Seven people involved in a pay-to-play scandal with the $160.7 billion New York State Common Retirement Fund, Albany, have settled charges brought by the SEC, the agency announced Monday.
The Securities and Exchange Commission filed charges against David Loglisci, former New York deputy comptroller and chief investment officer of the fund, and Henry Morris, a top political adviser and fundraiser for former comptroller Alan Hevesi, for extracting kickbacks from investment management firms seeking contracts with the pension fund.
According to the SEC, the two men “orchestrated a fraudulent scheme” from 2003 through late 2006 to have private equity firms and hedge fund managers pay millions in “sham” placement agent fees to win investment contracts. SEC officials charged a total of 17 defendants in the case, including some of the investment firms and their principals.
Former state Comptroller Alan Hevesi went to jail in 2011 for his role in the scheme. Current Comptroller Thomas DiNapoli, the sole trustee of the pension fund, banned all private placement agents in 2009.
"These individuals acted in their own interest to enrich themselves and deserve to pay for their inappropriate actions. This settlement rightly bars them and sends a strong message to those who would attempt similar scams," Jennifer Freeman, a spokeswoman for Mr. DiNapoli, said in an e-mail.
The SEC civil action has been on hold until now as the New York attorney general pursued parallel criminal action against some of the defendants. Mr. Morris, who pleaded guilty to criminal charges, served a multiyear prison term and forfeited $19 million. Mr. Loglisci pleaded guilty to criminal charges and received a conditional discharge for cooperating with the investigations. Former broker Julio Ramirez, who facilitated some of the payments, pleaded guilty and forfeited $289,975 in fees.
Other defendants named in the settlement were connected to shell companies and firms that participated in the scheme.
The final judgments in the civil action were entered in U.S. District Court in Manhattan on March 3. The SEC also imposed remedial sanctions against Messrs. Morris and Loglisci and the related firms, preventing them from participating in certain securities transactions.
