NYS Comptroller Fights Back

 

Earlier this week, we alerted readers to a report by the New York State Department of Financial Services concerning New York State Comptroller Tom DiNapoli’s oversight of the Common Retirement Fund (CRF).  As discussed in our post, the report took issue with DiNapoli’s decision to invest a small percentage of the CRF’s assets in so-called alternative investment — mainly hedge funds and private equity funds — citing the funds’ allegedly high fees and poor performance compared to other asset classes.

Not surprisingly, Comptroller DiNapoli fought back this week, defending his oversight of the CRF and calling into question the methodology and conclusions contained in the DFS report. (See a representative press reports containing DiNapoli’s rebuttal here.) A number of commentators have chimed in, as well, raising questions about possible political motivations for the DFS report.  The DFS report appeared shortly after DiNapoli called upon the state to return to the Comptroller’s Office contract oversight powers that Governor Cuomo and the Legislature took from the Comptroller’s Office in 2011.  In 2011, the Governor and the Legislature enacted a statute that eliminating the need for pre-approval from the state comptroller for all SUNY (State University of New York) procurements (excluding non-construction service purchases totaling more than $250,000).  As students of Albany politics know, federal and state prosecutors have been investigating alleged bid rigging involving New York State contracts for months — including contracts connected to SUNY Polytechnic Institute.  On September 22, 2016 Preet Bharara, the crusading United States Attorney for the Southern District of New York, brought corruption charges against Joseph Percoco, a former top aide of Governor Cuomo, SUNY Polytechnic Institute’s founding president and CEP Alain Kaloyeros, and executives of prominent development firms.  According to the DOJ, (press release and complaint available here) “[t]he charges arise from two separate but overlapping schemes involving bribery, corruption, and fraud in the award of hundreds of millions of dollars in New York State contracts and other official state actions.”  DiNapoli also recently called upon the state to phase out the use of economic development nonprofit entities to oversee development projects.  SUNY Polytechnic Institute used nonprofits to manage several projects at the heart of DOJ’s complaint.

So, what does all of this mean?  At this point, all that we can say with certainty is (i)  politics remains a blood sport in New York; and (ii) USAO Bharara is not done.  Stayed tuned to the blog for updates as this story unfolds.

 

 

Christine Chung

Christine Chung

This blog is edited by Christine Sgarlata Chung, Associate Professor of Law at Albany Law School, and Co-Director, Institute for Financial Market Regulation. In addition to her work in academia, Professor Chung previously served as a Branch Chief in the Enforcement Division of the Securities and Exchange Commission and as a partner at a large Boston-based law firm.
Christine Chung