Last week, we noted an Israeli press report that Markstone Capital Partners was near a settlement with New York AG Andrew Cuomo, over its role in the state’s pay-for-play scandal.
Cuomo’s office declined to comment at the time, but today announced that the report was legit. Israel-focused Markstone will pay back $18 million in fees related to a $250 million investment from the New York State Common Retirement Fund into Markstone’s debut fund. It also has signed Cuomo’s “code of conduct,” which basically promises not to use placement agents for future fundraising efforts in the U.S.
Not sure how much that last part matters, considering that: (A) I really can’t imagine Markstone raising another fund, and (B) If Markstone does try to raise, it could focus on investors in Israel, where the code of conduct has no legal bearing.
I’ve been critical of these settlements in the past, because they often look like get-out-of-jail cheap cards for private equity pros. Pay a little money and promise not to do bad in the future (without admitting to doing bad in the past).
This one is different, however, because Markstone co-founder and former chairman Elliott Broidy pled guilty in December to a felony count of rewarding official misconduct ($1m of gifts to pension officials in exchange for the $250m commitment). Still no word yet on what his sentence might be — as such rulings won’t occur until there is finality to the cases against former New York CIO David Loglisci and “placement agent” Hank Morris.
Also worth noting that Cuomo announced a $1 million settlement with Los Angeles-based Wetherly Capital, which had split fees for several fund placement jobs with Hank Morris. Cuomo also announced that Wetherly would exit the fund placement business, as we reported back in October.