Carlyle Group is being probed by New York prosecutors and the U.S. Securities and Exchange Commission over whether the world’s second-largest private- equity firm made illegal payments to intermediaries to secure $1.3 billion in investments from the state’s pension fund, according to a person with knowledge of the matter.
New York Attorney General Andrew Cuomo and SEC lawyers are investigating Carlyle, hedge funds and other private-equity firms that did business with New York’s employee pension fund, according to the person, who declined to be identified because the probe isn’t public.
The probe is related to civil lawsuits and criminal charges filed last month by Cuomo and the SEC against former New York state Deputy Comptroller David Loglisci and political adviser Hank Morris for allegedly soliciting millions of dollars in kickbacks from firms managing the state’s retirement fund.
Morris was a so-called placement agent for Searle & Co., a registered broker-dealer that arranged deals between Carlyle and the New York State Common Retirement Fund, the person said. Morris allegedly pressured the investment firms to use Searle’s services and received millions of dollars in payments in exchange, court filings show.
Loglisci arranged for the pension fund, the third-largest in the U.S., to invest $5 billion with private-equity firms and hedge-fund managers that paid “sham” finder fees to Morris and others, the SEC said in last month’s complaint filed in federal court in Manhattan. Loglisci told managers the payments were required to do business with the fund, the regulator said.