The NY Pay-to-Play Rap SheetOctober 7, 2010: 1:24 PM ET
Alan Hevesi, the former New York state comptroller, today pled guilty to charges of felony public corruption. This is part of the noxious pay-to-play scandal, in which private equity fund managers paid a crooked "finder" to secure financial commitments from the state pension system. He faces up to four years in prison.
While we await the inevitable conference call with future Governor Cuomo, here's a rundown of the scandal's other players:
Name: David Loglisci
Loglisci is the former chief investment officer for the New York State Common Retirement Fund. When private equity funds would come to him for money, he would direct them to hire Hank Morris, a "placement agent" who previously was a top political aide to Alan Hevesi. If a firm did so, then Loglisci typically would approve the fund commitment.
Loglisci does not appear to have shared in Morris' commissions. Instead, he apparently felt his reward was being allowed to maintain his CIO position. In addition, one of the kickback arrangements allegedly helped Loglisci's brother on a film production/distribution deal.
Status: Loglisci pled guilty last March. He will be sentenced at the completion of Cuomo's investigation.
Name: Hank Morris
Morris is the primary actor in all of this, and allegedly gained the most financially. He is accused of serving as a double-dealing "placement agent" -- taking on clients (and commissions) from firms dropped at his doorstep. Morris then used his existing relationships with Hevesi and Loglisci to secure the commitments. In other words, they were never in doubt.
Status: Morris was indicted in March 2009, and is still awaiting trial on charges that include money laundering, bribery and violating the Martin Act. He had sought a dismissal of all charges, arguing that The Martin Act only applies if the state pension system suffered economic harm (which he claims it has not). A judge didn't buy it.
Name: The Quadrangle Group
Quadrangle is a private equity firm that was accused by Cuomo and the SEC of knowingly helping to finance a film being produced by the brother of David Loglisci.
Status: Quadrangle settled with both state and federal authorities in April, agreeing to repay $7 million to the New York Common Retirement Fund.
Name: Steven Rattner
Rattner is a former partner with Quadrangle who is believed to have been the firm's primary liaison with both Hank Morris and Loglisci's brothers. It also has been alleged that Rattner contributed to Hevesi via a third party, at the urging of Morris.
Cuomo reportedly gave Rattner immunity from certain charges in exchange for information, only later to discover emails that may further implicate Rattner (some of which were referenced in the charges against quadrangle). My understanding also is that Cuomo originally refused to let Quadrangle settle separate from Rattner, but ultimately relented.
As part of its settlement, Quadrangle said: "We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller's political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong, and unethical."
Status: Rattner has maintained his innocence, but has not yet provided any detailed comments on the matter. Cuomo has not yet said that his investigation into Rattner is concluded.
Name: Elliot Broidy
Broidy was founding partner of private equity firm Markstone Capital Partners, who was accused of giving $1 million in gifts to pension officials in exchange for a $250 million fund commitment. This included $300,000 to Loglisci's brothers. Broidy also paid some of Hevesi's travel fees, including for five trips to Israel.
Status: Broidy pled guilty last December, and is still awaiting sentencing. He is the only private equity fund manager involved in the scandal who could be facing jail-time. In a subsequent settlement, Markstone agreed to repay $18 million in fees to the NYSCRF. Broidy is no longer with Markstone.
Name: David Leuschen
Leuschen is co-founder of Riverstone Holdings, an energy-focused private equity firm that often raises co-branded funds with The Carlyle Group. He was accused of having "invested" $100,000 into the film being produced by Loglisci's brothers, but never faced formal legal charges. He also hired Morris to raise money from NYCRF for Riverstone funds.
Status: Leuschen agreed to repay $20 million "in restitution" to the state pension system. Quite the payout for someone who didn't do anything wrong…
Name: Riverstone Holdings
Riverstone is a private equity firm that hired Hank Morris to secure fund commitments from NYSCRF.
Status: In June 2009, Riverstone agreed to repay $30 million in management fees, and sign a "code of conduct."
Name: The Carlyle Group
Carlyle is a private equity firm that hired Hank Morris to secure fund commitments from NYSCRF.
Status: In May 2009, Riverstone agreed to repay $20 million in management fees, and sign a "code of conduct."
Name: Saul Meyer
Meyer was founding partner of Dallas-based private equity "gatekeeper" Aldus Equity, who hired Hank Morris to secure fund commitments.
Status: Meyer pled guilty to Martin Act violations in October 2009, saying that he hired Morris with the understanding of how the kickback arrangement worked. He is still awaiting sentencing. Meyer also admitted to having agreed to conduct due diligence, and recommend, a third-party fund commitment at the urging of Loglisci. Aldus has since collapsed.
Name: Ray Harding
Harding is the former Liberal Party chair in New York, who in April 2009 was accused of serving as a "sham placement agent" for certain pension fund investments. Harding received nearly $1 million for these activities, and in exchange provided political favors to Hevesi. For example, he created a State Assembly vacancy so that Hevesi's son could take the seat in a special election.
Status: Harding pled guilty last October.
Name: Pacific Corporate Group
PCG is a private equity group that gave Morris a 5% ownership stake in a a $750 million co-investment vehicle funded by New York State Common Retirement Fund, and formed/managed by PCG and hedge fund The Clinton Group. How come? Because Morris helped secure the money.
Status: PCG was never formally charged, but did agree to repay $2 million in fees. It also laid the blame on an ex-employee named Steve Moseley, who subsequently resigned from his then-current firm. Moseley has never been charged with any wrongdoing, nor been asked to make restitution.
Name: Barrett Wissman
Wissman is a Texas hedge fund manager who held a 10% position in the aforementioned co-investment vehicle (and sat on its investment committee). He also acted as a "finder" for certain private equity firms, then splitting the commissions with Morris (who got Loglisci to approve the commitments).
Status: Wissman pled guilty in April 2007 to securities fraud, and agreed to repay $12 million.
Name: HM Capital Partners
HM is a private equity firm that hired Morris to secure NYSCRF commitments, without knowledge of the kickback scheme
Status: Agreed to repay $1.56 million in fees related to the commitment.
Name: Falconhead Capital
Falconhead is a private equity firm that hired Morris to secure NYSCRF commitments, without knowledge of the kickback scheme
Status: Agreed to repay $1.3 million in fees related to the commitment.
Name: Levine Leichtman Capital Partners
LLCP is a private equity firm that hired Barrett Wissman, who split fees with Morris (unbeknownst to firm)
Status: Agreed to repay $200,000 in fees related to the commitment.
Name: Access Capital Partners
Access is a private equity firm that hired Barrett Wissman, who split fees with Morris (unbeknownst to firm)
Status: Agreed to repay $1.6 million in fees related to the commitment.
Name: Julio Ramirez
Ramirez was a placement agent with a firm called Wetherly Group, and was charged with being part of Hank Morris' "national network of actors who often acted in concert across the country' to help firms secure investments from pension funds and allow agents to collect lucrative fees."
Status: Ramirez pled guilty to securities fraud in May 2009.
Name: GKM Newport
The California-based fund-of-funds manager paid Morris and an associate (Kevin McCabe) to secure $800 million in capital commitments from NYSCRF for a captive fund-of-funds.
Status: GKM agreed this past April to repay approximately $1.6 million, and since has agreed to be acquired by Macquarie Group.
Name: Kevin McCabe
McCable helped Morris with the aforementioned GKM Newport deal, and received $477,000.
Status: This past April, McCabe agreed to repay $715,000.