Alan Hevesi, former New York state comptroller, pleaded guilty earlier this month in New York State Supreme Court to accepting nearly $1 million in gifts in exchange for approving $250 million in investments for the New York State Common Retirement Fund from 2003 to 2006.
Markstone Capital Partners, the firm that received the investments, gave Mr. Hevesi more than $500,000 in campaign contributions, $380,000 in sham consulting fees for a lobbyist friend and $75,000 in travel expenses for Mr. Hevesi and members of his family, state Attorney General Andrew Cuomo said in a news release announcing the guilty plea.
“I deeply regret my conduct, and I sincerely and deeply apologize to the people of the state of New York, the court and my family,” Mr. Hevesi said. He faces up to four years in prison and has agreed to cooperate with Mr. Cuomo's ongoing investigation.
“Alan Hevesi presided over a culture of corruption and violated his oath as a public servant,” Mr. Cuomo said in the release. “He was solely charged with protecting our pension fund, but he exploited it for his personal benefit instead.”
Mr. Hevesi resigned as comptroller after pleading guilty to a felony in December 2006 for using state employees to chauffeur around his disabled wife, ending his 35-year career in politics.
He was sole trustee of the $124.8 billion fund from 2003 to 2006. He allegedly allowed his political consultant, Henry “Hank” Morris, to corrupt the investment process to benefit money managers who made campaign contributions and politically connected placement agents who received lucrative fees.
Mr. Cuomo has spent more than three years investigating and prosecuting “pay-to-play” practices at the fund. At least six people have pleaded guilty to criminal charges, 15 investment firms have settled and more than $130 million has been paid to the fund and state from the probe.
Mr. Cuomo has elicited admissions and cooperation from at least six men connected to the corruption.
David Loglisci, chief investment officer of the state fund under Mr. Hevesi, pleaded guilty in March to a violation of the state's general business law for allowing Mr. Morris to choose which money managers received alternative investments from the pension fund.
Mr. Loglisci, who agreed to cooperate, said in court then that he was instructed by a senior official to get approval from Mr. Morris before recommending or declining investment suggestions.
In all, about $5 billion of the New York state pension fund's $9.5 billion in alternative investments made in the 2003-"07 period were tainted by kickbacks, according to the SEC, which is also investigating.
Mr. Loglisci had been charged in March 2009 along with Mr. Morris in a 123-count indictment. Mr. Morris, who has pleaded not guilty, faces trial on enterprise corruption and more than 70 other charges.
State Comptroller Thomas P. DiNapoli, who was chosen by the state Assembly to succeed Mr. Hevesi, has banned the use of placement agents or lobbyists in investments with the fund, and banned contributions from those who do business with the fund.
Mr. Cuomo supports legislation to establish a board of trustees to oversee the state pension fund in place of the current sole trustee.
In a separate action, Steven Rattner, co-founder of Quadrangle Group, a private equity firm he has since left, is said to be near a $6 million settlement with the SEC in its investigation, according to a person familiar with the matter. The proposed agreement also includes a two-year ban from the financial industry, according to the person, who declined to be identified because the talks are private. SEC spokesman John Nester declined to comment.
Mr. Rattner allegedly paid $1.1 million in finder fees to Henry “Hank” Morris, the former chief political consultant to Alan Hevesi, ex-New York state comptroller, according to New York Attorney General Andrew Cuomo. In exchange, Quadrangle received an investment from the fund, said Mr. Cuomo, who settled his probe of the firm earlier this year for $7 million.
“We wholly disavow the conduct engaged in by Steve Rattner,” New York-based Quadrangle said of its settlement at the time, adding that it didn't admit or deny any wrongdoing.
Also, the law firm Manatt Phelps & Phillips LLP agreed on Oct. 12 to a five-year ban from appearing before public pension funds in New York state as part of a $550,000 settlement with Mr. Cuomo's office.
The law firm will also cooperate in Mr. Cuomo's ongoing investigation of improper influence on state pension fund investments, according to a settlement document provided by Mr. Cuomo's office.
Manatt also will comply with Mr. Cuomo's public pension fund code of conduct, according to a news release from Mr. Cuomo's office.
“The agreement arises from Manatt's conduct on behalf of financial firms seeking investments from public pension funds without a securities license,” according to the release.
Bloomberg contributed to this story.