Pension Fund Litigators Donated Heavily to New York Comptroller’s Campaign

DiNapoli’s predecessor as comptroller, Alan Hevesi, pled guilty to accepting free travel and other benefits from the principal of a private equity firm that received $18 million in management fees from the pension fund.

Early in his tenure, DiNapoli voluntarily barred investment advisers that donated to a comptroller campaign from managing pension fund assets for two years. (The federal Securities and Exchange Commission was simultaneously moving to adopt a similar nationwide restriction). 

At times, DiNapoli has refused to accept donations from the law firms that seek to bring litigation on behalf of the pension fund. A 90-day contribution blackout occurs around the period, roughly every four years, when law firms submit bids seeking to be part of a “pool” that is eligible to represent the fund. There are currently 18 law firms in the pool.

For the law firms, pool selection is only the first step towards a major payday. These firms must then convince DiNapoli’s office to hire them for a lawsuit against a publicly traded company or its officers. During this process, there is no contribution blackout period, and DiNapoli has accepted donations around the time firms have been hired.

DiNapoli has taken steps to clean up the scandal-plagued office. But in a state elections system dominated by big money, there were limits to the campaign finance restrictions he could unilaterally impose on himself, he said.

“I’ve gone further than anybody else in this office to limit the opportunity for money to be a key factor in what we’re doing, but it’s not the perfect solution,” DiNapoli told The New York Times in 2009. “Unless we have public financing, I’m going to do the best I can with the limits I’ve put forward.”

New York does now have a publicly funded elections program, which matches small donations with public dollars, and DiNapoli is enrolled. Still, he has continued to take large donations from lawyers that seek to represent the pension fund, including $25,000 in March from partners at the powerful law firm Bernstein Litowitz Berger & Grossmann.

Attorneys from the firm have given at least $211,000 in total to DiNapoli — more than any other firm — and also have represented the pension fund. 

This June, DiNapoli is facing his first Democratic primary challenge since assuming the office.

One of his primary challengers, Drew Warshaw, said he would refuse all donations from lawyers that do business with the fund. He said the limitation should apply to all candidates for the office, and called DiNapoli’s ban on law firm contributions during the every-four-year bidding process a “smoke screen.”

“If you believe there should be a ‘blackout period’ — because you’re concerned about undue influence — it follows that you wouldn’t allow this money to come in at all,” Warshaw said. 

Another Democratic primary challenger, Raj Goyle, charged that DiNapoli was engaged in “a longtime pay-to-play scandal.” Goyle also said he would refuse all campaign donations from lawyers who seek to represent the fund. A comptroller’s decisions about whether to sue a company should be made on the merits, he said, and not about a “pipeline where law firms are pitching cases and then, in return, giving financial contributions to a campaign.”

Joseph Hernandez, the Republican nominee and a longtime Wall Street investor, has highlighted the Bernstein Litowitz donations as an example of “pay-to-play.” Any law firm that donated to the Hernandez campaign would not be allowed to do business with the pension fund under his leadership for two years, he said. Echoing a longtime criticism lodged by Republicans and business leaders, Hernandez called law firms that specialize in bringing such lawsuits “public markets ambulance chasers.”

DiNapoli spokesperson Matthew Sweeney said that for nearly 20 years, DiNapoli had led by example by imposing his own restrictions on donations to his campaign beyond what the law requires and “not taken any improper donations.”

“Claims that campaign contributions influence the Fund’s litigation decisions are baseless — they ignore a staff-driven, competitive procurement process and rigorous, multi-layered, expert case evaluation,” Sweeney said. “This is an independent, merit-based system, fully insulated from politics.”

Because of its size, the state pension fund is often chosen by judges as “lead plaintiff” in class action cases it chooses to pursue — a designation crucial to its law firms’ prospects of landing a major payday.

During the competitive bidding process for selecting New York’s “pool” of law firms, responses are scored by legal staff who have “no knowledge of any political contributions,” according to DiNapoli’s office. DiNapoli has no role in this selection, according to the office, which said law firms in the pool are subject to “strict fee limits” lower than typical fee arrangements in the industry.

When law firms within the pool pitch specific ideas for litigation, the proposals are first vetted by legal staff, and any recommendation to move forward must then be approved by DiNapoli’s counsel, the office said. If his staff recommends pursuing a lawsuit, proposals are reviewed by a committee composed of a handful of senior staff from the office and pension fund  — and DiNapoli only provides his approval after the committee members make the final recommendation. 

According to DiNapoli’s office, he has “never” overruled the recommendation of the selection committee. 

The office has been selective, filing only 11 cases since 2007, but when such a case does go forward, the settlements — and payouts to his office’s lead outside counsel — can be massive.

Bernstein Litowitz knows this well. The Manhattan-based law firm has obtained many of the largest monetary recoveries in history — over $40 billion on behalf of investors across the country — and itself achieved significant corporate governance reforms.

It also has a long track record of making campaign donations to New York state comptrollers.

Before former Comptroller Carl McCall tapped the firm for a major case against the company Worldcom, founding partner Max Berger donated $12,500 to McCall’s re-election bid. 

In a 2005 interview with Bloomberg, Berger reportedly said such campaign donations were about “getting a foot in the door.” (Bernstein Litowitz told New York Focus that Berger denies making the statement attributed to him in the 2005 Bloomberg article and said “would never have used such language” in that context. No correction has been made to the 21-year-old article concerning the quote.) Berger remains at the firm and donated to DiNapoli as recently as March.

In the Worldcom lawsuit, Bernstein Litowitz accused the telecommunications company of rampant accounting fraud. The case ultimately settled for more than $6 billion. The judge reportedly awarded about $335 million for legal fees, calling the firm’s work “superb.” As co-lead counsel, Bernstein Litowitz was entitled to a significant chunk.

Under DiNapoli, the firm’s donations have continued. Attorneys with the firm donated $5,000 to his campaign in June 2024. Three months later, DiNapoli applied to be lead plaintiff in a case against the cybersecurity company CrowdStrike with Bernstein Litowitz as lead counsel. Several months later, attorneys at the firm donated an additional $25,000. 

Before being selected for that litigation, Bernstein Litowitz was required to provide a significant amount of information regarding the merits of the case and the firm’s qualifications, and undergo detailed interviews with DiNapoli’s counsel, according to the law firm. This was the first time during DiNapoli’s long tenure that Bernstein Litowitz had been selected to represent the pension fund in securities or derivatives litigation. 

Bernstein Litowitz had unique qualifications to be selected in this case: In 2023, it won a $26 million settlement, paid out by a software company called SolarWinds, which allegedly failed to tell investors about security vulnerabilities before a massive cyberattack. That case unfolded in the courtroom of a Texas federal judge Robert L. Pitman. 

The CrowdStrike case concerned similar subject matter — and was also to be heard in Pitman’s courtroom. But this time, the result was very different. In January, Pitman dismissed the case. In March, law firm partners donated another $25,000 to DiNapoli. 

John Rizio-Hamilton, a partner at Bernstein Litowitz, told New York Focus that “law firms across the country — whether representing defendants, plaintiffs, or both — routinely make political contributions to candidates who share their values.” 

He said Bernstein Litowitz “proudly supports candidates like Comptroller DiNapoli who share our commitment to protecting victims of corporate wrongdoing.”  

Before its appointment in the CrowdStrike case, another battle involving Bernstein Litowitz spilled into public view.

In 2019, New York City’s main pension fund accused two law firms within its own pool — Bernstein Litowitz and another firm — of using access to the fund’s confidential trading data to help a different client be appointed lead plaintiff in a class action lawsuit.

The firms argued that the information was not subject to attorney-client privilege. When an Illinois federal judge issued a ruling, he did not comment on the alleged ethical lapse but did approve of the firms as co-lead counsel in the case. The law firms later struck a settlement for their client and were awarded $90 million in attorneys’ fees.

In a different state, Bernstein Litowitz’s work for another pension fund client also drew notice. During the late 2000s, the Mississippi attorney general’s office frequently appointed Bernstein Litowitz as lead counsel in lawsuits, while the firm donated heavily to Mississippi Attorney General Jim Hood’s campaign. 

Hood’s office also requested that Bernstein Litowitz retain Mississippi-based law firms during litigation, including one sole practitioner who was married to an official in the attorney general’s office. In a court filing, Hood’s office said the hirings were part of a policy to promote the hiring of “qualified minority attorneys.”