Attorney General Cuomo Announces Arrest Of Dallas-based Investment Adviser In Continuing Investigation Of Pay-to-play Kickback Scheme At The Nys Comptroller's Office

 

NEW YORK, NY (April 30, 2009) - Attorney General Andrew M. Cuomo today announced the arrest of a founding partner of a Dallas-based firm that advises public pension systems across the nation for his alleged involvement in a pay-to-play kickback scheme at the New York State Office of the Comptroller.

Saul Meyer, a founding partner of the Dallas-based Aldus Equity, was charged with Martin Act securities fraud for allegedly paying illegal kickbacks to Hank Morris, the top political adviser to former New York State Comptroller Alan Hevesi, in exchange for business with the state Common Retirement Fund (CRF). The felony complaint, filed in New York County Supreme Court, also alleges that while Meyer sought additional business from the Hevesi-controlled CRF, he was helping one of Hevesi’s sons land a $25 million investment deal with the New Mexico public pension system, earning the son a $250,000 placement fee. At the time, Aldus was an advisor to both the New Mexico and New York State public pension funds.

“Today’s allegations shed additional light on the depth and breadth of corruption involving the New York State pension fund,” said Attorney General Cuomo. “We’ve uncovered corruption in New York, our government and our retirement accounts - and now we see the scheme reaching companies, individuals and pension funds nationwide. Saul Meyer is the latest chapter in my Office’s investigation, and we will not stop until public trust has been restored.”

According to the felony complaint, between 2003 and 2004, New York’s CRF was establishing an “emerging manager fund” which would invest exclusively in minority-owned and women-owned funds. The CRF needed to find a company to manage the new fund, and began negotiations with a minority-owned investment firm. However, that firm was rejected by David Loglisci, Hevesi’s Chief Investment Officer, when it allegedly refused to pay kickbacks to Morris and another associate as part of the deal.

Today’s charges allege that Morris then sent word to Meyer and promised to give the lucrative management contract to Meyer’s company, Aldus, if Meyer agreed to pay 35 percent of the deal -- approximately $300,000 -- to Morris. Morris conveyed that he himself would pay 10 percent of his share to the messenger he used to convey the illegal offer.

The complaint alleges that Meyer agreed to Morris’s terms, and Aldus was brought in to manage what became known as the Aldus/NY Emerging Fund, with an initial capital investment of $175 million that was made based on Loglisci’s recommendation. Once the Fund was established, Aldus allegedly knew that Morris was working both sides by marketing private equity funds for investments in Aldus/NY Emerging Fund at the same time that Morris had a 35 percent interest in the upside of the Emerging Fund.

Cuomo added: “The defendant allegedly corrupted one of the most laudatory programs associated with the state pension fund - an initiative designed specifically to invest with minority-owned and women-owned funds. The emerging funds program was designed to diversify pension fund investments, not be a source of kickbacks.”

The Attorney General’s Office further alleges that in early 2006 Meyer sought an additional $200 million from the Common Retirement Fund for the Aldus/NY Emerging Fund. At the same time, one of Comptroller Hevesi’s sons was seeking a deal with the New Mexico State Investment Council for his client, Catterton VI. At the time, Meyer’s firm Aldus was advising the New Mexico fund, and recommended a $30 million deal with Catterton VI. A week later, Meyer received the $200 million he was seeking from the Hevesi-controlled New York pension fund. According to records obtained by the Attorney General’s Office, Hevesi’s son personally thanked Meyer “for NM.”

Meyer is charged with one count of violating the Martin Act (class E Felony). He was arraigned today in New York County Criminal Court and released on $200,000 bond.

Today’s announcement arises from a two-year, ongoing investigation into corruption involving the New York State Comptrollers Office and the State pension fund (the Fund). The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends.

Morris and Loglisci have been charged in a separate 123-count indictment with, among other charges, enterprise corruption, Martin Act securities fraud, grand larceny, bribery and money laundering. The indictment, unsealed in February, alleges Morris and others reaped more than $30 million in undisclosed fees, gifts, and bribes as a result of tainted investment deals.

Former state Liberal Party Chairman Ray Harding has also been charged with allegedly obtaining over $800,000 in illegal fees on State pension fund investments as a reward for over 30 years of political support to Hevesi, including helping to open up a State Assembly seat for his son. Additionally, hedge fund manager Barrett Wissman pleaded guilty to a felony charge under the Martin Act for conduct related to the pension fund, and has agreed to pay $12 million in penalties and forfeiture to the State of New York.

Meyer and the separately-charged defendants Morris, Loglisci and Harding are presumed innocent until they are proven guilty in court.

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 valued at 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

In a parallel civil lawsuit today, the Securities and Exchange Commission amended the complaint against Morris, Loglisci, Harding and Wissman to include Meyer and Aldus as defendants. Attorney General Cuomo thanked the SEC for its invaluable assistance in the investigation

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 Nachtigall Biben, Special Deputy Attorney General for Public Integrity, and Linda A. Lacewell, Special Counsel.


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