(March 18, 2010) — Henry “Hank” Morris, the former chief political adviser to ex-New York Comptroller Alan Hevesi, said access to the state’s largest pension fund wasn’t a crime, maintaining that the indictment against him should be dropped.
The case draws greater attention to calls for heightened regulation of the popular, controversial use of placement agents at retirement funds or of “pay to play,” the practice of exchanging political contributions to pension fund officials for profitable investment contracts.
“The simple fact is that no matter how much the Attorney General disapproves as a matter of policy or ethics of the web of relationships that provided access and influence in the CRF investment process, there was no crime here,” William J. Schwartz, a lawyer for Morris, said to The Wall Street Journal. He said that the act of private equity and hedge funds hiring politically connected middlemen and others to fund staff members had been a long-standing practice in New York.
In March 2009, Morris was charged with securities fraud and grand larceny in a 123-count indictment as part of Attorney General Andrew Cuomo’s probe into the New York state’s retirement fund, the third largest in the US valued at about $129 billion. The accusations against Morris claim he sold access to billions of dollars held by the Common Retirement Fund. The allegations say he favored pension fund investors who made campaign contributions to Hevesi as well as deals for personal and political gain. Already, six people have pleaded guilty to criminal charges in the probe, including David Loglisci, the pension fund’s former CIO, previously Morris’s co-defendant.
Cuomo’s probe of the fund has already collected settlements of more than $100 million from at least nine investment firms and two individuals, Bloomberg reported. As part of the settlement, the firms agreed to abide by a new “code of conduct.”
The nation’s largest public pension fund has also faced scrutiny over its involvement with middlemen. Following recent news that middlemen reportedly earned $125 million in fees for more than a decade for helping funds get business with the $199.5 billion California Public Employees’ Retirement System (CalPERS), the fund giant has reported taking steps to increase transparency.
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