by Kenneth Lovett

ALBANY – Faced with a mushrooming scandal, officials will bar firms from using well-connected middlemen to get business with the state pension fund, the Daily News has learned.

State Controller Thomas DiNapoli on Wednesday will announce a complete ban on the use of placement agents, lobbyists, consultants and other middlemen, a source close to DiNapoli said.

“No one can get paid to bring a deal to the fund,” the source said.

DiNapoli has the power to ban the practice unilaterally.

The controller signed the change in policy yesterday, the source said. DiNapoli will push for a law to make it permanent, the source said.

“He has been reforming the pension system since he took office [last year] in response to the ongoing investigations,” the source said.

DiNapoli has limited campaign contributions from those doing business with the fund and has implemented changes designed to provide more oversight and transparency when it comes to the fund. State and federal probers have been looking into how the $120 billion pension fund operated under DiNapoli’s predecessor, Alan Hevesi.

Top Hevesi consultant Hank Morris and pension deputy David Loglisci have been indicted on charges they steered billions in pension fund business to companies that agreed to pay kickbacks to them or political cronies. Former Liberal Party boss Ray Harding has also been charged.

Several companies, including the Carlyle Group and Quadrangle, whose former partner Steve Rattner is President Obama’s chief Treasury adviser on the auto industry bailout, are under investigation.

Meanwhile, the head of the Securities and Exchange Commission is considering barring financial firms from donating to elected officials who choose pension investors.

SEC Chairman Mary Schapiro told Bloomberg News she may resurrect a 1999 proposal that would have barred firms from managing state pension funds for two years if they’ve donated to elected officials involved in the deal.

The SEC never adopted the measure.

“One of the first things I asked the staff to do was just dust off” the proposal and “take a look at it,” said Schapiro, who has been chairwoman since January.

“Let’s see if it still makes sense or if there are things that we should do differently.”

Schapiro’s remarks came after The News reported state Attorney General Andrew Cuomo wants financial firms doing business with the pension fund to follow a “code of conduct.”

Cuomo wants to bar the use of middlemen and ban all gratuities. He also is pushing for more transparency measures and wants to require pension decisions to be overseen by a board rather than just the controller.