Former NY state comptroller Hevesi pleads guilty to corruption in pay-to-play scandalBy Jennifer Peltz, AP
Thursday, October 7, 2010
Ex-NY comptroller pleads guilty in pay-to-play
NEW YORK — Former New York state Comptroller Alan Hevesi admitted Thursday that he accepted free travel and campaign contributions from a financier in exchange for investing hundreds of millions of dollars of state pension money with the businessman’s firm.
Hevesi — a Democrat who had resigned after pleading guilty in another case involving misuse of his office — became the highest-ranking official to admit playing a role in the sweeping pay-to-play scandal that has wracked one of the world’s largest government pension funds.
State Attorney General Andrew Cuomo’s investigation into the pension fund has swept up a firm run by former Obama administration auto industry czar Steven Rattner, a former political party boss and a man who once ran a popular military museum. The probe also tangentially touched on a low-budget movie and a 1960s actress.
His voice soft but steady, Hevesi apologized as he pleaded guilty to a felony corruption charge, receiving reward for official misconduct. He acknowledged getting nearly $1 million worth of gifts and favors.
“I deeply regret my conduct and sincerely and deeply apologize to the people of the state of New York, to the court, and to my family,” he told a Manhattan judge.
Hevesi admitted that he allowed a California venture capitalist to pay for him and his family to take five trips to Israel and one to Italy, at a total cost of about $75,000. The businessman, Elliott Broidy, also arranged for $500,000 in campaign contributions.
Around the same time, Hevesi authorized the pension fund to invest $250 million in Broidy’s company, Markstone Capital Partners.
Hevesi, 70, was released without bail until his sentencing, set for Dec. 16. His punishment could range from no jail time to up to four years in prison.
He and his lawyers brushed off reporters’ questions as he left the courthouse.
Cuomo’s investigators have spent years looking into whether top Hevesi aides exploited their positions for personal profit, extracting millions of dollars in kickbacks from money management firms that had been awarded lucrative state investment contracts. More than 15 companies accused of making questionable payments were entangled in the investigation, including some big players on Wall Street and in Washington, D.C.
“Alan Hevesi presided over a culture of corruption and violated his oath as a public servant,” said Cuomo, a Democrat who is running for governor.
With Hevesi’s plea, Cuomo wrapped up a big case that could help his campaign but hurt his party in the process by reminding voters of a scandal on a Democrat’s watch. State Republicans are making corruption in Democrat-controlled Albany a major campaign issue.
The pension probe has netted seven guilty pleas and $138 million in recovered money so far, Cuomo’s office said, and it has spurred changes in state pension investment procedures. It also has led to spinoff investigations of similar pay-to-play allegations in California and New Mexico, and prompted the Securities and Exchange Commission to propose new rules restricting political donations by money managers seeking state business.
Cuomo’s office said Thursday that current Comptroller Thomas DiNapoli isn’t an issue in the ongoing investigation. A Cuomo spokesman said the office had reviewed a Hevesi-started pension investment that DiNapoli, also a Democrat, increased but concluded no action was warranted.
Hevesi resigned in 2006 after pleading guilty to a felony in an unrelated case for using state workers to chauffeur his wife. Before becoming the state’s chief financial officer, Hevesi held the same office for New York City and was a longtime state assemblyman in a Queens district now represented by his son, Andrew Hevesi.
Cuomo accused Alan Hevesi’s longtime political consultant, Hank Morris, and the retirement system’s chief investment officer, David Loglisci, of cashing in on the $125 billion pension fund’s investments in private equity.
Prosecutors said the pair told money managers that if they wanted to do business with the state, they could sweeten their chances by paying hefty “placement” fees to the right people.
Many embraced the idea.
The Carlyle Group, one of the world’s largest private equity firms, paid $13 million to Morris for his help in landing $730 million in state investments.
The Quadrangle Group, then run by Rattner, secured a $100 million pension fund deal after agreeing to pay Morris placement fees worth $1 million.
Rattner also arranged for a film distribution company owned by Quadrangle to release a DVD of a low-budget movie produced by Loglisci’s brother. Several other money managers doing business with the pension fund, including Broidy, also invested in the movie, a screwball comedy called “Chooch.”
Morris has pleaded not guilty to a number of criminal charges. He and his lawyers have argued in court papers that, since he wasn’t a state official, there was nothing illegal about him using political connections to help clients get state money.
Loglisci pleaded guilty in March to a securities fraud charge.
Broidy pleaded guilty in December to a felony charge of rewarding official misconduct. In court, he admitted subsidizing the luxury travel of a high-ranking official in the comptroller’s office, revealed Thursday to be Hevesi himself.
The trips involved first-class airfare for Hevesi and his family, luxury hotel suites, a helicopter tour, a car with a driver and a security detail. He also arranged to have a lobbyist friend of Morris’ paid $380,000 in consulting fees.
In a side note, Broidy also acknolwedged giving illegal gifts to other state officials — including about $90,000 for an official’s girlfriend, who has been identified as actress Peggy Lipton. Lipton, famous for starring in the 1960s TV show “The Mod Squad,” hasn’t been accused of any wrongdoing.
A string of other investment advisers, lobbyists and minor political figures have also pleaded guilty to charges, most carrying a low risk of jail time.
Raymond Harding, the former head of New York’s defunct Liberal Party and a longtime Hevesi ally, pleaded guilty a year ago to securities fraud. He acknowledged receiving a kickback as a reward for doing a political favor for Hevesi.
The former head of the Intrepid Sea, Air and Space Museum in New York City, Bill White, agreed last month to forfeit $1 million in placement fees he received in connection with pension fund deals. White had also raised money for Hevesi’s campaign.
Gormley reported from Albany, N.Y. Associated Press writer David Caruso contributed to this report.
Tags: Campaign Finance Improprieties, Campaigns, Corporate Crime, Corporate Governance, Fraud And False Statements, Government Pensions And Social Security, Manhattan, New York, New York City, North America, Personnel, Political Corruption, Political Fundraising, Political Issues, Political Scandals, United States