CUOMO ANNOUNCES GUILTY PLEAS BY FORMER LIBERAL PARTY CHAIR
NEW YORK, NY (October 6, 2009) - Attorney General Andrew M. Cuomo today announced two guilty pleas in the ongoing investigation relating to the New York State Common Retirement Fund (“CRF”). Raymond Harding, the former chair of the Liberal Party, and Saul Meyer, a founding partner of a Dallas-based firm that advises public pension systems across the nation, both pled guilty to felony securities fraud charges for their involvement in pay-to-play kickback schemes at the New York State Office of the Comptroller and the CRF.
“These guilty pleas vividly depict the depth and breadth of corruption involving the New York State pension fund,” said Attorney General Cuomo. “In one case, we see New York’s state pension fund looted to reward a political boss with hundreds of thousands of dollars in improper payments. In the other, we see a pension fund adviser - the outside “gatekeeper” who is supposed to safeguard the integrity of the pension fund process - recommending deals based on pressure from pension officials and politically-connected people. We are bringing this ugly corruption to light and we must fix the system as well.”
Raymond Harding
On April 15, the Attorney General’s Office arrested former Liberal Party chair Raymond Harding, and charged him with felony Martin Act securities fraud violations. Today, Raymond Harding pled guilty to a felony Martin Act securities fraud violation - a felony - before the Honorable Lewis Bart Stone, in New York County Supreme Court. Harding faces up to four years in prison. Harding is now cooperating with the investigation.
During his plea, Harding admitted to having participated in a scheme devised by Hank Morris, the top political adviser to former New York State Comptroller Alan Hevesi, and David Loglisci, the former state pension fund chief investment officer, to corrupt the process of selecting investments at the State pension fund to favor political allies, friends and family. As part of this scheme, Morris inserted Harding as a sham placement agent for certain investments with the CRF in order to reward him for political favors to Hevesi. In addition to his more than thirty years of political support for Hevesi through the Liberal Party, Harding helped create a vacancy in the New York State Assembly so that Comptroller Hevesi’s son, Andrew Hevesi, could take the seat in a special election. Harding did so by helping the incumbent Assemblyman in the 28th District in Queens get a six-figure job at an insurance company. To reward him for these political favors, Morris and Loglisci helped Harding secure over $800,000 in sham placement fees relating to the pension fund’s investments with Paladin and Pequot, two private equity firms. According to Harding, Morris’s goal was to provide Harding with $150,000 per year from state pension fund deals - a form of illicit pension in itself for Harding for services and loyalty to Hevesi.
Saul Meyer
On April 30, 2009, the Attorney General’s Office arrested Saul Meyer, a founding partner of Dallas-based Aldus Equity, and charged him with Martin Act securities fraud for paying illegal kickbacks to Hank Morris in exchange for business with the CRF.
On October 2, 2009, Meyer pled guilty to the Martin Act charge against him - a felony - for fraud relating to the CRF investments in the Aldus/NY Emerging Fund and Strategic Co-Investment Partners, L.P. (“Strategic Co-Investment”), a joint venture between PCG, the Clinton Group, and Barrett Wissman, as well as fraud in investment transactions relating to public pension funds in New Mexico. Meyer pled before Justice Lewis Bart Stone, in New York County Supreme Court Part 31, and faces up to four years in prison on the charge. The plea was unsealed today.
During his plea, Meyer admitted that he understood that because of Hank Morris’s political connections, Morris had the ability to secure a CRF investment mandate for Aldus. As a result, Meyer entered into an arrangement with Hank Morris pursuant to which Aldus agreed to pay Morris 35 percent of management fees and profit on the CRF investment. Meyer stated that Loglisci was aware of the arrangement with Hank Morris, and recommended that the CRF make the investment in the Aldus/NY Emerging Fund at least in part because of Meyer’s arrangement with Morris. As a result, in or about December of 2004, Aldus received an investment from the CRF in the Aldus/NY Emerging Fund, and, thereafter, obtained millions of dollars in fees in connection with that investment, more than $300,000 of which Aldus paid to Hank Morris.
With respect to the CRF investment in Strategic Co-Investment, Meyer stated that Loglisci directed Meyer to have Aldus perform the due diligence on that fund - a fund in which Loglisci’s friend Barrett Wissman had an interest. When Meyer declined this request, Loglisci made it clear that Meyer had no choice, and threatened to pull the CRF investment in Aldus/NY Emerging Fund if Meyer did not perform the due diligence in a way that resulted in Aldus recommending the investment in the fund to CRF. Loglisci instructed Meyer to prepare a diligence report on the proposed investment that concealed Meyer’s concerns to provide a basis for CRF to make the investment in Strategic Co-Investment. Meyer stated that at Loglisci’s direction, and notwithstanding his concerns, he ensured that Aldus prepared such a report, leading to CRF’s $750 million investment in Strategic Co-Investment, the largest CRF commitment at that time.
In addition, from 2004 through February 2009, Aldus acted as an adviser to the New Mexico State Investment Council (“SIC”) and the New Mexico Educational Retirement Board (“ERB”) in the State of New Mexico. Meyer admitted that on numerous occasions, contrary to his fiduciary duty to SIC and ERB, he ensured that Aldus recommended proposed investments that were pushed on him by politically-connected individuals in New Mexico, knowing that these politically-connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico.
The Investigation
The guilty pleas announced today arise out of the two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and the State pension fund. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends.
Morris and Loglisci have been charged in a separate 123-count indictment with, among other charges, enterprise corruption, Martin Act securities fraud, grand larceny, bribery and money laundering. The indictment, unsealed in March, alleges Morris and others reaped more than $30 million in undisclosed fees, gifts, and bribes as a result of tainted investment deals. That indictment remains pending before Justice Lewis Bart Stone, and Morris and Loglisci are presumed innocent until they are proven guilty in court.
Previously, hedge fund manager Barrett Wissman pled guilty to a felony charge under the Martin Act for conduct related to the pension fund, and agreed to pay $12 million in penalties and forfeiture to the State of New York. Julio Ramirez, an unlicensed placement agent previously associated with Wetherly Capital in Los Angeles, also pled guilty to a Martin Act securities fraud charge for conduct related to the pension fund.
The State pension fund is the biggest pool of money in the State and the third largest public pension fund in the country, most recently valued at approximately $116.5 billion. At the time of the events charged, it was valued at approximately $150 billion. The New York State Comptroller is the sole trustee of the Fund, responsible for managing and investing the pension fund solely in the best interests of the over one million current and former State employees.
To date, seven firms have signed onto the Attorney General’s Reform Code of Conduct: The Carlyle Group, Riverstone Holdings, Pacific Corporate Group, HM Capital, Falconhead Capital, Levine Leichtman Capital Partners, and Access Capital Partners. These firms collectively have agreed to return nearly $60 million associated with CRF investments; these funds will principally be provided to the CRF for the benefit of the pension holders. In July, the United States Securities & Exchange Commission proposed new pay-to-play rules that would institutionalize Cuomo’s Code of Conduct nationwide.
Cuomo also issued subpoenas in May to over 100 investment firms and agents after his investigation found that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.
The investigation was conducted by Stacy Aronowitz, Deputy Chief of the Public Integrity Bureau, and Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision of Ellen Nachtigall Biben, Special Deputy Attorney General for Public Integrity, and Linda A. Lacewell, Special Counsel.
“These guilty pleas vividly depict the depth and breadth of corruption involving the New York State pension fund,” said Attorney General Cuomo. “In one case, we see New York’s state pension fund looted to reward a political boss with hundreds of thousands of dollars in improper payments. In the other, we see a pension fund adviser - the outside “gatekeeper” who is supposed to safeguard the integrity of the pension fund process - recommending deals based on pressure from pension officials and politically-connected people. We are bringing this ugly corruption to light and we must fix the system as well.”
Raymond Harding
On April 15, the Attorney General’s Office arrested former Liberal Party chair Raymond Harding, and charged him with felony Martin Act securities fraud violations. Today, Raymond Harding pled guilty to a felony Martin Act securities fraud violation - a felony - before the Honorable Lewis Bart Stone, in New York County Supreme Court. Harding faces up to four years in prison. Harding is now cooperating with the investigation.
During his plea, Harding admitted to having participated in a scheme devised by Hank Morris, the top political adviser to former New York State Comptroller Alan Hevesi, and David Loglisci, the former state pension fund chief investment officer, to corrupt the process of selecting investments at the State pension fund to favor political allies, friends and family. As part of this scheme, Morris inserted Harding as a sham placement agent for certain investments with the CRF in order to reward him for political favors to Hevesi. In addition to his more than thirty years of political support for Hevesi through the Liberal Party, Harding helped create a vacancy in the New York State Assembly so that Comptroller Hevesi’s son, Andrew Hevesi, could take the seat in a special election. Harding did so by helping the incumbent Assemblyman in the 28th District in Queens get a six-figure job at an insurance company. To reward him for these political favors, Morris and Loglisci helped Harding secure over $800,000 in sham placement fees relating to the pension fund’s investments with Paladin and Pequot, two private equity firms. According to Harding, Morris’s goal was to provide Harding with $150,000 per year from state pension fund deals - a form of illicit pension in itself for Harding for services and loyalty to Hevesi.
Saul Meyer
On April 30, 2009, the Attorney General’s Office arrested Saul Meyer, a founding partner of Dallas-based Aldus Equity, and charged him with Martin Act securities fraud for paying illegal kickbacks to Hank Morris in exchange for business with the CRF.
On October 2, 2009, Meyer pled guilty to the Martin Act charge against him - a felony - for fraud relating to the CRF investments in the Aldus/NY Emerging Fund and Strategic Co-Investment Partners, L.P. (“Strategic Co-Investment”), a joint venture between PCG, the Clinton Group, and Barrett Wissman, as well as fraud in investment transactions relating to public pension funds in New Mexico. Meyer pled before Justice Lewis Bart Stone, in New York County Supreme Court Part 31, and faces up to four years in prison on the charge. The plea was unsealed today.
During his plea, Meyer admitted that he understood that because of Hank Morris’s political connections, Morris had the ability to secure a CRF investment mandate for Aldus. As a result, Meyer entered into an arrangement with Hank Morris pursuant to which Aldus agreed to pay Morris 35 percent of management fees and profit on the CRF investment. Meyer stated that Loglisci was aware of the arrangement with Hank Morris, and recommended that the CRF make the investment in the Aldus/NY Emerging Fund at least in part because of Meyer’s arrangement with Morris. As a result, in or about December of 2004, Aldus received an investment from the CRF in the Aldus/NY Emerging Fund, and, thereafter, obtained millions of dollars in fees in connection with that investment, more than $300,000 of which Aldus paid to Hank Morris.
With respect to the CRF investment in Strategic Co-Investment, Meyer stated that Loglisci directed Meyer to have Aldus perform the due diligence on that fund - a fund in which Loglisci’s friend Barrett Wissman had an interest. When Meyer declined this request, Loglisci made it clear that Meyer had no choice, and threatened to pull the CRF investment in Aldus/NY Emerging Fund if Meyer did not perform the due diligence in a way that resulted in Aldus recommending the investment in the fund to CRF. Loglisci instructed Meyer to prepare a diligence report on the proposed investment that concealed Meyer’s concerns to provide a basis for CRF to make the investment in Strategic Co-Investment. Meyer stated that at Loglisci’s direction, and notwithstanding his concerns, he ensured that Aldus prepared such a report, leading to CRF’s $750 million investment in Strategic Co-Investment, the largest CRF commitment at that time.
In addition, from 2004 through February 2009, Aldus acted as an adviser to the New Mexico State Investment Council (“SIC”) and the New Mexico Educational Retirement Board (“ERB”) in the State of New Mexico. Meyer admitted that on numerous occasions, contrary to his fiduciary duty to SIC and ERB, he ensured that Aldus recommended proposed investments that were pushed on him by politically-connected individuals in New Mexico, knowing that these politically-connected individuals or their associates stood to benefit financially or politically from the investments and that the investments were not necessarily in the best economic interest of New Mexico.
The Investigation
The guilty pleas announced today arise out of the two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and the State pension fund. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends.
Morris and Loglisci have been charged in a separate 123-count indictment with, among other charges, enterprise corruption, Martin Act securities fraud, grand larceny, bribery and money laundering. The indictment, unsealed in March, alleges Morris and others reaped more than $30 million in undisclosed fees, gifts, and bribes as a result of tainted investment deals. That indictment remains pending before Justice Lewis Bart Stone, and Morris and Loglisci are presumed innocent until they are proven guilty in court.
Previously, hedge fund manager Barrett Wissman pled guilty to a felony charge under the Martin Act for conduct related to the pension fund, and agreed to pay $12 million in penalties and forfeiture to the State of New York. Julio Ramirez, an unlicensed placement agent previously associated with Wetherly Capital in Los Angeles, also pled guilty to a Martin Act securities fraud charge for conduct related to the pension fund.
The State pension fund is the biggest pool of money in the State and the third largest public pension fund in the country, most recently valued at approximately $116.5 billion. At the time of the events charged, it was valued at approximately $150 billion. The New York State Comptroller is the sole trustee of the Fund, responsible for managing and investing the pension fund solely in the best interests of the over one million current and former State employees.
To date, seven firms have signed onto the Attorney General’s Reform Code of Conduct: The Carlyle Group, Riverstone Holdings, Pacific Corporate Group, HM Capital, Falconhead Capital, Levine Leichtman Capital Partners, and Access Capital Partners. These firms collectively have agreed to return nearly $60 million associated with CRF investments; these funds will principally be provided to the CRF for the benefit of the pension holders. In July, the United States Securities & Exchange Commission proposed new pay-to-play rules that would institutionalize Cuomo’s Code of Conduct nationwide.
Cuomo also issued subpoenas in May to over 100 investment firms and agents after his investigation found that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.
The investigation was conducted by Stacy Aronowitz, Deputy Chief of the Public Integrity Bureau, and Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision of Ellen Nachtigall Biben, Special Deputy Attorney General for Public Integrity, and Linda A. Lacewell, Special Counsel.
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