Ex-NY pension fund chief pleads guilty

David Loglisci, former chief investment officer for the New York State Common Retirement Fund, last week pleaded guilty to helping favored firms gain access to the state’s $129 billion pension fund.

Loglisci, who had reported directly to onetime Democratic Comptroller Alan Hevesi, admitted to violating the state’s Martin Act and will cooperate in the ongoing “pay-to-play” investigation involving the NY Common Retirement Fund.

Loglisci was released last week after entering his plea, but was subjected to travel restrictions. He could be sentenced in mid-June. He could face up to four years in prison.

The case “symbolizes the corruption that has gone on for decades in Albany,” New York Attorney General Andrew Cuomo said on a conference call with reporters last week. “The comptroller’s office, I think, is symbolic of the depth, the virulence of it.”

Loglisci and Henry “Hank” Morris, a former political adviser and fund raiser for Hevesi, were charged in March 2009 in a 123-count indictment over the alleged steering of hundreds of millions of dollars of investments in exchange for kickbacks.

It was not immediately clear how Loglisci’s plea and cooperation might affect Hevesi, who resigned as comptroller in December 2006. Hevesi later pleaded guilty to an unrelated charge, but has not been charged in the pension fund probe.

“Alan Hevesi never instructed David Loglisci or anyone at the comptroller’s office to obtain Hank Morris’ approval prior to recommending or declining proposed alternative investments,” Bradley Simon, an attorney for Hevesi, said last week.

“Furthermore, Mr. Hevesi never directed Mr. Loglisci to cede his authority to Hank Morris,” Simon added. “Any implication or suggestion to the contrary is patently false.”

Morris has also maintained his innocence. A lawyer representing him was not immediately available to comment.

States are now clamping down on the use of “placement agents,” who are typically politically connected individuals, such as Morris, who place business with pension funds.

Thomas DiNapoli, New York’s current comptroller, said in a statement last week that he has revamped the Common Retirement Fund’s operations, banning pay-to-play and the use of placement agents and lobbyists in investments. He called Loglisci’s plea a “welcome step” toward moving past prior “transgressions.”

Cuomo said Loglisci had authority to recommend how to invest pension money but violated the public trust by making decisions based on the “political benefit for the comptroller” rather than for fund’s best interest.

The attorney general said Loglisci’s actions helped turn the fund into a “piggy bank” for Morris and his allies.

Cuomo, nevertheless, said that while Loglisci’s powerful position made his job “a career-maker,” there were “no signs” he was taking kickbacks.

“David Loglisci found himself in a nearly impossible situation,” his attorney, Kevin Keating, said last week. “The facts are now clear. While those around him made millions, Loglisci never asked for a single cent from anyone.”

The probe has also caught up prominent financial firms, including Quadrangle Group and The Carlyle Group, among others.

The U.S. Securities and Exchange Commission is conducting its own civil probe into the matter. The investigation has swept into other states, including California and New Mexico.

Cuomo said the pension fund probe has resulted in the return of more than $120 million, most of which is going back to the Common Retirement Fund, with the rest to the state treasury. Just last month, Cuomo announced that the Wetherly Capital Group, a placement agent that served as a broker for investment companies eager to invest in the state’s pension fund, agreed to return $1 million associated with the pension investments.

Similarly, David Leuschen, co-founder of private equity firm Riverstone Holdings, agreed late last year to pay $20 million in restitution to resolve his role in the kickback probe of New York’s state pension fund.

In addition, to Loglisci, other guilty please have come from Saul Meyer, founding partner of Dallas-based private equity advisor Aldus Equity, and Ray Harding, former head of the New York Liberal Party, who both pleaded guilty in the kickback scandal. Elliott Broidy, co-founder of Los Angeles-based Markstone Capital Partners, last year pleaded guilty to a felony charge for bribing four senior officials who managed the New York pension fund.

They are awaiting sentencing, which will be determined by a judge at the case’s conclusion.

Cuomo, a Democrat, is widely expected to run for governor this year. He used much of the conference call last week to demand changes to help protect the New York pension fund.

“This situation will not be fully remedied until we change the rules, and we change the laws,” Cuomo said. “The same scam could happen today.”