The SEC yesterday charged a former New York deputy comptroller and a top political adviser with allegedly extracting millions of dollars in kickbacks from money managers.
The SEC yesterday charged a former New York deputy comptroller and a top political adviser with allegedly extracting millions of dollars in kickbacks from money managers seeking to manage assets of the $138.4 billion New York State Common Retirement Fund, Albany.
David Loglisci, former deputy comptroller and CIO for the retirement fund, and Henry Morris, a top adviser and chief fundraiser for former state Comptroller Alan Hevesi were charged for allegedly conducting a fraudulent scheme from 2003 through late 2006 “to enrich Morris as well as others with close ties to Morris and Loglisci,” an SEC news release said.
“Specifically, the SEC alleges that Loglisci caused the fund to invest billions of dollars with private equity firms and hedge fund managers who together paid millions of dollars in the form of sham ‘finder’ or ‘placement agent’ fees to obtain investments from the fund,” the SEC news release said. “As asserted in the SEC’s complaint, Morris made more than $15 million in such purported placement and finder fees,” the release said.
The civil complaint was filed in U.S. District Court in New York.
In an e-mailed statement, William J. Schwartz, partner at Cooley Godward Kronish and attorney for Mr. Morris, said: “The New York State Pension Fund made hundreds of millions, if not billions, of dollars on investments Hank Morris lawfully introduced to it, and the fund did not pay him one penny. There was no fraud and no corruption. Hank Morris is innocent, and we will defeat these charges at trial.”
The two also were charged with fraud and more than 100 other criminal charges in a 128-page indictment filed in New York state court. The indictment followed a two-year investigation, according to a news release by the New York state attorney general’s office.
“By injecting politics and self-dealing into investment decisions at the state pension fund, the defendants are alleged to have corrupted the New York state comptroller’s office,” said Attorney General Andrew M. Cuomo in the news release.
The indictment charges that Mr. Morris and others corrupted billions of dollars worth of investments from which they received more than $30 million in undisclosed fees, gifts and bribes, the news release said.
The indictment alleged that more than 20 fund investment deals were “allegedly tainted” by the kickback schemes and fraudulent self-dealing. Among the deals cited were five investments with private equity firm The Carlyle Group, which has about $730 million in capital commitments from the state fund that resulted in more than $13 million of alleged sham placement fees for Mr. Morris and his partner, according to the news release.
Other funds included the Olympia John Street Fund, a hedge fund with $900 million in capital commitments from the state fund, which generated more than $6.6 million in fees; the Access/NY European Fund, a captive fund of funds with almost $600 million in capital commitments from the state pension fund, which generated more than $2.3 million in alleged sham fees; and Strategic Co-Investment Partners, a co-investment fund with $750 million in capital commitments from the state fund, which generated more than $1.2 million in alleged sham management fees, the release said.
Chris Ullman, spokesman for The Carlyle Group, said: "Carlyle has fully cooperated with the New York attorney general’s office and is not a target of the investigations."
Representatives of Olympia John Street Fund, Access/NY European Fund and Strategic Co-Investment Partners could not be reached by press time.
Dennis Tompkins, a spokesman for the New York retirement fund, did not return telephone calls by deadline.
