Thursday, May 14, 2009

Carlyle Group Ponies Up $20 million to Resolve NY Pension Scandal

The Carlyle Group paid the New York Attorney General $20 million for its role in the New York "pay for play" pension scandal. The settlement resolved Carlyle's role in the matter. Even though Carlyle frequently paid placement fees on other pension investments, the private equity underwriter (PEU) offered a stiff defense:

“Carlyle was victimized by Hank Morris’s alleged web of deceit,” said Carlyle in a statement Thursday, adding that it plans to sue Morris and Searle & Co. for more than $15 million in damages.

Carlyle said it has adopted Cuomo’s “code of conduct,” which injects transparency and accountability into the pension fund investment process.

“Carlyle will be the first company to adopt the New York Attorney General’s Code of Conduct and set a new standard for ethics in the industry,” said the company.

The largest investors in Carlyle's numerous funds are pensions and endowments. They need the two groups to stay fully invested, to put up more capital as asset values sink. Carlyle's compliance is critical to avoid investor flight, i.e. a PEU run.

Yet another settlement by a big money firm to make an investigation go away. Goldman Sachs had one earlier this week. As usual, there is no admission of guilt. Justice does have a price. Most PEU's can afford it.