Three former deputies to city Comptroller Bill Thompson now own or work at firms that earn millions of dollars in fees to invest the pension funds he oversees, The Post has found.
Government watchdogs blasted the ex-employees for seemingly exploiting their connections to get high-paying jobs and bring government cash to their private businesses.
Two of Thompson’s former top pension managers, Josh Wolf-Powers and Adam Blumenthal, quit their city jobs and founded Blue Wolf Capital Management in 2005.
The private equity firm landed contracts to invest $63 million of city pension funds — and will collect at least $1.2 million in fees, officials said.
Fees paid to firms that manage pension investments have soared in the past five years from under $100 million to about $400 million a year, said a source close to the pension funds.
“They’re huge moneymakers,” the source said of the deals.
Thompson was unavailable for comment, but his spokesman said Wolf-Powers and Blumenthal waited more than a year before seeking business with the pension funds, as city rules require, so “there was no conflict.”
Another of Thompson’s closest aides, Horatio Sparkes, the ex-deputy comptroller for pension funds, left in 2006 to join Yucaipa Companies, an investment firm led by supermarket magnate and Bill Clinton buddy Ron Burkle.
Yucaipa already had a contract to invest $170 million in 2003, according to city documents. The company got new contracts last year to invest another $360 million for four city pension funds, documents indicate.
While total payments to Yucaipa were not disclosed, records show the company has raked in $9.5 million in fees from the $347 million it invests for the city’s biggest pension fund — NYCERS.
Even if the deals follow the letter of the law, they reek of preferential treatment, watchdogs say.
“The ex-employees use their insider knowledge and past relationships to gain an upper hand and make a wad of cash,” said Dick Dadey, executive director of Citizens Union.
A Yucaipa spokesman said the firm didn’t make an offer to hire Sparkes, who joined its Manhattan office, until he quit the Comptroller’s Office in 2006 — and that Sparkes wasn’t allowed to work on accounts related to the city for more than a year.
Thompson’s office has come under scrutiny in a widening pay-for-play probe by state Attorney General Andrew Cuomo.
Cuomo and the Securities and Exchange Commission last month indicted political adviser Hank Morris for allegedly steering state pension-fund business to investment firms in exchange for kickbacks. Morris denies the charges.
The state scandal was linked to Thompson’s office last week, when The Post revealed that Morris had pocketed a placement fee on an $85 million deal between NYCERS and Quadrangle, an investment firm headed by Steven Rattner, now the chief of President Obama’s auto-bailout task force.
In addition, Wolf-Powers, Thompson’s former managing director for private markets, was quoted as telling Rattner that any investment firm doing business with the city needs a “placement agent,” a middleman who charges a finder’s fee.
Wolf-Powers has said he never told Rattner to hire Morris.
But Blue Wolf did not use a placement agent in 2008, when it landed contracts to invest $63 million of the city’s pension money, the Comptroller’s Office confirmed. Thompson’s spokesman said the Blue Wolf investment was “reviewed and recommended” by two private equity consultants hired by the pension funds.
Before getting the contracts, Blue Wolf donated $4,950 to Thompson’s campaign for mayor in July 2007. At the same time, Blumenthal, Thompson’s former first deputy comptroller and chief financial officer, gave $4,050.