Private equity firm Riverstone Holdings LLC agreed to pay $30 million to resolve its role in a corruption probe of New York state's pension fund, Attorney General Andrew Cuomo said on Thursday.
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For over two years, the Democratic attorney general has been probing millions of dollars of kickbacks paid by investment firms eager to invest the state's $110 billion retirement fund. The investment firms hired an array of middlemen -- lobbyists, lawyers, media consultants and placement agents -- who reaped the fees.
But by jacking up the cost of doing business, these fees cost taxpayers dearly, Cuomo said in a conference call, noting the public now is being asked to contribute more to the fund to make up for its recent steep investment losses.
The state retirement fund will get the benefit of the payment by Riverstone, which manages $17 billion of assets.
Cuomo, who is continuing his probe, has been joined in the investigation by the U.S. Securities and Exchange Commission.
And while he said other states are just now ramping up their own investigations, New York for years has been rife with this kind of corruption, partly because just one individual, the state comptroller, runs the pension fund, he said.
Almost all other states have multi-member boards to oversee their funds, which altogether total almost $3 trillion.
So far, all indictments and charges involve the state pension fund when it was run by the former Democratic comptroller, Alan Hevesi. Two people have pleaded guilty.
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Hevesi was New York City's comptroller before he was elected to the same position in the state. Cuomo suggested that the city's use of pension boards protected New York City's funds from corruption.
We haven't found any evidence of Mr. Hevesi committing or his team, his associates, or Mr. Morris, committing the same type of activity on the city side that they did once they got to the state side, Cuomo said.
The attorney general was referring to Henry Morris, who was Hevesi's top fund raiser. Morris has been indicted, along with the pension fund's former chief investment officer, David Loglisci. Lawyers for Morris, Loglisci and Hevesi, who has not been charged, all say their clients are innocent.
There was an explosion of fraud, however, once Hevesi became the state comptroller, Cuomo said, calling for systemic reforms to safeguard the pension fund from any more corruption.
Riverstone's spokesman said: For our investors and the firm, we believe we have reached the right decision through this resolution.
Cuomo's case rests partly on a movie called Chooch that was produced by one of Loglisci's brothers; a Riverstone founder, David Leuschen, invested $100,000 in the movie, which DVD Talk's online review describes as an unoriginal low-budget buddy film. The movie's plot, according to the Internet Movie Database, includes a mix-up on the way to the airport involving a mysterious bag of money.
Leuschen, a former Goldman Sachs energy expert, is not included in the Riverstone resolution, Cuomo said.
A spokesman for Leuschen had no immediate comment.
Cuomo has not accused Loglisci, the state pension fund's former chief investment officer, of taking kickbacks, which is one reason the movie is significant. Loglisci disclosed his ties to the movie in his state ethics filings.
(Reporting by Joan Gralla; Editing by Jan Paschal)