* Private equity fund pays $20 mln penalty to settle probe

* Carlyle Group accepts new code of conduct

* Carlyle intends to sue pension middlemen/broker dealer

* Carlyle takes responsibility for partner's actions (Adds details throughout)

By Joan Gralla

NEW YORK, May 14 (Reuters) - Private equity fund The Carlyle Group CYL.UL will pay $20 million to settle its role in a probe of investment firms that hired politically-connected people to help them get chosen to manage New York state's pension fund, the state attorney general said on Thursday.

Carlyle also agreed to a new code of conduct that bars it from using middlemen to win business from pensions and blocks campaign contributions to pension officers for two years, Attorney General Andrew Cuomo told reporters on a call.

Cuomo's probe, which has led to two guilty pleas and been joined by the U.S. Securities and Exchange Commission and 36 states, centered on the role of Henry Morris, a former New York state comptroller's top fund-raiser, who was indicted along with the pension fund's chief investment officer.

"It's the intersection of corporate and government corruption," Cuomo, the state's current attorney general, said adding the code will protect retirees from having pension investments directed by politicians rewarding cronies.