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The pension fund mess; Prison sentence for ex-comptroller emphasizes the need for reform

Former state comptroller Alan G. Hevesi's sentencing to prison for his role in a corruption case involving the pension fund system he once led is an indictment of the man, and in no way reflects on the office or the person now leading it.

Having said that, the need for change is obvious, and some change already has resulted from the years of investigation in the case brought by Gov. Andrew M. Cuomo when he was attorney general.

The once-brash Hevesi admitted last year to steering pension fund business to a friend, one of many wrongdoings committed during his watch over the $140 billion fund. Current State Comptroller Thomas P. DiNapoli was not accused of any wrongdoing in Cuomo's probe of the pension fund -- one of the world's largest public employee retirement accounts.

The pension fund serves hundreds of thousands of current and former state and local government workers. The state comptroller, the sole trustee of the fund, has a significant responsibility that Hevesi ignored in his corrupt management.

The one- to four-year sentence was the maximum possible for Hevesi's guilty plea to one felony count last year. The sweeping investigation and convictions made clear the need for reform and transparency in the New York State pension system, one of the few state pension funds with a single trustee.

The idea of an outside panel or some other board of trustees has been kicking around for decades.

Cuomo, when he was state attorney general, offered a plan that included not only creating a board of trustees but also a code of conduct and criminal penalties for violations of the code.

The comptroller is not able to manipulate most of the $140 billion pension fund on a day-to-day basis, since most of it is in index funds and other investments.

However, as sole trustee he is able to steer the money to private investment companies. Hank Morris, a longtime Democratic Party operative and Hevesi champion, has a lucrative role as a go-between for the outside investment companies and the pension fund. Morris received one to four years in prison for his part in the scandal.

Hevesi admitted taking gifts in return for approving $250 million in pension fund business to Markstone Capital Partners LP. He pleaded guilty last fall to getting nearly $1 million in various gifts, including foreign travel and campaign contributions, in return for steering the pension fund business to Markstone. Markstone was founded by Elliott Broidy, a Hevesi friend and fundraiser. Broidy previously pleaded guilty in the case and is awaiting sentencing.

The attorney general's office under Cuomo spent four years investigating pension fund abuses and that work has paid off. The now-Gov. Cuomo noted the case resulted in eight people pleading guilty and the recovery of $70 million for the state.

Current Comptroller DiNapoli is working to improve the image of the office, releasing a monthly report on outside investments, initiating reforms and cracking down on "pay-to-play" practices. He also ended the notion of placement agent fees. Indeed, DiNapoli seems to be doing a good job at cleaning up the mess.

As for Hevesi, he told the judge he caused "enormous damage" to the integrity of the office and publicly disgraced himself.

That, he did.

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