Spitzer-Cuomo Showdown Looms Over Pension Fund

Governor Spitzer's announcement of new regulations to guard against abuses of the state pension fund is the latest sign of a coming showdown with Attorney General Cuomo over who should have ultimate control of the fund's $154 billion of assets.

Mr. Spitzer and the state comptroller, Thomas DiNapoli, yesterday said the pension fund, the third largest in America, would be governed by new regulations that they said would help restore confidence in the management of the fund, which is the subject of multiple corruption investigations.

Among the new regulations, which are expected to go into effect in several months upon completion of a review process that includes a public hearing, are the creation of independent audit and actuarial committees, as well as new procurement rules and conflict-of-interest reporting standards. The comptroller's office developed the rules with Mr. Spitzer's insurance superintendent, Eric Dinallo.

Removing the comptroller as sole trustee of the pension fund and turning over control to an oversight board is said to be a central goal of Mr. Cuomo's. His office, along with Albany and federal investigators, is examining charges that investments firms seeking pension fund business illegally steered millions of dollars to aides and family members of a former comptroller, Alan Hevesi. A year ago, Hevesi pleaded guilty to a felony charge of defrauding the state government in connection with his use of a state employee as a chauffeur and servant for his ailing wife.

The Democratic governor's decision to partner with Mr. DiNapoli, a Democrat who strongly favors sole trusteeship, suggests that Mr. Spitzer is leaning toward Mr. DiNapoli's position on the issue.

The response from the attorney general's office to the regulations was curt and absent of praise. "We agree that the comptroller's office needs significant reforms and will comment on them at the end of our ongoing investigation concerning that Office," a spokesman for Mr. Cuomo, Jeffrey Lerner, said in a statement.

Mr. Cuomo, a source said, approached the governor's office in the spring with a plan to eliminate sole trusteeship. The governor, whose rivalry with the Democratic attorney general has grown during the year, said he would consider the idea but never gave Mr. Cuomo a final answer.

An administration official said the governor was not opposed to the idea of spreading out power over the retirement money, but said Mr. Spitzer's first priority is to rapidly put in place anti-corruption measures. Eliminating sole trusteeship can only happen through a constitutional amendment, requiring the approval of two consecutive sitting Legislatures.

Yesterday's announcement is also an indication of a strengthening alliance between Messrs. DiNapoli and Spitzer, who early in the year belittled the former Long Island assemblyman as unfit for the job.

Bringing the two Democrats together are a number of shared interests, political observers say. For Mr. Spitzer, having the state comptroller by his side will likely come in handy during next year's budget negotiations, giving the governor an advantage over Senate Republicans on issues such as revenue forecasting and spending.

The new pension fund rules also help to associate the embattled governor with a major reform effort, beating to the punch the attorney general, who is expected to trumpet a litany of recommendations for increasing oversight and transparency of the fund once his office finishes its probe.

For Mr. DiNapoli, whom lawmakers in February installed as comptroller to replace Hevesi, Mr. Spitzer's endorsement of the regulations will help him distance himself from damaging allegations of criminal abuse involving the pension fund that are sure to come out of Mr. Cuomo's lengthy investigation, political observers say.