NY Judge: Hank Morris Can Be Tried on Felonies

(Reuters) – The central figure in a New York public pension corruption case will be tried on some of the most serious charges brought against him by the attorney general, including felonies, a judge ruled on Thursday.

Henry Morris, the former state comptroller’s top political aide, was charged in March 2009, along with David Loglisci, the pension fund’s ex-top investment officer, who one year later became the sixth person to plead guilty in the scheme.

New York Supreme Court Judge Lewis Bart Stone dismissed some of the 90 counts Morris faced, but ruled he could be tried on charges including money laundering, bribery and violating the state securities law, the Martin Act.

Attorney General Andrew Cuomo, the Democratic candidate in November’s gubernatorial election, had charged that Morris turned the state’s $132 billion pension fund into a piggybank, reaping millions of dollars in placement fees from individuals and firms that wanted to invest the public’s money.

The former Democratic comptroller, Alan Hevesi, has not been charged.

The case, however, has involved high-profile firms, such as The Carlyle Group [CYL.UL], and power players, including Steven Rattner, who once ran U.S. President Barack Obama’s auto bailout task force, as well as television actress Peggy Lipton Jones, best known for her role on “The Mod Squad” from 1968 to 1973.

THE ‘ANTI-SOCIAL’ CLUB

Morris’ lawyers argued the Martin Act does not apply as the pension fund suffered no economic harm.

But the judge held that the state securities law covers “anti-social behavior” that could damage New York’s financial sector, which happens to be the city’s economic engine.

The New York comptroller is the sole trustee of its pension fund, the Common Retirement Fund.

Cuomo’s probe led to state and federal crackdowns on placement agents, such as Morris, who often exploited political ties to win business for alternative investments with hedge funds and private equity firms.

“An evaluation of Morris’ behavior in light of real-world economics shows that his actions may also have had a substantial likelihood of causing a material economic loss to the Common Retirement Fund,” the judge wrote.

That is because the pension fund’s investments were not chosen strictly on their merits, but on the $35 million of fees that were paid by alternative investment firms.

“Morris’ scheme was to create a ‘toll gate’ for entry into the Common Retirement Fund alternate investment program where only those who paid Morris’ toll could enter,” the judge said.

Morris’ lawyers said the state’s Martin Act does not cover the limited partnerships that were involved.

The judge disagreed. (Reporting by Joan Gralla; Additional reporting by Jon Stempel; Editing by Jan Paschal)