News from Attorney General Andrew M. Cuomo

Department of Law Department of Law
120 Broadway The State Capitol

New York, NY 10271 Albany, NY 12224

FOR IMMEDIATE RELEASE
New York City Press Office / 212-416-8060
Albany Press Office / 518-473-5525
nyag.pressoffice@oag.state.ny.us

CUOMO SECURES AGREEMENT WITH LEADING PENSION FUND ADVISOR PACIFIC
CORPORATE GROUP HOLDINGS TO ADOPT CODE OF CONDUCT AND ELIMINATE
PAY-TO-PLAY IN PENSION FUNDS NATIONWIDE

Pacific Corporate Group Holdings Adopts Cuomo’s Reform Code of
Conduct Which Ends Campaign Contributions and the Use of Intermediaries
For Public Pension Fund Investments

PCG Corporate Partners Advisors II Will Return Over $2 Million In
Proceeds Associated With New York State Common Retirement Fund’s
Investment

NEW YORK, NY (July 1, 2009) - Attorney General Andrew M. Cuomo today
announced that leading pension fund advisor Pacific Corporate Group
Holdings, LLC (“PCG”) has adopted Cuomo’s Code of Conduct to
reform the public pension fund system and to end pay-to-play nationwide.
Under the terms of the agreement announced today, PCG Corporate
Partners Advisors II, an affiliate of PCG, will also return over $2
million in proceeds associated with a New York State Common Retirement
Fund (“CRF”) investment. This payment will be returned to the CRF
for the benefit of the pension holders. The agreement resolves PCG
Corporate Partners Advisors II’s (“PCGCP”) role in Cuomo’s
investigation of corruption involving the CRF.

“PCG is the third signatory to our Code of Conduct and the first
pension fund advisor to adopt the Code. The Code of Conduct reforms the
public pension fund system by ending pay-to-play campaign contributions
and the use of intermediaries to sell access to public money,” said
Attorney General Cuomo. “PCG’s adoption of our Code sets a new
standard for gatekeepers industry-wide. As a gatekeeper to public
pension funds, PCG has a responsibility to exercise the highest level of
ethical conduct in its work. By proactively adopting our Code, PCG has
set an important example for the industry.”

Attorney General Cuomo’s Code of Conduct bans investment firms from
hiring, utilizing, or compensating placement agents, lobbyists, or other
third-party intermediaries to communicate or interact with public
pension funds to obtain investments. To avoid pay-to-play schemes, the
Code prohibits investment firms (and their principals, agents, employees
and family members) from doing business with a public pension fund for
two years after the firm makes a campaign contribution to an elected or
appointed official who can influence the fund's investment decisions.
This provision would also bar all firms currently doing business with
the pension fund from making such campaign contributions. Investment
firms must also disclose any conflicts of interest to public pension
fund officials or law enforcement authorities, to increase transparency
and avoid abuse of the fund for personal gain.

PCG is headquartered in La Jolla, California and maintains offices in
New York, San Diego, Boston, Singapore, Washington D.C., and Hong Kong.
PCG offers consulting services to institutional investors, such as
public pension funds. In its role as a consultant, PCG is responsible
for conducting due diligence on private equity investments on behalf of
institutional investors, essentially evaluating whether and to what
extent a particular investment is suitable for that investor. PCG has
acted as a consultant for the California Public Employees’ Retirement
System (the nation’s largest public pension fund), New York City, the
State of Oregon, and the State of Connecticut, among others. PCG also
manages private equity funds with a net asset value of over $1 billion.
PCG and PCGCP have cooperated in the Attorney General’s investigation.

The Attorney General’s investigation revealed that PCGCP was a
minority partner in a joint venture known as Strategic Co-Investment
Partners (“SCP”), along with New York-based hedge fund manager the
Clinton Group and Barrett Wissman, a hedge fund manager and friend to
then-CRF Chief Investment Officer David Loglisci. As previously charged
in court documents, SCP was the brainchild of Loglisci, and received a
$750 million capital commitment from the CRF in October of 2006. At that
time, SCP was the largest single private equity investment ever made by
the CRF. Loglisci allegedly sculpted and funded the SCP investment
substantially in order to benefit Wissman and Henry (“Hank”) Morris,
the chief political aide to then Comptroller Alan Hevesi. Wissman and
Loglisci allegedly hid Morris’s secret ownership interest from senior
management at PCGCP and the CRF investment staff.

The SCP transaction is alleged as the basis for Martin Act and other
charges in the 123-count indictment returned by the grand jury and filed
by Cuomo’s office in March against Morris and Loglisci. Wissman has
pled guilty to Martin Act securities fraud charges for conduct related
to the pension fund.

Under today’s agreement, PCG has embraced the Code of Conduct and its
affiliate, PCGCP, has agreed to return over $2 million in proceeds
resulting from the SCP transaction, given that Morris’s secret
ownership interest was hidden from the senior management at PCGCP, along
with CRF investment staff.

A PCG Holdings spokesperson stated, “We are taking these steps to
make the public whole for the improper actions of a former executive, to
put this episode behind us and to move our business forward. Adopting
Attorney General Cuomo's Code of Conduct represents a natural next step
in our efforts to meet or exceed the high fiduciary standards adhered to
by PCG Holdings, and that are expected of those entrusted with public
funds. It will help maintain trust in the public pension systems'
investment process by enhancing transparency and accountability into the
pension fund investment process.”

The Attorney General’s Public Pension Fund Reform Code of Conduct:

- Bans Placement Agents: Investment firms are prohibited from using
Placement Agents, Lobbyists, or any other third-party intermediary to
communicate or interact with Public Pension Funds for any purpose. The
prohibition does not apply to the use of consultants and investment
banks to otherwise directly assist investment firms by, for example,
preparing marketing materials or performing due diligence;

- Bans "Pay to Play": Prohibits investment firms (and their
principals, agents, employees and family members) from doing business
with a public pension fund for two years after the firm makes a campaign
contribution to any elected or appointed official who can influence a
public pension fund's investment decisions. The prohibition also applies
to candidates for such positions, but does not apply to contributions of
$300.00 or less to elected officials or candidates for whom the person
making the contribution can vote;

- Increases Transparency: Requires rigorous, ongoing disclosure of
information relating to campaign contributions, the identities,
responsibilities and qualifications of investment fund personnel and any
payments by investment firms to third-parties in connection with public
pension fund matters. Also requires investment firms to promptly publish
such information on their websites;

- Imposes Higher Standard of Conduct: Holds investment firms to a
higher, standard of conduct that avoids even the appearance of
impropriety. The Code prohibits (1) improper relationships between
pension fund officials and an investment firm's personnel or agents, (2)
“revolving door” employment by investment firms of former public
pension fund officials and employees, and (3) improper gifts by
investment firms to public pension fund employees and officials;

- Enhances Conflicts of Interest Policies: Inves
tment firms are
required to promptly disclose and cure any actual, potential and
apparent conflicts of interest to public pension fund officials or law
enforcement authorities where appropriate.

- Ensures Ongoing Compliance: Investment firms must certify annually
to the Office of the Attorney General (and any public pension fund that
asks) that they are in compliance with the Code of Conduct. Violations
of the Code constitute grounds for either termination of an existing
investment, disqualification from doing further business with the public
pension fund for up to ten years, or both.

Attorney General Cuomo’s investigation into corruption at the CRF has
led to a number of criminal charges to date, including charges against
Morris and Loglisci, former Liberal Party Chair Ray Harding, and
investment advisor Saul Meyer. In addition to Wissman, Julio Ramirez, an
unlicensed placement agent associated with Wetherly Capital, has pled
guilty to Martin Act securities fraud charges for conduct related to the
pension fund. Morris, Loglisci, Meyer, and Harding are presumed innocent
until they are proven guilty in court.

Cuomo also issued subpoenas last month to over 100 investment firms and
their agents after his investigation found that 40 to 50 percent of
agents obtaining investments from New York pension funds were
unregistered.

Today’s announcement arises from a two-year, ongoing investigation
into corruption involving the New York State Comptroller’s Office and
the Fund. The charges to date allege a complex criminal scheme involving
numerous individuals operating at the highest political and governmental
levels under former Comptroller Alan Hevesi, in which the New York state
pension fund was used as a piggy bank for the Comptroller’s chief
political aide and a favor bank for political allies and other friends.

The investigation is being conducted by Stacy Aronowitz, Deputy Chief
of the Public Integrity Bureau, and Assistant Attorneys General Emily
Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision
of Ellen Nachtigall Biben, Special Deputy Attorney General for Public
Integrity, and Linda A. Lacewell, Special Counsel, and with the
assistance of Richard Jackson, Assistant Solicitor General.

# # #