Legal News

SEC Declines To Investigate Law Firm Pay-To-Play

By Nathan Koppel

We've blogged before about New York Attorney General Andrew Cuomo's investigation into whether financial firms improperly shelled out payments to middlemen in exchange for the firm getting hired to manage state pension-fund investments. (Here's an LB backgrounder.)

In May, for example, Carlyle Group struck a deal to pay $20 million to resolve it's involvement in Cuomo’s pay-to-play probe.

The SEC, meanwhile, is looking into whether it can clamp down on pay-to-play practices by investment firms.

But what about law firms? Securities class action firms shell out tons in campaign contributions to state politicos who often return the favor by hiring the firms to file securities suits on behalf of state pension funds. Pro business groups, and even some plaintiffs' lawyers, have long complained about this practice.

Last week, Utah Senator Robert Bennett took aim at pay-to-play by law firms, according to this story by Deseret News. The senator fired off a letter (link unavailable) to SEC Chair Mary Schapiro. Campaign contributions by law firms, in exchange for business, he wrote, "is no less serious a threat to the integrity of the nation's public pension funds, and it too requires the Commission's immediate attention."

This week, Schapiro (shown right) wrote back, declining Bennett's invitation. "The commission's review of play-to-play . . . .relates to fund managers and financial firms," she wrote. "Our ongoing review necessarily focuses on those entities and conduct that fall squarely within our jurisdiction."

(Click here to read the full letter.) We've got a call into Bennett's office to see if he has a response to Schapiro's letter. We'll let you know what we hear.

Photo:AP

Full post as published by Law Blog - WSJ.com on July 17, 2009 (boomark / email).