The Securities and Exchange Commission has filed an amended complaint charging a former state political party leader and a hedge fund manager in connection with a multimillion-dollar kickback scheme involving New York's largest pension fund.
The Securities and Exchange Commission has filed an amended complaint charging a former state political party leader and a hedge fund manager in connection with a multimillion-dollar kickback scheme involving New York's largest pension fund.
Raymond Harding, a former leader of the New York State Liberal Party, and Barrett Wissman, a former hedge fund manager from Dallas, are accused of accepting millions of dollars in the form of sham “finder” or “placement agent” fees from investment management firms seeking to manage the assets of the New York State Common Retirement Fund in Albany.
The SEC alleges that the kickbacks were arranged by David Loglisci, former deputy comptroller and chief investment officer of the pension fund, who invested billions of dollars from the fund with investment management firms that, in turn, paid millions of dollars to Mr. Harding, Mr. Wissman, and Hank Morris, a top political adviser and chief fundraiser for former New York State Comptroller Alan Hevesi.
Mr. Morris and Mr. Loglisci were charged in an initial complaint filed in U.S. District Court in Manhattan with orchestrating the fraudulent scheme.
In the amended complaint, the SEC alleged that from 2003 to late 2006, Mr. Wissman received at least $12 million in illegal fees, while Mr. Harding received about $800,000.
Mr. Wissman has pleaded guilty to the charges and will pay $12 million in penalties and forfeitures to the State of New York over three years, according to published reports.
“From 2004 to 2007, Mr. Wissman acted as a finder in connection with certain investments that were presented to the New York State Common Retirement Fund. Mr. Wissman acknowledges that he has [pleaded] guilty,” said William A. Brewer III of the Dallas law firm of Bickel & Brewer, who is representing Mr. Wissman.
“He takes full responsibility for his conduct and is cooperating in the ongoing investigations by the New York attorney general's office and the SEC. As such, he declines to make any further statement,” Mr. Brewer said.
Mr. Harding, however, intends to bring his case to court, according to his attorney Gary Naftalis, from the New York-based law firm Kramer Levin Naftalis & Frankel LLP.
“Ray Harding is innocent of these charges,” he said.
“He has had a long and honorable career in both pubic and private life, and his work as a placement agent was entirely lawful and honorable,” Mr. Naftalis said. “He looks forward to defending against these baseless accusations in court and maintaining his good name and record.”
During the scheme, Mr. Loglisci allegedly made sure that the investment managers who paid Mr. Morris, Mr. Wissman and Mr. Harding were rewarded with substantial contracts, while denying fund business to those who didn’t pay.
The SEC has also charged three entities through which Mr. Wissman perpetrated the alleged fraud: Flandana Holdings Ltd. of Limassol, Cyprus, and Tuscany Enterprises LLC and W Investment Strategies LLC, both based in St. Croix, U.S. Virgin Islands.
“These men put their greed above the interests of New York's hard-working public employees,” Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement. “We will continue to unravel this tangled web of fraud and corruption.”
According to the SEC, Mr. Wissman and Flandana Holdings have consented, without admitting or denying the allegations, to the entry of a partial final judgment that imposes permanent injunctive relief but defers disgorgement of ill-gotten assets and payment of interest to a later date.
Charges against Mr. Harding remain pending, and the SEC's investigation is continuing.
