Indicted Alan Hevesi aide Hank Morris' shady dealings stretched across U.S.
BY Kenneth Lovett, DAILY NEWS ALBANY BUREAU CHIEF, Monday, May 4th 2009

Hank's hands go everywhere
ALBANY - Hank Morris, the indicted top political aide to former state Controller Alan Hevesi, had his tentacles in public pension funds from sea to shining sea.http://www.propublica.org/article/decoder-the-pension-fund-scandal-0430

Morris' back-room and illegal dealings, which yielded him at least $25 million in the four years Hevesi was in office, stretched from New York to California, with New Mexico in between, court records and interviews show.

His accomplices in the pay-to-play schemes hailed from New York, Connecticut, Los Angeles and Dallas, prosecutors say.

"I believe we've disclosed a national network of actors who often acted in concert and did this across the country," Attorney General Andrew Cuomo said last week in announcing the latest charges in a probe that has snared Morris, former Liberal Party boss Ray Harding and a top pension aide to Hevesi.

"Mixing politics, self-dealing, kickbacks and billions in taxpayer funds is nothing short of the perfect public integrity storm," Cuomo said when Morris was indicted in March.

Until two years ago, few knew Morris was a registered financial broker, let alone getting obscenely wealthy off the state pension fund.

A longtime powerhouse Democratic political consultant to Hevesi and Sen. Chuck Schumer, Morris quietly registered as a financial broker just months after Hevesi took office as state controller in 2003.

Sources said he got the idea from former New York City Council President Andrew Stein - a well-connected registered broker paid by firms that won business with the city and state pension funds.

Stein won a large placement fee early under Hevesi but was frozen out afterward due to a personal clash with Morris, sources said.

Morris, meanwhile, helped install David Loglisci as Hevesi's chief investment officer. In turn, prosecutors say, Loglisci helped funnel business to Morris.

Morris, who managed Hevesi's upset of former city Controller Elizabeth Holtzman in 1993 and helped Schumer knock off Al D'Amato in the 1998 U.S. Senate race, created five companies to help shield his involvement.

Four of the five shared an address with his $4 million East Hampton home.

He also was hired as a broker by Searle & Co., a little-known Connecticut-based financial firm run by an old friend.

In most cases, firms that agreed to pay Morris would direct the fees to Searle, which kept 5% for itself and sent the rest to Morris.

Morris not only received fees from firms that won business in New York but also in places like New Mexico and California.

One of his accomplices was Barrett Wissman, a Dallas hedge-fund partner who helped Morris shake down firms and made $12million in fees of his own, prosecutors allege.

Also from Dallas, the Aldus Group, a financial firm, agreed to pay Morris in exchange for $175 million in state pension-fund business.

Aldus, which was an outside pension-fund adviser in New Mexico, recommended deals that resulted in fees for Morris and Hevesi's son, Dan, in New Mexico.

Morris also had ties to a Los Angeles firm, Wetherly, headed by a well-connected Democratic fund-raiser, David Weinstein.

Wetherly received fees from New York pension-fund deals and split fees with Morris on several pension deals in California and possibly New Mexico.

klovett@nydailynews.com

INDICTMENT

May 9, 2009
After Introduction From Ferrer, Firm Earned $100,000 From State Pension Fund
By DANNY HAKIM, NY TIMES

ALBANY — When Fernando Ferrer, the former Bronx borough president, met with State Comptroller Thomas DiNapoli in May 2007, it was to make an introduction.

Mr. Ferrer brought along Alfred Villalobos, a former deputy mayor of Los Angeles and the chairman of Arvco Capital, a Nevada firm that brokers deals between investment firms and public pension funds. Mr. Ferrer, the Democratic nominee for mayor of New York City in 2005, works as a consultant for Arvco.

About seven months after Mr. Ferrer made the introduction, Arvco earned $100,000 in fees and a $10 million investment from Mr. DiNapoli’s office for one of its clients, Craton Equity Partners.

Mr. Ferrer’s role in introducing Arvco to Mr. DiNapoli was never disclosed in the reports of pension investments and brokers made public by the comptroller’s office every month, underscoring the lack of transparency that pervades the operations of the $122 billion state pension fund.

The comptroller’s office has said that it requires investment firms to reveal the names of any brokers, known as placement agents, that it uses to arrange deals with the pension fund. But it is left up to the firms to determine who is considered a placement agent. Arvco apparently did not view him as such, and a spokesman for Mr. Ferrer said he only made an introduction and did not get involved in specific deals.

Mr. DiNapoli’s office called the encounter between the comptroller and Mr. Ferrer a “meet and greet” and said it was not aware that Mr. Ferrer and Arvco had a business relationship.

“The comptroller wanted to meet Villalobos because of his extensive experience on pension fund boards in California,” said Dennis Tompkins, a spokesman for Mr. DiNapoli. “Absolutely no business — Arvco or otherwise — was discussed.”

Mr. Ferrer declined to comment for this article. His introduction of Mr. Villalobos, a former trustee of Calpers, the giant California pension fund, was revealed in documents obtained through a Freedom of Information Law request to the comptroller’s office.

Neither Mr. Ferrer nor Mercury Public Affairs, a division of the Omnicom Group that employs him, have been subpoenaed in the investigations by Attorney General Andrew M. Cuomo and the Securities and Exchange Commission into corruption at the pension fund.

One of Mr. Ferrer’s partners at Mercury, Michael McKeon, said Mr. Ferrer “was introducing a former Calpers trustee,” adding that the men had “a broad discussion on a lot of general issues.”

He insisted that Mr. Ferrer did not act as an intermediary, or placement agent, for Arvco. “We give them business advice,” Mr. McKeon said, referring to the relationship of Mercury to Arvco. “We’re a business consultant; Freddy’s a business consultant.”

Mr. Cuomo has likened the comptroller’s office to the “Wild West” of regulation. It is not covered by state lobbying laws. The S.E.C. generally requires that individuals and firms that broker deals register with the agency, but many of the firms, especially those with political connections, have not been doing so.

The concern, Mr. Cuomo said, is that “people can sell access to the largest single asset of the State of New York, the common retirement fund, without any regulation whatsoever.”

The inquiries by Mr. Cuomo and the commission have looked into allegations that friends, relatives and aides of former Comptroller Alan G. Hevesi gained millions of dollars by selling access to the pension fund. Mr. Cuomo’s investigation has already focused on Raymond B. Harding, the former leader of the state Liberal Party, who was charged last month with a felony related to securities fraud. Two Hevesi aides, Hank Morris and David Loglisci, were indicted in March on a wide range of corruption charges. All three have denied wrongdoing.

A firm run by H. Carl McCall, Mr. Hevesi’s predecessor, also has been subpoenaed in the case. So have businesses affiliated with Peter J. Powers, a deputy mayor of New York under Rudolph W. Giuliani; Susan Torricelli, a prominent Democratic fund-raiser and the ex-wife of former Senator Robert G. Torricelli of New Jersey; and Kevin McCabe, who served as chief of staff to Peter F. Vallone Sr. when he was the City Council speaker.

The central question of the investigation has been to determine whether these politically connected intermediaries were actually working to earn fees from investment firms or were being paid because of their relationships with, or access to, Mr. Hevesi’s aides.

Mr. Hevesi pleaded guilty to a felony and resigned in late 2006, but prominent officials continued to make house calls on his successor, Mr. DiNapoli.

Assembly Speaker Sheldon Silver brought the former goalie of the New York Rangers, Mike Richter, to the comptroller’s office to help him peddle a deal, an effort previously reported by The Daily News. An Assembly spokesman said the speaker never sought fees, and no deal resulted from the visit.

The pension interests of Mr. Ferrer, a power broker well-known in Democratic circles, have been the subject of speculation for months, but the details of his work have not been known.

In a brief interview with The New York Times in February, Carissa Villalobos, general counsel for Arvco, declined to discuss Mr. Ferrer. Mr. DiNapoli was asked in March during a radio interview on Talk 1300 AM in Albany, if Mr. Ferrer or other politicians were paid to bring people before him who were seeking pension business. Mr. DiNapoli did not respond directly, describing instead the disclosure requirements.

“When a transaction is completed, we require a disclosure of any placement agent fees or fees that would be involved,” he said, adding that he was not aware that any such deal had been completed. Mr. DiNapoli recently said he would ban payments to any intermediaries in pension transactions.

Arvco also brokered a deal involving the city’s pension fund last year, but the office of City Comptroller William C. Thompson Jr. said Mr. Ferrer had not approached Mr. Thompson as part of any deal or for Arvco.

Mr. DiNapoli’s office could not say whether people connected to Arvco donated to Mr. DiNapoli’s campaign, and the company declined to comment on the issue. Mr. Ferrer contributed $5,000 to the comptroller in December, and Samantha F. Adams, an employee of Arvco, according to California records, contributed $10,000 on Jan. 5, 2009. A woman identified as Darcey Villalobos also donated $10,000 on the same day. And two people who listed addresses within five miles of Arvco’s headquarters in Nevada also donated another $10,000 each on that day.

100 subpoenas issued in Albany pension fund probe
By Kenneth Lovett, Daily News Albany Bureau Chief, Friday, May 1st 2009

ALBANY - State investigators Friday issued 100 subpoenas involving financial firms who used lobbyists and political consultants -- rather than licensed brokers -- to win pension fund business.

The move represents a major new front in Attorney General Andrew Cuomo's ongoing investigation into the state pension fund.

The Daily News reported in February that Cuomo was looking into registered middlemen, as well as well-connected political consultants and lobbyists, many of whom are not licensed financial brokers.

Among those mentioned were former Bronx Borough President Fernando Ferrer, lobbyist and former Assembly Speaker Sheldon Silver aide Patricia Lynch and former Bronx Borough President Roberto Ramirez.

For the state pension fund, Cuomo's office found that 22, or 49%, of the 45 middlemen used to help firms secure business were not registered financial brokers.

In the city, 41%, or 30 of the 70 middlemen used, were not registered brokers.

"The troubling pattern of unlicensed agents highlights yet another systemic weakness in New York's pension fund, creating a situation which is fraught with peril and prone to abuse," Cuomo said.

Cuomo issued subpoenas to 53 unlicensed agents and 49 investment firms that paid them.

The subpoenas seek information on why non-registered brokers were used, what fees were paid, and for what services.

They also ask how firms came to retain unlicensed agents and whether payments were disclosed to the pension fund.

Cuomo said his office and the Securities & Exchange Commission will seek penalties against those who performed the function of a securities broker but were not registered.

The penalties most likely will be civil, though he did not rule out criminal charges.

He also said he will look to propose reforms to fix the system.

City Controller William Thompson said he supports Cuomo's investigation and "will provide whatever assistance he needs from my office."

Thompson this week recommended the city pension funds suspend the use of any placement agents, firms, or middlemen in their investments.

State Controller Thomas DiNapoli unilaterally ordered that firms seeking state pension fund business no longer use paid third party intermediaries.

Assembly Speaker Sheldon Silver arranged pension sitdowns, including one with Mike Richter
BY Kenneth Lovett, DAILY NEWS ALBANY BUREAU CHIEF, April 23rd 2009

ALBANY - Investors trying win state pension fund business - including former Rangers goalie Mike Richter - got coveted access to the state controller with help from Assembly Speaker Sheldon Silver.

Silver twice arranged sitdowns with the controller, who has sole control over pension investments, the Daily News has learned.

One of the most powerful men in Albany, Silver a few years ago accompanied investor Shlomo Kalish of Jerusalem Global Ventures to meet with then-Controller Alan Hevesi to discuss a possible deal.

More recently, Silver and Richter met with Controller Thomas DiNapoli. Richter, the hero of the 1994 Stanley Cup team, is a partner with Environmental Capital Partners.

The pension fund ultimately took a pass on both deals.

But the involvement of Silver - whose spokesman Dan Weiller confirmed the meetings - has raised serious questions among government watchdog groups.

"At a minimum, it's an appearance of impropriety," said Susan Lerner, of Common Cause-New York. "It's very inappropriate because it looks as if the speaker is using his office as the most powerful elected official in the Assembly to try and influence the controller, an independent elected official," Lerner added.

"It has a tacit stamp of approval from the speaker when he's sitting there during the meeting, and that's extremely troubling," Lerner said.

Weiller said the speaker has no financial connection to Kalish, Richter or their firms, and that there had been no deals for him to receive any fees. He said Silver met Kalish, who could not be reached for comment, during a trip to Tel Aviv with the American Israel Friendship League.

Richter said he has known Silver, a longtime Rangers fan and season ticket holder, for years and often sees him at charity events.

The former Olympic medal winner said he believes it was at one of those events that he asked Silver to introduce him to DiNapoli.

"Clearly, he's well-connected, and I was trying to market my wares as much as possible," Richter said.

He said he never offered a fee to Silver. "I'd be embarrassed to suggest such a thing," Richter said. "I don't feel there was any wrongdoing whatsoever on either side," No. 35 said. "It was as upfront and honest and as proper as possible."

DiNapoli is a former assemblyman who was appointed to the position by Silver and his fellow Democrats after Hevesi resigned in disgrace.

DiNapoli spokesman Dennis Tompkins defended the meeting with Silver and Richter, saying the pension fund is always looking for good new investment opportunities. The fact that Richter's firm did not get the business shows the process is not unduly influenced by politics, Tompkins said.

"Obviously Shelly's influence didn't carry a lot of weight in this situation," Tompkins said. "The process worked. The investments were vetted, and it was found those products were not a good fit for the fund."

klovett@nydailynews.com

The Fall of Democratic Political Consultant Hank Morris
March 23, 2009 02:30 PM ET
By Michael Barone, Thomas Jefferson Street blog
LINK

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?

March 20, 2009
Hevesi Aides Indicted in Kickback Scheme
By DANNY HAKIM, NY TIMES

ALBANY — 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.

Hank Morris, who was once Mr. Hevesi’s chief political adviser and a nationally known Democratic consultant, was charged with myriad counts — including bribery, grand larceny, money laundering and fraud — in a case brought by the state attorney general, Andrew M. Cuomo. Mr. Morris collected more than $15 million in fees from investment companies during Mr. Hevesi’s tenure as comptroller, from 2003 to 2006, according to court papers.

David Loglisci, who was the top investment officer of the pension fund, was charged with multiple counts related to official misconduct, falsifying records and fraud. The two men pleaded not guilty at their arraignment in State Supreme Court in Manhattan, and were released pending the posting of bail, which was set at $1 million for Mr. Morris and $350,000 for Mr. Loglisci.

The indictment said that at least two other people participated in the criminal conspiracy, but it did not name them.

While Mr. Hevesi was not charged, the investigation is continuing and Mr. Cuomo did not rule out future action against the former comptroller, who resigned in 2006 after pleading guilty to a felony related to his use of state workers to drive his ailing wife. Mr. Cuomo said that Mr. Hevesi had benefited from the scheme because Mr. Morris encouraged investment firms to pour millions of dollars in contributions into Mr. Hevesi’s campaign fund.

“This is the first of several cases and developments that will be announced on this matter,” Mr. Cuomo said. “The indictment charges crimes that go beyond the grossest manifestations of pay to play.”

The Securities and Exchange Commission, which conducted a parallel investigation, charged Mr. Morris and Mr. Loglisci with violating several federal securities laws and is seeking to recoup the proceeds from their scheme. P. David Soares, the Albany County district attorney, also took part in the inquiry, which started in his office.

The two former advisers are accused of directing half of the $10 billion that the pension fund invested in so-called alternative investments, like hedge funds and private equity firms, to companies that used Mr. Morris or his associates as paid intermediaries. Firms that were not willing to pay were often turned down, according to the indictment.

To conceal his conduct, the indictment said, Mr. Morris laundered payments through a half-dozen limited liability companies he had created, and through Searle & Company, a Connecticut investment firm that he worked for while he was advising the comptroller.

The firms that paid fees to companies affiliated with Mr. Morris included some of Wall Street’s best known: the Carlyle Group, Pequot Capital and HM Capital, formerly known as Hicks, Muse, Tate & Furst, the indictment said. None of the investment firms or their employees were charged, though the S.E.C. filed civil charges against three companies Mr. Morris created.

Mr. Morris is also accused of rewarding Mr. Loglisci and another unnamed top official in the comptroller’s office for their help. Mr. Morris invested $100,000 in an independent film, “Chooch,” produced by Mr. Loglisci’s brother, and investment firms doing business with the fund also invested in the movie, according to the indictment.

“You couldn’t make this up,” Mr. Cuomo said. His office said it had frozen $11 million worth of Mr. Morris’s assets.

Mr. Morris, 55, largely dropped out of political consulting in recent years as he came under the cloud of the investigation. If convicted of the most serious charge, enterprise corruption, he and Mr. Loglisci, 38, each face up to 8 1/3 to 25 years in prison.

A lawyer for Mr. Morris, William J. Schwartz, said the pension fund had made “hundreds of millions, if not billions, of dollars on investments Hank Morris lawfully introduced to it, and the fund did not pay him one penny.”

Irving P. Seidman, a lawyer for Mr. Loglisci, said the indictment was “based on false and misleading evidence.”

Jack Chartier, Mr. Hevesi’s former chief of staff, was not charged. He has been a subject of the investigation, with scrutiny focusing on benefits that investment firms conferred on his behalf to the actress Peggy Lipton, a close friend, including a large loan and rent payments.

Scott Fein, a lawyer for Ms. Lipton, said that “she cooperated fully in the investigation and I believe all would agree she was blameless.” A lawyer for Mr. Chartier did not return calls.

Mr. Cuomo would not say whether some of the unnamed people in the criminal conspiracy faced charges in the future or had already cut deals with his office in exchange for cooperation.

Mr. Hevesi, 69, is now living in Forest Hills, Queens, where he cares for his wife and is not employed, said his lawyer, Bradley Simon. “Alan Hevesi has not been charged with any misconduct with respect to the management of the New York State pension fund,” Mr. Simon said. “As he has for the past two years, Mr. Hevesi continues to vehemently deny any wrongdoing.”

After Mr. Hevesi’s resignation, local, state and eventually federal investigators expanded the investigation of his use of state workers to encompass broader practices in his office.

The New York comptroller has unusual sway over the pension fund, since he serves as its sole trustee; many other states have opted to have their funds overseen by boards. The current comptroller, Thomas P. DiNapoli, has defended the sole trusteeship, while Mr. Cuomo continued to express concerns about it on Thursday.

Mr. Morris, who grew up in Westbury, on Long Island, is a political operative known for his intense and aggressive style. He directed Charles E. Schumer’s successful 1998 campaign to unseat Senator Alfonse M. D’Amato — he made sure everyone knew that Mr. D’Amato had used an expletive to refer to Mr. Schumer — and even pushed his own mother, Rita, a retired professor, to run for Congress in 1992. She lost. He also advised Senator Dianne Feinstein’s failed 1990 campaign for California governor.

But he was closest to Mr. Hevesi. The two men met in the 1970s, when Mr. Hevesi was a fledgling assemblyman from Queens and Mr. Morris was on the staff of the Assembly speaker, Stanley Steingut. Mr. Morris helped shape Mr. Hevesi’s rise to become comptroller of New York City and then state comptroller, and managed his unsuccessful run for mayor in 2001.

According to the indictment, after Mr. Hevesi was elected comptroller in 2002, Mr. Morris ousted the chief investment officer of the pension fund and installed Mr. Loglisci in the job.

He then held wide sway over investment decisions made by the pension fund. He even held meetings with Mr. Loglisci and other officials from the comptroller’s office at the offices of his political consulting firm, Morris & Carrick.

Aspects of the government’s argument could be difficult to prove in court.

Though Mr. Morris was not a public officer, Mr. Cuomo’s office asserts that he assumed a fiduciary responsibility because he was making investment decisions for the pension fund.

The indictment calls him “a de facto gatekeeper for alternative investment transactions.”

“When you follow the money in New York, the biggest pool of money is the state pension fund,” Mr. Cuomo said. “Morris used the fund as his own piggy bank.”

November 29, 2005
Ferrer Expounds on Blame for Failure of Mayoral Bid
By PATRICK D. HEALY and JIM RUTENBERG

Three weeks after losing the mayor's race by a historic margin, Fernando Ferrer said in a revealing interview that a biased news media and blundering pollsters were to blame for his defeat, and that fishy questions remained about a terrorism alert that Mayor Michael R. Bloomberg announced at a critical moment in the campaign.

Mr. Ferrer, the Democratic candidate, used the wide-ranging interview with El Diario, a Spanish-language newspaper that published his comments yesterday, to go beyond his criticism of Mayor Bloomberg's campaign spending and assign fault to others for the first time. Mr. Ferrer also said that he knew he would lose after the Oct. 6 terror alert, and sounded surprised that more New Yorkers had not rallied to him as the city's first Hispanic mayoral nominee.

In an interview yesterday with The New York Times, Roberto Ramirez, a senior political adviser to Mr. Ferrer, placed similar blame and also criticized some Democratic donors and labor unions for abandoning Mr. Ferrer in favor of a Republican mayor.

On one level, the remarks by the two men, as well as a speech by Mr. Ramirez to a Puerto Rican group this month, amount to trying to cast Mr. Ferrer's 20-percentage-point loss in the most favorable light - especially for Hispanics and other voters who accepted Mr. Ferrer as a history-making figure in the Latino community.

But these comments also reflect anger and frustration by Mr. Ferrer and his allies. Before and especially after the election on Nov. 8, they argued that the news media never took him seriously, ridiculing him in cartoons and even with the choice of some photographs, and that pollsters hurt his ability to raise money and generate momentum because they miscounted his support among Hispanics.

Mr. Ferrer told El Diario, one of the few New York newspapers to endorse him instead of Mr. Bloomberg, that the news media had treated his candidacy "in an absolutely different way" from the mayor's. As an example, he said he believed that reporters did not take notes at his news conferences and only cared about the "spin" on his remarks coming from the Bloomberg camp.

"It's hard to run for mayor, but it should not be impossible," Mr. Ferrer said, according to an English translation of the interview.

"I knew what I was facing, but I didn't think that all the editors were backing him," he said, referring to the mayor.

Mr. Ferrer, who does not place blame on himself at any point in the El Diario interview, said the news media did not sufficiently cover the issues he had raised in the campaign. Reporters, he said, "will always assert that there was nothing persuasive to report." He added, "Aren't hunger and housing persuasive issues?"

He also suggested that he might have been taken more seriously and could have closed in on Mr. Bloomberg if the polls had not forecast an inevitable runaway victory by the mayor. Some newspapers used opinion polls to predict a Bloomberg blowout, with The New York Post declaring "It's Over" in a headline three days before the election. Polls suggested that the mayor would win by up to 38 percentage points.

"Historic blunders were committed, but they'll never be held responsible for the harm that they did to me with the public and the fund-raising," Mr. Ferrer said.

Despite all of this, Mr. Ferrer said: "I thought that I would overcome partiality, especially after the primaries. I thought that being the first Latino nominated by the Democratic Party in New York would mean something."

As for Mr. Bloomberg, Mr. Ferrer said the mayor was never held accountable for the timing of the terror alert on Oct. 6. It came on the same evening as a campaign debate at the Apollo Theater in which the mayor did not participate. The alert distracted attention from the mayor's absence, which had been criticized by black leaders and Democrats.

After that debate, he told El Diario, "I knew that this was finished."

"I thought the media would hold him responsible" and ask more questions about the alert, Mr. Ferrer said, citing disputed reports about when the police were deployed because of the threat. "They never did."

Mr. Ferrer did not return telephone messages requesting an interview yesterday.

The candidate's political adviser, Mr. Ramirez, echoed these remarks while also criticizing Bloomberg supporters like Steven Rattner, a prominent Democratic donor, for rallying fellow Democrats to the Republican camp. Mr. Rattner declined to comment yesterday.

Mr. Ramirez, whose bond to Mr. Ferrer was forged decades ago in Bronx Democratic and Hispanic circles, argued that bias against the first Hispanic nominee may have been inevitable.

"Historically when a candidate emerges from a community that traditionally has not participated in the highest policy and elected positions, that candidate must pay a price," Mr. Ramirez said. "Society at large is unaccustomed to viewing individuals who come from that community with having the wherewithal to manage the finances, the policy. I think Fernando Ferrer made a down payment for future candidates of his race."

Rich Lamb, the president of the New York Press Club - and a radio correspondent with WCBS-AM who is based in City Hall - defended the news media and said reporters covering the race had played it fairly. "News people attempt to be fair and unbiased and I didn't see anything to the contrary," he said.

Edward Skyler, the mayor's communications director, said Mr. Ferrer had faced two hurdles that he ultimately failed to clear.

"First was to create a rationale for it by convincing people that the city wasn't doing well under the mayor's leadership," Mr. Skyler said, "and second was that he could do better. He had to clear the first to make the second relevant, but he never came close on either."

Joseph Mercurio, who had worked for a time with the primary campaign of C. Virginia Fields, the Manhattan borough president, said that the Bloomberg campaign did a better job getting its anti-Ferrer message into news reports than Mr. Ferrer's campaign did getting its anti-Bloomberg message out. But he said that he laid the blame at the feet of Mr. Ferrer's campaign team.

"The fact that Bloomberg did a good opposition campaign in the free media and Freddy didn't means he had a better operation than Freddy did," Mr. Mercurio said. "It doesn't mean the media was slanted."

Why Is Hank Morris Working For Hevesi at Bargain Rates?
By Greg Sargent, The New York Observer, May 27, 2001 | 8:00 p.m
LINK

Hank Morris, the chief political advisor to City Comptroller Alan Hevesi, has told associates that he will not bill Mr. Hevesi's Mayoral campaign for a commission on television commercials purchased on his candidate's behalf–a decision that could give his client a substantial financial advantage over his Democratic rivals.
Consultants like Mr. Morris generally take 10 to 15 percent of a candidate's spending on TV ads. In a television-heavy campaign like the New York Mayoral race, a consultant can make hundreds of thousands of dollars in commissions. If Mr. Morris ends up not taking the customary fee, Mr. Hevesi's campaign would have that much more money to spend. Two prominent businessmen, who asked that their names not be disclosed, told The Observer of private discussions with Mr. Morris in which he told them that he would not accept the standard commission. Mr. Morris did not return detailed phone messages requesting comment. One good-government advocate, Gene Russianoff, a senior attorney at the New York Public Interest Research Group, denounced the apparent arrangement as counter to the spirit of the city's campaign-finance law. "If Morris foregoes a standard fee that media consultants get, that raises questions about whether Hevesi effectively has more dough to spend," Mr. Russianoff said. "The whole point of the campaign-finance law is to insure that we move away from the days when candidates outspent each other and money was the decisive factor in elections." The city's campaign-finance law, passed in 1988, limits expenditures for citywide candidates at $5.2 million for party primaries. In return for adhering to the voluntary limits, candidates receive $4 in public funds for every $1 they raise from private sources. Candidates are not required to participate in the program, but Mr. Hevesi and his major Democratic rivals all have opted in. It is entirely possible that Mr. Morris has changed his mind about giving up his commission fees since discussing the strategy with the businessmen who spoke to The Observer. Still, it is worth noting that Mr. Morris incorporated the promise of a waived commission–and more money for ads–into his behind-the-scenes pitch to the city's power brokers. At issue is whether or not Mr. Morris intends to charge fair-market value for the service he is rendering–placing TV ads–for Mr. Hevesi. Campaign-finance law requires that a candidate pay fair-market value for services and goods–anything from public-relations advice to cell phones to the organizing of an event. According to Molly Watkins, a spokesman for the city's Campaign Finance Board, if a candidate accepts a service without paying fair-market value for it and fails to disclose that fact, the campaign will have violated campaign-finance rules. "A deviation from these rules could result in a fine or the withholding of public matching funds," Ms. Watkins said. Hank and Al The apparent arrangement raises new questions about the financial relationship between Mr. Hevesi and Mr. Morris, his longtime friend and trusted adviser. Mr. Hevesi's rivals already have questioned whether Mr. Morris, who has long functioned as a kind of one-man campaign for Mr. Hevesi, is skirting city campaign-finance rules by under-reporting his campaign expenses, which are far lower than those of his opponents. In mid-April, Mr. Morris defended his campaign as efficient and frugal, saying that campaign costs such as phone bills, rent and staff were all covered by his monthly charge of $5,000. That number is dwarfed by the spending of his opponents. Council Speaker Peter Vallone's Mayoral campaign costs approximately $25,000 a month; the operation of Public Advocate Mark Green costs around $70,000 a month. The discrepancy has led Mr. Vallone to charge that Mr. Morris is, in effect, subsidizing Mr. Hevesi's campaign. In response to the complaints, the Campaign Finance Board has said that it will be auditing all the campaigns, but that it would be taking a special look at the Hevesi campaign. The voluntary spending limits placed on candidates are designed to level the playing field as much as possible. All four major Democratic candidates are expected to spend the maximum allowed by the law, $5.2 million, meaning that no one candidate will be able to outspend the others. But if Mr. Hevesi is spending only $5,000 a month for his consultant and ends up not having to pay him the commissions that other consultants charge, he will have more cash for TV ads and mass mailings in the home stretch of what is expected to be an extremely close race. The two businessmen who spoke to The Observer told of conversations several months ago with Mr. Morris in which the consultant tried to persuade them that his candidate would be the next Mayor. Mr. Morris told them to ignore the polls showing that Mr. Hevesi's campaign is struggling, arguing that another of his clients, Senator Charles Schumer, was in similar trouble before staging a dramatic victory over his rivals in the 1998 Democratic Senate primary. One of the businessmen raised an objection: Hadn't Mr. Schumer's victory been made possible by the substantial financial advantage he enjoyed over his rivals, allowing him to saturate the airwaves with ads for months? How could Mr. Hevesi duplicate that performance, given that the city's campaign-finance program puts all the candidates on an equal financial footing? Mr. Morris' answer, according to both men, was that Mr. Hevesi would in fact enjoy a financial advantage because he would be not charging his client a commission, which would have to be paid from finite campaign funds. Instead, that cash could be put toward more TV commercials. "The issue was, if everyone is going to spend the same money, then how can Alan benefit?" one of the men recalled in an interview with The Observer . "Hank said, 'We're going to be able to do more commercials because I'm a close friend of Alan and I'm not going to charge him my fees.'" "He said he wasn't going to charge Hevesi any commission or fees for any television ad for the whole campaign," the other businessman added. Mr. Hevesi is expected to spend well over $3 million on ads; by not charging a commission, Mr. Morris would in effect be giving up at least $300,000. The additional funds could be crucial to Mr. Hevesi's chances. Unlike the other candidates, Mr. Hevesi has already spent $1.4 million on TV ads, leaving him with less money for the campaign's home stretch. Recent polls have shown that Mr. Hevesi isn't well-known to voters, a problem that is best solved by sustained television advertising. Campaign cash also becomes increasingly crucial in a race's closing days, because candidates need money to counterpunch against negative ads that could drive their numbers down shortly before Primary Day.