New York's Corruption, Second to None

Former Hevesi Aide Pleads Guilty in Pension Case
The New York Times by DANNY HAKIM - March 10, 2010

ALBANY, New York — The former chief investment officer for the state’s pension fund pleaded guilty to securities fraud on Wednesday, saying he helped steer pension money to political contributors to former State Comptroller Alan G. Hevesi and to companies that paid kickbacks to Mr. Hevesi’s top political consultant, Hank Morris. The guilty plea by David J. Loglisci, who has agreed to cooperate with investigators from the office of Attorney General Andrew M. Cuomo, is among the most significant developments in the case since it began nearly three years ago and suggests that the inquiry is moving closer to Mr. Hevesi. In State Supreme Court in Manhattan, Mr. Loglisci described a “culture of corruption” under Mr. Hevesi, saying senior officials in the comptroller’s office directed him to gain approval from Mr. Morris before signing off on investments. “I effectively ceded my authority over the alternative investment portfolio to Morris,” Mr. Loglisci said, reading from a prepared statement. “Morris corrupted the investment process to favor those who either made contributions to the comptroller’s campaign, which Morris managed, or agreed to pay placement or other fees to Morris or his associates, and to punish those who would not.” Giving such authority to Mr. Morris, an outsider who ran Mr. Hevesi’s campaigns, would represent a startling breach; Mr. Morris collected millions in consulting fees from investment firms.

Mr. Loglisci is the sixth person to plead guilty in the case but the first official from the comptroller’s office. The investigation centers on the lucrative benefits that friends and associates of Mr. Hevesi reaped by their proximity to the state’s $129 billion pension fund, one of the largest investment pools in the nation. Investment companies, including prominent firms like the Carlyle Group, have paid $120 million in settlements with Mr. Cuomo’s office and agreed to change their practices. The biggest change adopted by the companies and the state pension fund has been a ban on the use of placement agents, the middlemen who facilitate deals between investment firms and public pensions. The Securities and Exchange Commission has been conducting its own parallel inquiry into the matter. Mr. Morris, who was indicted last year along with Mr. Loglisci, declined to comment through his lawyer on Wednesday. A lawyer for Mr. Hevesi, who resigned in 2006 after pleading guilty to an unrelated felony related to state workers’ service as chauffeurs for his wife, strongly rejected any suggestion that the comptroller had permitted politics to guide investment decisions. “Alan Hevesi never instructed David Loglisci or anyone at the comptroller’s office to obtain Hank Morris’s approval prior to recommending or declining proposed alternative investments,” the lawyer, Bradley Simon, said. “Mr. Hevesi never directed Mr. Loglisci to cede his authority to Hank Morris.”

Mr. Loglisci has been a central figure in the investigation since it began. He pleaded guilty to a felony violation of the Martin Act, a sweeping state securities law, and faces up to four years in prison. Mr. Cuomo’s office said in a statement that Mr. Loglisci “acknowledged breaching his duties and intentionally engaging in fraud, deception and concealment in connection with numerous investment transactions.” He also admitted to destroying evidence, namely a list of placement agents who had been paid by investment firms doing business with the state pension fund. In a telephone news conference after Mr. Loglisci’s plea, Mr. Cuomo was repeatedly pressed about Mr. Loglisci’s statement in court that senior officials had instructed him to clear investment decisions with Mr. Morris. Mr. Loglisci reported directly to Mr. Hevesi and the comptroller’s chief of staff, Jack Chartier. Mr. Cuomo declined to say whether Mr. Hevesi was one of the senior officials referred to in Mr. Loglisci’s statement. “The words speak for themselves,” Mr. Cuomo said, adding that he would not comment on “anything Mr. Hevesi knew or didn’t know.”

“This is the chief investment officer,” he said. “He did report directly to the comptroller, at that time Mr. Hevesi.” When Mr. Morris and Mr. Loglisci were indicted nearly a year ago, Mr. Cuomo’s office accused Mr. Morris of having positioned himself as a gatekeeper, controlling access to about $10 billion in pension assets that were to be invested in hedge funds and private equity firms. Mr. Loglisci said Wednesday in court that Mr. Morris used his control over the pension fund to secure campaign contributions from investment firms. Shortly after Mr. Hevesi’s election in 2002, Mr. Morris played a key role in installing Mr. Loglisci, who had worked on Wall Street, in the chief investment officer’s position. “With today’s plea,” Mr. Cuomo said in his statement, “a former top official overseeing the state’s single largest asset admitted that decisions were driven by politics and greed — not the best interests of the fund or its beneficiaries.” Mr. Loglisci’s role in the case has been a colorful one. One of his brothers made a low-budget movie called “Chooch,” which featured, among other things, a nine-pound dachshund named Kiwi Limone. Several prominent investors seeking pension fund business put money into the movie-making effort. Prosecutors have said that other benefits were doled out to other aides under Mr. Hevesi; investment firms are accused of conferring gifts on behalf of Mr. Chartier to the actress Peggy Lipton, a close friend, including a large loan and rent payments. And last October, Raymond B. Harding, the former chief of the Liberal Party in the state, admitted that he had accepted more than $800,000 in exchange for doing favors for Mr. Hevesi, including a scheme to secure an Assembly seat for Mr. Hevesi’s son, Andrew.