NEW YORK (Reuters) – New York Attorney General Andrew Cuomo accused an indicted top aide to former state comptroller Alan Hevesi of running a $35 million fraud over the placement of billions of dollars of investments by the state’s biggest pension fund.
The filing in the New York State Supreme Court in Manhattan was in response to a bid by the onetime political aide Henry “Hank” Morris to dismiss the March 2009 indictment over alleged corruption at the $129.4 billion New York State Common Retirement Fund, the nation’s third largest public pension fund.
Justice Lewis Bart Stone, who has presided over the case, has said the lawsuit presents a novel use of New York’s securities law, the Martin Act, because Morris did not work for the state. [ID:nN16366871]
A lawyer for Morris did not immediately return requests on Monday for comment.
In Friday’s filing, Cuomo rejected what he called Morris’ defense that he simply engaged in a “long-standing” practice of using political ties to award access to public assets, sometimes known as pay-to-play.
Saying the idea that “everybody does it” is no defense, Cuomo also maintained that Morris acted in concert with David Loglisci, the fund’s former chief investment officer, to engage in a series of fraudulent transactions, enriching himself.
“The fact that fraud and corruption may be rampant does not cloak wrongdoers with impunity,” Cuomo said.
Morris, he said, “used lies, deceit and self-dealing” to further his scheme, obtaining “more than $19 million in placement and management fees. The aggregate amount that defendant and members of his criminal enterprise received as a result of their fraudulent conduct exceeded $35 million.”
Loglisci, who was also charged in the 123-count indictment, pleaded guilty in March to helping favored firms gain access to the Common Retirement Fund. Five other people have also pleaded guilty to criminal charges in the case.
At least 15 firms including private equity firms Quadrangle Group LLC and Carlyle Group [CYL.UL] have entered settlements in the probe. These have resulted in more than $130 million of recoveries for the fund, and adoptions of a code of conduct to curb the use of placement agents for pension fund investments.
If convicted on all charges, Morris could face 340 years in prison, Cuomo has said. The U.S. Securities and Exchange Commission separately charged Morris with securities fraud.
New York’s comptroller is sole trustee of the state pension fund. Hevesi, a Democrat, oversaw the fund from 2003 until late 2006. He has not been charged in the pay-to-pay case.
Cuomo, also a Democrat, is the frontrunner in the November election to succeed David Paterson as New York’s governor.
The case is Cuomo v. Morris, New York State Supreme Court, New York County, No. 00025/2009. (Reporting by Jonathan Stempel and Joan Gralla; Additional reporting by Basil Katz; Editing by Bernard Orr)