Cuomo Announces Guilty Plea From Hank Morris Associate In Ongoing Pension Fund Pay-to-play Investigation

 

NEW YORK, NY (May 12, 2009) - Attorney General Andrew M. Cuomo today announced that Julio Ramirez, an unlicensed placement agent formerly associated with Wetherly Capital Group, has pled guilty to securities fraud under New York’s Martin Act in Cuomo’s ongoing investigation into corruption involving the New York State Common Retirement Fund (“the CRF”).

Ramirez’s plea arises from his participation in fraudulent schemes involving multiple investment transactions with the CRF while he was an unlicensed placement agent associated with Wetherly Capital, a placement agent and broker-dealer. Between 2003 and 2006, Ramirez entered into corrupt arrangements with Hank Morris, the top political adviser to then Comptroller Alan Hevesi, to secure investments from the CRF for Wetherly clients and others. Transactions included FS Equity Partners V, the Ares Corporate Opportunities Fund II, and the Aldus/NY Emerging Fund.

“This investigation has uncovered a matrix of corruption - which grows more expansive and interconnected by the day,” said Attorney General Cuomo. “The web of corruption spans the United States and extends into numerous industries. Here, an unlicensed intermediary working with a broker-dealer partnered with the chief political operative at the Comptroller’s Office in New York to split profits from corrupt pension fund deals. This highlights the inherent risks in the use of placement agents - especially those that are unlicensed.”

Beginning in or around January of 2003, Wetherly was hired by FS Equity Partners V and the Ares Corporate Opportunities Fund II to help the funds secure investments from institutional investors, including the CRF. On behalf of Wetherly, Ramirez entered into an agreement with Hank Morris where Morris allegedly agreed to secure CRF investments in both funds, in exchange for 40 percent of the placement fees generated by the investments.

In late 2003 and early 2004, the CRF invested $50 million in both FS Equity Partners V and the Ares Corporate Opportunities Fund II. This generated more than $630,000 in fees for Wetherly and Ramirez, of which Morris allegedly obtained 40 percent, or more than $250,000.

As part of this corrupt scheme, Ramirez concealed Morris’s role in these transactions from the CRF investment staff and the general partners of the private equity firms involved, among others. Ramirez through Wetherly funneled payments to Morris to avoid creating a direct money trail between Wetherly and Morris. Instead, Wetherly issued checks to Ramirez, and Ramirez wrote checks to “PB Placement,” a shell company incorporated by Morris. Ramirez was acting as an unlicensed placement agent at the time that he entered into this corrupt arrangement, according to the Attorney General’s investigation.

These transactions are alleged as the basis for Martin Act and money laundering charges in the 123-count indictment returned by the grand jury and filed by Cuomo’s office in March against Morris and David Loglisci, the former Chief Investment Officer to Comtproller Hevesi.

In 2004, Ramirez was a part of another fraudulent scheme involving manipulation of the CRF, when the CRF was seeking to establish an “emerging manager fund,” which would invest exclusively in minority-owned and women-owned funds. Ramirez introduced Morris to Saul Meyer, the founding partner of Dallas-based Aldus Equity, which was trying to secure the investment mandate to manage the new fund. Once Meyer and Aldus allegedly agreed to pay Morris 35 percent of the fees, or over $300,000, Morris secured the $175 million investment for Aldus. These payments are alleged to be kickbacks from Meyer to Morris, a piece of which Morris shared with Ramirez for his role in the deal. The payments to Ramirez were concealed from the CRF investment staff and others.

This transaction is also alleged as the basis for a Martin Act charge in the indictment against Morris and Loglisci, as well as the recent felony complaint against Meyer.

Attorney General Cuomo has also charged former state Liberal Party Chairman Ray Harding 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. Additionally, hedge fund manager Barrett Wissman pleaded guilty last month to a felony charge under the Martin Act for conduct related to the pension fund.

Meyer, Morris, Loglisci and Harding are presumed innocent until they are proven guilty in court.

Cuomo also issued subpoenas earlier this month to over 100 investment firms and their agents after his investigation found that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.

Today’s announcement arises from a two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and 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.

The investigation is being 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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