.

It’s not current practice to suggest to vetting companies such as CSG which firms should be given state money, said Robert Whalen, a spokesman for the New York state comptroller’ office.
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