ATTORNEY GENERAL CUOMO ANNOUNCES SWEEPING INDICTMENT IN PAY-TO-PLAY KICKBACK SCHEME AT THE NEW YORK STATE COMPTROLLER’S OFFICE

Defendants Hank Morris and David Loglisci are Charged with 123 Counts, Including Enterprise Corruption and Martin Act Offenses

Indictment Alleges that Former Chief Political Adviser and Chief Investment Officer for Then Comptroller Alan Hevesi Engaged in a Scheme to Corrupt State Pension Fund for Political, Personal, and Financial Gain

NEW YORK, NY (March 19, 2009) – Attorney General Andrew M. Cuomo today announced the indictment of Henry (“Hank”) Morris and David Loglisci on 123 charges, including enterprise corruption, Martin Act securities fraud, grand larceny, bribery, money laundering, and related offenses. The charges were filed in a 128-page indictment filed in the New York State Supreme Court.

The indictment announced today arises from a two-year investigation conducted pursuant to New York’s securities fraud statute, the Martin Act. The investigation is continuing. If proven, the allegations in the indictment reveal a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels of the Office of the State Comptroller. The charges entail a web of corrupt acts for both political and personal gain.

The State pension fund is the biggest pool of money in the State and the third largest public pension fund in the country, most recently valued at approximately $122 billion. At the time of the events charged, it was worth approximately $150 billion. The New York State Comptroller is the sole trustee of the Fund, responsible for managing and investing the pension fund solely in the best interests of the over one million current and former State employees and their families.

From 2003 to 2006 Hank Morris was Alan Hevesi’s top political advisor, and David Loglisci was the Chief Investment Officer in the Comptroller’s Office. They are charged with conspiring to sell access to billions of taxpayer dollars in exchange for millions of dollars in kickbacks and other payments for political and personal gain.

“By injecting politics and self-dealing into investment decisions at the State pension fund, the defendants are alleged to have corrupted the New York State Comptroller’s Office,” said Attorney General Cuomo. “The over one million New Yorkers and their families who are the beneficiaries of this fund deserve to have their hard-earned retirement accounts kept free from politically-driven investments and personal agendas. We owe it to them to hold accountable those who would seek to corrupt the system and violate the public’s trust. Mixing politics, self-dealing, kickbacks, and billions in taxpayer funds is nothing short of the perfect public integrity storm.”

The indictment alleges a web of interlocking relationships, where money and favors were exchanged between senior-level State officials, the Comptroller’s chief campaign aide, and those doing business or seeking to do business before the Comptroller’s Office, all in breach of fiduciary duties and the public trust. The driving force of the scheme was money, not political partisanship. The indictment alleges that the process of selecting investments at the Fund – investments of billions of dollars – was skewed and corrupted to favor political associates, family and friends of Morris and Loglisci, and other officials in the Office of the State Comptroller. In this network of corruption, it is alleged that:

Morris extracted millions of dollars in campaign contributions for Alan Hevesi from firms doing business before the Comptroller’s Office. Frequently, Morris had helped ensure that these firms won the Comptroller’s approval of their proposed investments, which generated millions of dollars in fees for the firms.

Morris used the fund as his own piggy bank and took approximately $30 million in fees for himself and his business partners on investments which Morris himself had a role in approving.

Morris and senior-level government officials at the Comptroller’s Office orchestrated a scheme whereby unnamed political cronies of Alan Hevesi got paid sham “placement fees” on investment fund transactions as kickbacks or rewards for political favors and endorsements for Hevesi. Senior-level government officials at the Comptroller’s Office accepted hundreds of thousands of dollars worth of gifts and bribes for themselves and their family and friends.

David Loglisci, Chief Investment Officer, steered hundreds of millions of dollars worth of investment deals to Morris and to favored firms and accepted from them hundreds of thousands of dollars worth of benefits in the form of sham “investments” for the production by his brother of a low-budget movie, “Chooch.” Among the investments were $100,000 from Morris and $100,000 from a principal of another private equity fund doing business with the Office. Loglisci also caused the head of a private equity fund seeking an investment from the Comptroller’s Office to arrange a contract worth almost $90,000 to distribute the DVD of the movie.

An unnamed high-ranking official in the Comptroller’s Office secured from Morris and others doing business with the Office gifts and bribes including cash, rent payments for his female companion’s luxury Manhattan apartment, a sham $100,000 loan for her, and a job and other benefits for her daughter.
The indictment charges that Morris and others corrupted billions of dollars worth of investments from which they reaped more than $30 million in undisclosed fees, gifts, and bribes. Over twenty investment deals were allegedly tainted by the defendants’ kickback schemes and fraudulent self-dealing, including the following:

Access/NY European Fund, a captive fund of funds with almost $600 million in capital commitments from the State pension fund, generating over $2.3 million in sham management fees for Morris and his partner. Morris’s role was allegedly concealed from Access.

Aldus New York Emerging Fund, a captive fund of funds with $375 million in capital commitments from the State pension fund, generating $262,000 in sham management fees for Morris. Aldus Equity Partners, L.P. is also an outside consultant and fiduciary to the State pension fund on private equity transactions. Morris secured this mandate for Aldus after having blocked Pharos from receiving the mandate when a principal of Pharos Capital Group, LLC, refused to pay Morris or his partner. Morris then caused Aldus to invest in other funds on which Morris also obtained sham placement fees.

Five investments involving The Carlyle Group, one of the world’s largest private equity funds, totaling approximately $730 million in capital commitments from the State pension fund. Morris and his partner obtained over $13 million in sham placement fees.

GKM/NY Venture Capital Fund, a captive fund of funds with $800 million in capital commitments from the State pension fund. Morris and his partner, a political crony of Hevesi, obtained over $650,000 in sham placement fees.

Olympia John Street Fund LP, a hedge fund with $900 million in capital commitments from the State pension fund, generating over $6.6 million in fees for Morris and his partner.

Paladin Homeland Security Fund (NY), a $20 million private equity fund, generating $300,000 in sham placement fees for a political crony of Hevesi. That person also received hidden fees of over $500,000 in connection with Pequot Diversified Offshore Fund/Pequot Private Equity Partners Fund IV, which had a combined commitment of $110 million from the State pension fund.

Strategic Co-Investment Partners, a co-investment fund with $750 million in capital commitments, the largest capital commitment by the State pension fund at the time. This generated over $1.2 million in sham management fees for Morris’s partner, with Morris as a secret partner.

Morris and Loglisci are charged with 123 counts, including enterprise corruption, violations of the Martin Act, money laundering, grand larceny, falsifying business records, offering false instruments for filing, receiving rewards for official misconduct, rewarding official misconduct, bribery, and related offenses. (See attached chart listing charges).

If convicted on the top charge of enterprise corruption, the defendants face a minimum of 1 to 3 years and a maximum of 8 1/3 to 25 years in prison. If convicted on all charges, Morris faces a total maximum sentence of 340 years in prison and Loglisci faces a total maximum sentence of 193 years in prison.

In a parallel civil lawsuit filed today, the Securities and Exchange Commission charged Morris and Loglisci with multiple acts of securities fraud. Attorney General Cuomo thanked the SEC for joining the investigation.

The defendants are presumed innocent unless and until proven guilty.

Also today, Cuomo announced that he had obtained a forfeiture order permitting the seizure of assets up to $35 million. Pursuant to that order, Cuomo’s Office has frozen approximately $11 million worth of Morris’s assets, consisting of $7 million in bank accounts and $4 million in real property. Both defendants are under an injunction not to dissipate assets.

The investigation was conducted by Stacy Aronowitz, Deputy Chief of the Public Integrity Bureau, and Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision of Ellen Biben, Special Deputy Attorney General for Public Integrity, and Linda Lacewell, Special Counsel.

Table of Charges
Indictment

Friday, March 20, 2009
This Isn't First Time Hank Morris Had Brush With Law

Hank Morris, who is not only closely tied to Alan Hevesi but helped steer Chuck Schumer to his win over Al D'Amato for D'Amato's Senate seat, has had problems with following the law in the past:

August 17, 2001
Compromise Brings Hevesi $2.6 Million in City Funds
By ERIC LIPTON

Comptroller Alan G. Hevesi struck a compromise yesterday with the Campaign Finance Board, which then released $2.6 million in city matching funds for his mayoral campaign and, perhaps just as important, lifted what had been a cloud over his candidacy.

As part of the deal, Mr. Hevesi offered to pay his chief political consultant, Hank Morris, an extra $240,000 for work leading up to the Democratic primary on Sept. 11. Mr. Hevesi's opponents had charged that he was circumventing the campaign finance spending cap by allowing Mr. Morris, a longtime friend, to work for free or provide his firm's help at a steep discount.

The campaign finance law limits spending to $5.5 million in the primary, so anyone paying less than fair market value for a service would be able to spend that much more on items like television advertisements or campaign mailings.

Last week, the Campaign Finance Board refused to release Mr. Hevesi's share of city matching funds, which are paid to candidates in exchange for honoring spending limits and accepting restrictions on the size of political donations.

Once Mr. Hevesi's campaign agreed to pay Mr. Morris higher fees and a larger commission on television advertisements he buys, the board declared the dispute over.

'I think they tried, as every campaign does, to test the boundaries of the law,' said the Rev. Joseph A. O'Hare, chairman of the Campaign Finance Board. 'They tried in a way that may have been a little more inventive and creative than some others, but which in the end proved to be unpersuasive.'

Mr. Hevesi did not attend the meeting, but he said afterward he was relieved that the matter was settled.

'I am delighted and gratified this issue is resolved,' he said yesterday evening. 'I don't think it would have been helpful to anyone, including the Campaign Finance Board, for this to be escalated into a large dispute.'

Mr. Morris, who caused Mr. Hevesi some political embarrassment by threatening last week to take the Campaign Finance Board to court, a position Mr. Hevesi quickly backed away from, also did not attend the meeting yesterday.

Mr. Hevesi's opponents called the settlement an admission of wrongdoing, noting with some satisfaction that the $240,000 in extra payments cost Mr. Hevesi about three days' worth of television ads.

'Hevesi's campaign attempted to play fast and loose with the nation's best campaign finance law, and they got caught,' said Mattis Y. Goldman, a spokesman for City Council Speaker Peter F. Vallone, one of Mr. Hevesi's opponents. 'This is a $250,000 slap to the Hevesi campaign.'

Herman Badillo, a Republican candidate for mayor, is now the only major mayoral candidate participating in the campaign finance system who has not received matching funds, since he has not raised enough small donations from residents to qualify for the city support. Mr. Vallone, Mark Green and Fernando Ferrer, all Democrats, have each received between $2.1 million and $2.7 million in matching funds.

Mr. Badillo still has one more chance to get a city payment before the primary, but he will be far outspent by his opponent, Republican Michael R. Bloomberg, who is not bound by the spending cap because he is paying for the campaign with a piece of his own personal fortune. Mr. Bloomberg has already spent more than $16 million, more than the total spent by all other candidates in both parties.

The board's ruling yesterday made a second day of good news for Mr. Hevesi's campaign, since he picked up a significant endorsement on Wednesday from the leaders of the city's teachers' union.

The comptroller clearly wanted to put the issues of finance and ethical action behind him. As long as the questions persisted, Mr. Hevesi conceded yesterday, it was more difficult for him to focus attention on his campaign agenda. His reputation as an honest, by-the-books politician was also beginning to suffer, political consultants said.

'Most of the people who have been talking about Hevesi have been talking about this for the last four weeks, and that is not what he wanted to have happen,' said Kieran Mahoney, an adviser to Gov. George E. Pataki and other Republicans, who is not actively involved in the city elections.

Prior to the Sept. 11 primary, assuming Mr. Hevesi spends about $4 million on television advertisements, Mr. Morris's company should now earn a total of about $785,000. But even with the adjustments in payments to Mr. Morris and his consulting firm, Morris, Carrick and Guma, Mr. Hevesi will still be spending much less than his opponents on the basic costs of a citywide race.

The Campaign Finance Board also released matching funds for the first time yesterday to 39 other candidates, most of them running for City Council. Kathryn E. Freed and Norman Siegel, Democrats running for public advocate, also received their first payments after questions about their eligibility were resolved. A total of $26 million has been paid out so far in matching funds -- $4 for each $1 in small contributions received from residents."

Comptroller Alan G. Hevesi struck a compromise yesterday with the Campaign Finance Board, which then released $2.6 million in city matching funds for his mayoral campaign and, perhaps just as important, lifted what had been a cloud over his candidacy.

As part of the deal, Mr. Hevesi offered to pay his chief political consultant, Hank Morris, an extra $240,000 for work leading up to the Democratic primary on Sept. 11. Mr. Hevesi's opponents had charged that he was circumventing the campaign finance spending cap by allowing Mr. Morris, a longtime friend, to work for free or provide his firm's help at a steep discount.

The campaign finance law limits spending to $5.5 million in the primary, so anyone paying less than fair market value for a service would be able to spend that much more on items like television advertisements or campaign mailings.

Last week, the Campaign Finance Board refused to release Mr. Hevesi's share of city matching funds, which are paid to candidates in exchange for honoring spending limits and accepting restrictions on the size of political donations.

The September 11 in question? That would be September 11, 2001. Even back then, Hevesi and his political cronies were busy skirting the rules. Now, we know that they were up to no good for years. The Campaign Finance Board gave them a slap on the wrist - essentially saying that boys will be boys and that politicians will always try to test the boundaries of the law.

Morris profited mightily from his Hevesi connections, through links to other major politicians and most of all from his pension plan connections:

Since Mr. Hevesi took office in 2003, Mr. Morris created or was employed by half a dozen companies whose main purpose was to help hedge funds, private equity firms and others handle some of the investments of New York State’s $154 billion pension fund.

As comptroller, Mr. Hevesi had sole authority over the fund, and Mr. Morris appears to have been paid handsomely for making introductions: state investigators believe that at least $25 million in fees were paid to Mr. Morris’s business interests during Mr. Hevesi’s four-year tenure.

Mr. Morris’s earnings from pension fund work, along with those of other friends and political allies of Mr. Hevesi, a Democrat, are now the focus of criminal investigations by Attorney General Andrew M. Cuomo, also a Democrat, and P. David Soares, the Albany County district attorney.

It's that pension fund work that led to the indictments yesterday.

Consultant Hank Morris, Hevesi aide David Loglisci get corruption charges in $35M pension scheme
By Kenneth Lovett and Melissa Grace, Daily News Staff Writers, March 19th 2009, 10:13 PM
LINK

Another day, more news to turn Albany upside-down: This time it's a scandal involving the state's $120 billion pension fund. A former aide to disgraced state comptroller Alan Hevesi has been charged.

A key political consultant and a top aide to former Controller Alan Hevesi were slapped with corruption charges Thursday over the state's $120 billion pension fund.

State Attorney General Andrew Cuomo, whose office conducted a two-year pension fund probe, warned there could be more indictments.

Hevesi consultant Hank Morris and David Loglisci, a former deputy controller for pensions, were named in the devastating 123-count indictment.

Cuomo said Morris and Loglisci plotted "to sell access to billions of dollars in exchange for millions" in kickbacks.

"The indictment charges crimes that go beyond the grossest manifestation of pay to play," Cuomo said.

Morris pocketed $30 million in pension-related fees over four years from companies that won business with the fund. Companies that wouldn't pay often didn't get business, the indictment said.

The two also helped steer millions of dollars in donations from financial companies to Hevesi's campaign, probers said.

They also gave Hevesi's "political cronies" sham fees.

The Daily News reported in January that former state Liberal Party Chairman Ray Harding and former New York City Council President Andrew Stein received $300,000 and $1.5 million in fees, respectively, from companies subsequently named in the indictment.

Morris, who helped run Hevesi's campaigns, had a major say over how a portion of the pension fund was run after Hevesi took office in 2002, the indictment alleges.

He forced out the old top investment officer and had him replaced with Loglisci, who helped steer business to Morris and their associates, prosecutors say.

Morris and Loglisci pleaded not guilty before Manhattan Supreme Court Justice Lewis Bart Stone.

In addition to corruption charges, the indictment listed securities fraud, bribery, money laundering, falsifying business records and grand larceny.

Hevesi, who resigned in 2006 after pleading guilty to an unrelated felony, was not charged. He has denied wrongdoing. Morris was freed on $1 million bail, Loglisci on $350,000 bail.

Two unnamed unindicted co-conspirators also were involved, the indictment states.

Sources identified the first as Barret Wissman, a pal of Loglisci and his brother and part owner of a Dallas firm that did business with the fund and Morris.

The second unindicted co-conspirator was described by Cuomo as a high-ranking official in the controller's office who got rent payments for his girlfriend's luxury Manhattan apartment, a "sham" $100,000 loan for the woman and a job for her daughter.

Sources said that official was Hevesi's former chief of staff, Jack Chartiere, who was probed for showering pension fund resources on actress Peggy Lipton.

Cuomo wouldn't say whether the unindicted co-conspirators or the Hevesi cronies would be charged. He didn't charge any of the firms that paid fees, including the Carlyle Group, Quadrangle and Wissman's fund, Hunt Financial Ventures.

Morris' lawyer William Schwartz said, "There was no fraud and no corruption." He said the pension fund made "hundreds of millions" through Morris.

Loglisci's lawyer, Irving Seidman, said the fund more than doubled under Loglisci. "This matter has its origin not in truth, but in politics," Seidman said.

Meanwhile, the Securities and Exchange Commission filed a civil complaint against Morris and Loglisci seeking to recoup the money. Cuomo also has frozen some $11 million in Morris' assets.

klovett@nydailynews.com

Alleged $30 Million Extortion By Hevesi Campaign Manager
By Henry J. Stern, NY CIVIC
March 20, 2008

The most shocking political news of the year came today in the indictment in New York County by a 23-member grand jury of Hank Morris, former campaign manager for former City and State Comptroller Alan Hevesi, and David Loglisci, former top investment officer of the New York State pension fund. The indictment followed a two-year investigation by the office of State Attorney General Andrew M. Cuomo.

The Times’ story, by Danny Hakim, began on pA1 above the fold, and jumps to pA24. The headline: 2 ARE ACCUSED OF VAST FRAUD OVER PENSIONS. The lede:

“Two top advisers to Alan G. Hevesi, the former state comptroller, were charged Thursday in a 123-count grand jury indictment that said they had turned New York’s $122 billion pension fund into a criminal enterprise. The scheme netted them and other Hevesi associates tens of millions of dollars in kickbacks from firms investing the fund’s money, the indictment said.”

This case is by far the most important political corruption case in many years. The State Comptroller makes many decisions regarding how the moneys in the pension fund are invested. Companies that wish to receive funds hire agents to assist them, and Mr. Morris became a highly successful agent because he was Mr. Hevesi’s campaign manager.

Morris is alleged to have received thirty million dollars in commissions from those firms that hired him to get the pension fund to invest in them. He concealed these transactions by various methods described in the indictment.

As you know, we are used to writing about political corruption; unfortunately, it is all too common in Albany. But the enormity of this scheme far outstrips the previous record holder among accused influence peddlers, former Senate Majority Leader Joseph L. Bruno, who was said to have taken $3.2 million from various groups seeking state contracts or other benefits.

Several questions arise:

What, if anything, did Alan Hevesi get out of the scheme, under which his campaign manager is alleged to have received thirty million dollars? If he did share in Morris’ alleged loot, where are the funds concealed. Hevesi could not have lost all of it in the stock market, or in a Ponzi scheme.

Whether he received money or not, how could Hevesi have tolerated an obviously criminal operation in his own office? A Ph.D. in political science and a college professor, Hevesi was known to be among the most intelligent of public servants, and an authority on gaming the system, particularly the pension plan.

It appears inconceivable that such an extensive and far-reaching fraud could take place without his knowledge and tacit consent. Could Morris have been cheating Hevesi? It is difficult to believe that such a previously highly respected and well-educated figure could betray his oath of office and engage in such rampant criminality.

Even Eliot Spitzer was not accused of cheating the government.

We defended Hevesi in 2006 when he was pilloried for using his car and driver to take care of his sick wife. What he did then was wrong, but it did not justify the removal from office of a state-wide official just re-elected by the voters after a campaign in which the facts of his misuse of the car were widely publicized. In a democracy, public approval can cleanse an official from minor offenses.

But this is an entirely different matter. If proven, the charges indicate a colossal misuse of high office and betrayal of the public trust. The last such omnibus indictment came in the case of former Assemblyman Brian McLaughlin, now awaiting sentencing for a panoply of offenses from selling jobs to stealing from a Little League.

The Morris-Loglisci indictments were widely publicized. The Post story, on p5, DEM DUO IN $30M PENSION ’SCAM’, 123 ‘PAY TO PLAY’ RAPS, was written by Brendan Scott in Albany and Laura Italiano in New York.

The Post carried Attorney General Andrew Cuomo’s strong statement: “Morris used the fund as his own piggy bank. The indictment charges crimes that go beyond the grossest manifestations of pay-to-play.” The Post also reported that the “indictment mentioned two anonymous co-conspirators, including one high-ranking Hevesi official who allegedly took hundreds of thousands of dollars in bribes, including cash and rent payments for his girlfriend.

A source familiar with the investigation identified that person as Hevesi’s former chief of staff, Jack Chartier, who was dating one-time ‘Mod Squad’ star Peggy Lipton.” Chartier and Lipton have been mentioned previously in connection with the misuse of state cars assigned to the Comptroller.

A Post column by State Editor Fredric U. Dicker was published on p5 as well: The headline is GRAFT JUST LIKE BAD OL’ DAYS OF TAMMANY. The lede:

“Longtime Democratic political consultant Hank Morris saw his opportunities when Alan Hevesi became state comptroller in 2003. As Tammany Hall’s George Washington Plunkitt famously declared to justify what he called ‘legal graft’ -- 'I took 'em.'"

The Daily News put the story at the top of p2, with the headline, OUT OF CONTROL: 2 Top Former Hevesi Aides Indicted in Huge Pension Fund Kickback Scheme. The news report was written by Kenneth Lovett and Melissa Grace. Their lede:

“A key political consultant and a top aide to former Comptroller Alan Hevesi were slapped with corruption charges yesterday over the state’s $120 billion pension fund. State Attorney General Andrew Cuomo, whose office conducted a two-year pension fund probe, warned there could be more indictments.”

OUR OBSERVATIONS:

1) This is a really bad case. Pay to play is never a sound practice, but it is widely tolerated in small amounts. When large sums are required to be raised for political campaigns, incumbents know that the individuals and corporations with whom they deal are natural feeding grounds. What is alleged to have happened here goes far beyond what any reasonable person would tolerate.

The defense lawyers contend that the state did not lose a penny because of the fees paid to their innocent clients. That is ridiculous to us; if the companies did not have to bribe their way into getting contracts, they would have been able to pay the $30 million to the State of New York rather than to the fixers. And who can tell whether they were offering the best opportunities to the fund?

2) Another question arises regarding whether the State pension fund investments obtained through bribery were financially sound. Did the terms of the transactions provide the pension funds with the best possible rate of return? Did any of the investments fail?

3) If the office of the State Comptroller was operated for four years under Hevesi as a criminal enterprise, as the Attorney General alleges, did any of its thousands of employees complain about what was going on? Were the employees threatened in any way? How much money, if any, did the State lose by not being able to make investments that might have been more remunerative for the pension fund?

4) How many other people, State employees or not, were involved in this scheme? Did Morris and Loglisci, like Bernie, do it all by themselves?

5) Those paying the bribes, or the victims of extortion (as one might see it) appear to have escaped being held accountable. Granted that their co-operation was necessary to the investigation, doesn’t it take two to tango?

We have not seen the last of this matter. It is always possible that the alleged wrongdoers will not be convicted by a jury, or that the case will be thrown out by the judge. If they are convicted, however, we think twenty years is about right, with time off for good behavior, of course. We want very much to deter this kind of conduct by other fixers.

PENSION $TINK HAS ANOTHER LINK
By KENNETH LOVETT, NY Post
LINK

August 27, 2007 -- ALBANY - A Texas-based hedge fund that received $100 million in New York state pension investments paid hundreds of thousands of dollars in "referral fees" as part of the deal to a company tied to former Comptroller Alan Hevesi's top consultant, The Post has learned.
At the time it was seeking to do business with New York's $150 billion pension fund, Hunt Financial Ventures of Dallas was told to contact Hevesi's political guru, Hank Morris, according to the hedge fund's lawyer, Bill Brewer.

The man responsible for steering the hedge fund to Morris was former City Council President Andrew Stein, who now works as a business consultant, Brewer said.

Brewer told The Post that Morris, in turn, instructed Hunt to pay the referral fees to certain companies.

The outfit collecting the fees now is Searle & Co., a small Greenwich, Conn., financial-services firm located above a Christian Science reading room. Searle is headed by Robert Searle, a longtime personal friend of Morris.

The fees paid to Searle are based on a percentage of the hedge fund's return on the pension investment and a slice of what Hunt charges for fund management.

Investigators have described Morris as "associated" with the Searle firm and believe he received the lion's share of the pension-related referral fees paid to the company by entities that received large investments from the pension fund.

Investigators are trying to determine if Searle and Morris did any work in return for collecting large referral fees and whether all the payments were properly disclosed, sources said.

Morris is a nationally known Democratic political consultant who spearheaded Hevesi's election as comptroller in 2002, as well as Sen. Charles Schumer's successful campaigns in 1998 and 2004.

The Post recently revealed that Searle & Co. last month amended its most recent required filing with the Securities Exchange Commission to disclose that it received $6 million more in fees than it had originally reported, bringing the total for last year to $7.7 million.

In its revised report, Searle also showed it paid out about $7.3 million of the fees; the recipient is not indicated. The original filing showed no fees paid out.

Comptroller's Office documents relating to Hunt's dealings with the pension fund - which began in 2004 - have disappeared and are believed to have been swiped by a former top official in the office.

Brewer said the hedge fund has recently been contacted by investigators from state Attorney General Andrew Cuomo's office, as well as the Comptroller's Office, as they seek to re-create the missing information as part of a criminal probe into pension investments under Hevesi.

Hunt is partly owned by Barrett Wissman, who, sources said, is a friend of David Loglisci, a former deputy comptroller who oversaw the pension fund under Hevesi and is suspected by probers of having removed the important documents from the office. Wissman is also a pal of Loglisci's brother Steve Loglisci.

Wissman, who along with his wife is actively involved in the classical-music scene in Texas, invested in a poorly received movie, "Chooch," which was produced by Steve Loglisci in 2003, sources said.

Wissman is also chairman of IMG Artists, whose clients include Itzhak Perlman, opera singer Frederica von Stade, and guitarist Christopher Parkening.

Brewer denied Hunt received hedge-fund investments from the Comptroller's Office because of Wissman's ties to the Loglisci brothers. He said officials made their connection with the pension fund through Stein, a well-connected city Democrat with whom they were familiar, although Brewer didn't provide details of that relationship.

Stein told The Post he had lunch once with Wissman and the Loglisci brothers, but said they only discussed "Chooch," not the pension funds. Stein called it "utter nonsense" that he referred Wissman to Morris.

Brewer said Hunt is cooperating with the investigation into the pension fund, which is being conducted jointly by Cuomo and Albany County District Attorney David Soares.

He added that no officials from the firm have been subpoenaed or asked by investigators to be interviewed, and that the fund had made all required disclosures.

Hunt was among the two top-producing hedge funds for the state pension system during Hevesi's four years in office, the lawyer said.

Morris and his lawyer, William Schwartz, did not return calls for comment. Searle also did not return calls.

Hevesi's lawyer, Bradley Simon, said his client had done nothing improper with regard to the pension fund.

kenneth.lovett@nypost.com

Attorney General Cuomo probing political links to state pension business
BY Kenneth Lovett , DAILY NEWS ALBANY BUREAU CHIEF
Friday, February 27th 2009, 4:00 AM
LINK

ALBANY - The attorney general's office is looking into whether financial firms are using politically connected consultants to get state pension business, the Daily News has learned.

Among those who shepherded clients to the controller's office are former Bronx Borough President Fernando Ferrer, former Bronx Democratic Chairman Roberto Ramirez and lobbyist Patricia Lynch, a former top aide to Assembly Speaker Sheldon Silver (D-Manhattan), sources said.

All have long political ties to Controller Thomas DiNapoli, whose office decides where pension funds are invested.

DiNapoli spokesman Dennis Tompkins denied any firm is getting special treatment based on who represents them.

Tompkins also said DiNapoli has tightened reporting requirements to make companies divulge the names of any intermediaries before they get investment money.

"The controller meets with any number of people," Tompkins said. "Once they walk in the door, they're all treated the same."

Citing "systemic conflicts of interest," Attorney General Andrew Cuomo has been investigating the operation of the pension fund since 2007.

The probe has mainly focused on a possible pay-to-play scam under former disgraced Controller Alan Hevesi, whose political consultant, Hank Morris, received $25 million in fees from companies that won pension business.

Investment firms commonly hire middlemen, who take a commission after they broker deals with pension funds.

What has changed - and turned investigators' attention to DiNapoli's shop - is that many investment firms now are paying politically powerful consultants just to get in the door, sources said.

The lobbying and consulting firms in most cases are not required to disclose who their clients are because pension investments are exempt from the state lobbying law.

Sources said Ramirez represented InterMedia Partners, a firm created by former YES president Leo Hindery Jr. Ramirez sat in on a meeting with Hindery, DiNapoli and his staff when they discussed adding $15 million to a previous $50 million deal.

Though the deal went through, Ramirez' involvement was never reported. Tompkins said regulations at the time did not require reporting the involvement of all intermediaries.

Ramirez refused to identify his clients and Hindery did not return calls.

Sources said Ferrer and Lynch have brought potential deals to DiNapoli, but none has gone through. Ferrer declined to comment and Lynch said she does not do business with the controller's office.

klovett@nydailynews.com

Political bigs gorged on Hevesi pension fund trough
BY KENNETH LOVETT, DAILY NEWS ALBANY BUREAU CHIEF
Sunday, January 4th 2009, 8:20 PM
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ALBANY - Political consultant Hank Morris cashed in on pension fund-related fees under disgraced ex-state Controller Alan Hevesi - but he was hardly alone, the Daily News has learned.

The list of well-rewarded insiders also includes ex-City Council President Andrew Stein, former Deputy Mayor Peter Powers and Ray Harding, head of the now-defunct Liberal Party. Each was paid handsome fees by companies that won business with the state's $154 billion pension system - a fund Hevesi controlled after he took office in 2003.

For now, Morris, Hevesi's longtime political guru, remains the focus of Attorney General Andrew Cuomo's investigation, which is before a grand jury probing a possible illegal pension payoff scheme.

But a list of placement fees paid to companies that served as middlemen in bringing the pension fund and investment companies together turns up other well-connected brokers.

Stein, working for Arapaho Partners, was paid $1.5 million by Carlyle Europe Partners for helping the group win a $133.7 million deal with the pension fund in 2003.

Stein was a supporter of Hevesi's run for controller in 2002. The two worked closely together as colleagues in the Assembly before that.

It was Stein who first raised the specter of making money off the pension fund to Morris, who didn't become a financial broker until after Hevesi became controller in 2003, sources said.

Morris raked in more than $25 million in fees during Hevesi's four years as state controller, investigators have said.

Stein did not return calls for comment. He was interviewed by Cuomo's office as part of a probe into how Hevesi's office ran the fund.

Harding, now a lawyer at Cozen O'Connor, collected $300,000 in 2004 from Paladin Capital Management for his role in securing a $20 million investment from the pension fund during Hevesi's first year as controller.

Harding's Liberal Party had endorsed Hevesi's failed mayoral run as well as his runs for city and state controller. Like Morris, Harding did not become a registered financial broker until six months after Hevesi took office, records show.

Harding, a lawyer, told The News he got his broker's license because "I thought I'd explore other avenues." He is no longer a registered broker; Harding wouldn't comment on his relationship with Hevesi or the firm that paid him.

Powers, a longtime friend and aide to Rudy Giuliani, was paid $150,000 from Milestone Managers LLC, which won a $15 million investment from the pension fund in April 2007.

The deal concluded when Hevesi resigned in December 2006 after pleading guilty to an unrelated felony, but it began before he stepped down, said Dennis Tompkins, spokesman for current state Controller Thomas DiNapoli.

"It was a good deal for the fund and a good deal for the [pension fund] members," Tompkins said.

Powers did not return a call for comment.

Hevesi lawyer Bradley Simon said, "There was absolutely no favoritism with respect to the awarding of pension business. There were gatekeepers within and outside the pension fund to ensure all business was done on a meritorious basis."

klovett@nydailynews.com

The Fall of Democratic Political Consultant Hank Morris
March 23, 2009, Newsday
By Michael Barone, Thomas Jefferson Street blog
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I had lost track of Democratic political consultant
Hank Morris some time ago; I knew him as a Democratic campaign consultant in the 1970s and 1980s, and one who always seemed reasonably honest and candid. So I was shocked to see this. Morris's lawyer says he's innocent. I find that hard to believe, but I also find it hard to believe that Morris would be involved in a scam like this. Though $30 million is a lot of money. What could have been going on in his mind?