A former New York state political party leader was criminally charged in a probe of kickback fees paid to manage state pension investments, New York's top legal officer said on Wednesday.
In a joint investigation with the U.S. Securities and Exchange Commission, New York Attorney General Andrew Cuomo also announced that a former hedge fund manager, Barrett Wissman, pleaded guilty for his role in the pay to play scheme, and will serve as a witness in the probe.
Wissman, formerly associated with the Texas-based Hunt Financial Ventures, agreed to pay $12 million in forfeiture and penalties to the state over three years.
The former Liberal Party leader, Raymond Harding, was charged with getting more than $800,000 in illegal fees on state pension fund investments. Harding had supported Cuomo, a Democrat, when he ran for governor in 2002 before Cuomo withdrew in favor of the then sitting state comptroller, Carl McCall.
MORE CHARGES LIKELY
Cuomo told reporters on a telephone conference call that that he expects additional charges from the investigation.
But he said he had no evidence that the current comptroller, Democrat Thomas DiNapoli, was involved.
DiNapoli replaced Democratic Comptroller Alan Hevesi after Hevesi pleaded guilty to an unrelated felony and resigned in 2006, and so far the probe has focused on investment decisions made when Hevesi was the state comptroller.
Asked whether Hevesi would face charges, Cuomo declined comment, saying only that his probe was continuing.
Hevesi's lawyer was not immediately available to comment.
Hevesi's son, Andrew, should not step down from his state Assembly seat, Cuomo said. New York's attorney general said he has no evidence that Democratic Assemblyman Hevesi knew that the incumbent whose seat he won in a special election became vacant as part of the illegal scheme.
SEC CITES MILLIONS IN 'SHAM' FEES
Last month, Henry Morris, who was Hevesi's top fundraiser when he was comptroller, and David Loglisci, the state's pension investment chief, were charged with taking millions of dollars in kickbacks from money manager firms.
Here, as alleged, the scheme reached another branch of New York State government when an Assembly seat was used as a pawn for personal profit, Cuomo said in a statement. The State pension fund should not be used as a political tool -- it is held in trust for over one million State employees and their families.
Our investigation will continue until we have unearthed all aspects of this scheme and restored the public trust.
The SEC said it brought civil charges against Harding and Wissman in connection with the scheme.
The regulator alleges that Wissman arranged some of the payments made to Morris, and Wissman was rewarded with at least $12 million in sham 'finder' or 'placement agent' fees, the SEC said in a statement.
Harding received approximately $800,000 in sham fees that were arranged by Morris and Loglisci, according to the SEC's statement.
These men put their greed above the interests of New York's hard-working public employees, said Robert Khuzami, director of the SEC's Division of Enforcement. We will continue to unravel this tangled web of fraud and corruption.
Several investment firms are being investigated over whether they made improper payments to intermediaries to gain business from the pension fund, sources familiar with the investigation said on Tuesday.
In mid-March, Cuomo and the SEC said Morris had gotten more than $13 million in sham placement fees from five investments totaling $730 million that involved The Carlyle Group, one of the world's largest private equity funds. Carlyle said in a statement on Tuesday that it had fully cooperated with the inquiry by Cuomo's office.
(Reporting by Joan Gralla; Additional reporting by Grant McCool; Editing by Jan Paschal)