CUOMO ANNOUNCES FELONY GUILTY PLEA BY HANK MORRIS, THE CHIEF POLITICAL ADVISER TO FORMER COMPTROLLER ALAN HEVESI, IN PAY-TO-PLAY PENSION FUND KICKBACK SCHEME
Morris Will Forfeit $19 Million and Will Be Permanently Banned From the Securities Industry in New York State
NEW YORK, NY (November 22, 2010) – Attorney General Andrew M. Cuomo today announced a felony guilty plea by Henry “Hank” Morris, the chief political adviser to former Comptroller of the State of New York Alan Hevesi, for his involvement in a pay-to-play kickback scheme at the Office of the New York State Comptroller.
Morris used the pension fund for a pay-to-play scheme in which he personally received approximately $19 million in fees from billions of dollars in pension deals and steered investments to friends and political associates.
Morris pleaded guilty to a felony violation of the Martin Act, a class E felony, and faces up to four years in prison. The sentence will be determined by the judge on February 1, 2011. According to today’s plea agreement, Morris will forfeit $19 million that will go to the state pension fund. He will also be permanently banned from the securities industry in New York State and will be prohibited from soliciting or receiving investments from the State of New York or any governmental entity within the State. In addition, Morris will be prohibited from holding any public position or entering into any contractual relationship with the State of New York or any governmental entity within the State.
“Hank Morris used his influence at the New York State Comptroller’s Office to stockpile millions in fees for himself from state pension fund investments,” said Attorney General Cuomo. “Through his scheme, Morris personified pay-to-play corruption. With this plea, funds will be rightly restored to the State of New York and justice will be served.”
Today’s announcement marks the eighth guilty plea in Cuomo’s three-year investigation into corruption involving the Office of the New York State Comptroller and the state pension fund. The charges allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi. Through this scheme, Hevesi, Morris, and certain of their political allies and friends reaped tens of millions of dollars in kickbacks, bribes, and sham consulting and finder fees connected to pension fund investments.
In addition to the guilty pleas, Cuomo’s investigation has resulted in agreements with sixteen firms and three individuals, garnering more than $158 million in recoveries for the state, including today’s case.
DETAILS OF THE MORRIS SCHEME
During Hevesi’s administration, from January 2003 through December 2006, Morris, as a paid placement agent, engaged in a fraudulent scheme in which he used the pension fund’s multi-billion dollar alternative investment portfolio to enrich himself and to hand out favors and paybacks to political friends and allies.
Morris knew that Hevesi and then-Chief Investment Officer David Loglisci both had a fiduciary duty to act exclusively in the best interests of the members and beneficiaries of the pension fund. Nevertheless, Morris worked with Hevesi and Loglisci to facilitate the approval of certain proposed alternative investments in order to generate fees for Morris or individuals chosen by Morris. Through this scheme, he promoted more than $5 billion worth of public pension fund securities transactions that brought him $19 million in fees. Morris actively concealed his involvement in these investments from pension fund staff vetting the deals.
During his plea, Morris acknowledged receiving millions of dollars in fees on over a dozen investments and secretly sharing fees with other favored associates. In addition, Morris admitted to helping arrange for Raymond Harding, the former head of the Liberal Party, to receive fees on two pension fund investments. Morris also admitted that as Hevesi’s chief political consultant he sought and received contributions for Hevesi’s reelection campaign from individuals seeking to do business with the state pension fund, who then received investments from the pension fund.
Morris pleaded guilty before Justice Bart Stone in the State Supreme Court, New York County, Part 31 and remains out on bail pending sentencing. Sentencing is scheduled for February 1, 2011.
BACKGROUND INFORMATION
Attorney General Cuomo’s investigation into corruption at the pension fund has led to a number of criminal charges and eight guilty pleas to date, including guilty pleas by the following individuals: former New York State Comptroller Alan Hevesi; Hevesi’s paid political adviser and campaign manager Henry “Hank” Morris; former Chief Investment Officer at the Office of the State Comptroller David Loglisci; former Liberal Party Chair Ray Harding; investment advisor Saul Meyer; hedge fund manager Barrett Wissman; unlicensed placement agent Julio Ramirez; and venture fund manager Elliott Broidy.
In May 2009, the Attorney General’s office subpoenaed investment firms and their agents in connection with New York public pension fund investments after determining that 40 to 50 percent of agents acting to secure investments from the state and city pension funds were unlicensed.
Last year, Cuomo announced his Public Pension Fund Reform Code of Conduct, which, among other things, bans investment firms from compensating intermediaries for introductions to public pension funds. To date, sixteen firms have endorsed the Code: investment firms The Carlyle Group, Riverstone Holdings, LLC, Pacific Corporate Group Holdings, LLC, HM Capital Partners I, Levine Leichtman Capital Partners, Access Capital Partners, Falconhead Capital, Markstone Capital Group, Ares, Freeman Spogli, Quadrangle, and GKM; placement agent Wetherly Capital Group; political consulting firm Global Strategy Group; lobbying firm Platinum Advisors; and law firm Manatt Phelps & Phillips, LLP. Two individuals have also agreed to abide by the Code of Conduct: unlicensed placement agents Kevin McCabe and Bill White.
These firms collectively have agreed to return more than $100 million associated with pension fund investments; these funds will principally be provided to the pension fund for the benefit of the pension holders. Payments from individuals, including criminal defendants, bring that total to more than $158 million for the pension fund and the State.
This investigation was conducted by Deputy Chief of the Public Integrity Bureau Stacy Aronowitz, Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, and Legal Aide Michael Ellis, under the supervision of Special Deputy Attorney General for Public Integrity Ellen Nachtigall Biben and Special Counsel to the Attorney General Linda A. Lacewell.
NEW YORK, NY (November 22, 2010) – Attorney General Andrew M. Cuomo today announced a felony guilty plea by Henry “Hank” Morris, the chief political adviser to former Comptroller of the State of New York Alan Hevesi, for his involvement in a pay-to-play kickback scheme at the Office of the New York State Comptroller.
Morris used the pension fund for a pay-to-play scheme in which he personally received approximately $19 million in fees from billions of dollars in pension deals and steered investments to friends and political associates.
Morris pleaded guilty to a felony violation of the Martin Act, a class E felony, and faces up to four years in prison. The sentence will be determined by the judge on February 1, 2011. According to today’s plea agreement, Morris will forfeit $19 million that will go to the state pension fund. He will also be permanently banned from the securities industry in New York State and will be prohibited from soliciting or receiving investments from the State of New York or any governmental entity within the State. In addition, Morris will be prohibited from holding any public position or entering into any contractual relationship with the State of New York or any governmental entity within the State.
“Hank Morris used his influence at the New York State Comptroller’s Office to stockpile millions in fees for himself from state pension fund investments,” said Attorney General Cuomo. “Through his scheme, Morris personified pay-to-play corruption. With this plea, funds will be rightly restored to the State of New York and justice will be served.”
Today’s announcement marks the eighth guilty plea in Cuomo’s three-year investigation into corruption involving the Office of the New York State Comptroller and the state pension fund. The charges allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi. Through this scheme, Hevesi, Morris, and certain of their political allies and friends reaped tens of millions of dollars in kickbacks, bribes, and sham consulting and finder fees connected to pension fund investments.
In addition to the guilty pleas, Cuomo’s investigation has resulted in agreements with sixteen firms and three individuals, garnering more than $158 million in recoveries for the state, including today’s case.
DETAILS OF THE MORRIS SCHEME
During Hevesi’s administration, from January 2003 through December 2006, Morris, as a paid placement agent, engaged in a fraudulent scheme in which he used the pension fund’s multi-billion dollar alternative investment portfolio to enrich himself and to hand out favors and paybacks to political friends and allies.
Morris knew that Hevesi and then-Chief Investment Officer David Loglisci both had a fiduciary duty to act exclusively in the best interests of the members and beneficiaries of the pension fund. Nevertheless, Morris worked with Hevesi and Loglisci to facilitate the approval of certain proposed alternative investments in order to generate fees for Morris or individuals chosen by Morris. Through this scheme, he promoted more than $5 billion worth of public pension fund securities transactions that brought him $19 million in fees. Morris actively concealed his involvement in these investments from pension fund staff vetting the deals.
During his plea, Morris acknowledged receiving millions of dollars in fees on over a dozen investments and secretly sharing fees with other favored associates. In addition, Morris admitted to helping arrange for Raymond Harding, the former head of the Liberal Party, to receive fees on two pension fund investments. Morris also admitted that as Hevesi’s chief political consultant he sought and received contributions for Hevesi’s reelection campaign from individuals seeking to do business with the state pension fund, who then received investments from the pension fund.
Morris pleaded guilty before Justice Bart Stone in the State Supreme Court, New York County, Part 31 and remains out on bail pending sentencing. Sentencing is scheduled for February 1, 2011.
BACKGROUND INFORMATION
Attorney General Cuomo’s investigation into corruption at the pension fund has led to a number of criminal charges and eight guilty pleas to date, including guilty pleas by the following individuals: former New York State Comptroller Alan Hevesi; Hevesi’s paid political adviser and campaign manager Henry “Hank” Morris; former Chief Investment Officer at the Office of the State Comptroller David Loglisci; former Liberal Party Chair Ray Harding; investment advisor Saul Meyer; hedge fund manager Barrett Wissman; unlicensed placement agent Julio Ramirez; and venture fund manager Elliott Broidy.
In May 2009, the Attorney General’s office subpoenaed investment firms and their agents in connection with New York public pension fund investments after determining that 40 to 50 percent of agents acting to secure investments from the state and city pension funds were unlicensed.
Last year, Cuomo announced his Public Pension Fund Reform Code of Conduct, which, among other things, bans investment firms from compensating intermediaries for introductions to public pension funds. To date, sixteen firms have endorsed the Code: investment firms The Carlyle Group, Riverstone Holdings, LLC, Pacific Corporate Group Holdings, LLC, HM Capital Partners I, Levine Leichtman Capital Partners, Access Capital Partners, Falconhead Capital, Markstone Capital Group, Ares, Freeman Spogli, Quadrangle, and GKM; placement agent Wetherly Capital Group; political consulting firm Global Strategy Group; lobbying firm Platinum Advisors; and law firm Manatt Phelps & Phillips, LLP. Two individuals have also agreed to abide by the Code of Conduct: unlicensed placement agents Kevin McCabe and Bill White.
These firms collectively have agreed to return more than $100 million associated with pension fund investments; these funds will principally be provided to the pension fund for the benefit of the pension holders. Payments from individuals, including criminal defendants, bring that total to more than $158 million for the pension fund and the State.
This investigation was conducted by Deputy Chief of the Public Integrity Bureau Stacy Aronowitz, Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, and Legal Aide Michael Ellis, under the supervision of Special Deputy Attorney General for Public Integrity Ellen Nachtigall Biben and Special Counsel to the Attorney General Linda A. Lacewell.
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