Paying to Play With NY Pension Money

Andrew Cuomo is on a roll.

The New York attorney general paused from his knee-deep involvement in the bonus bedlam at AIG and Merrill Lynch today in order to charge two former New York state officials with 123 charges, including securities fraud, grand larceny, bribery, and money laundering.

Resulting from a two-year investigation, two former officials from the Office of the State Comptroller, Hank Morris and David Loglisci, are accused of running an elaborate kickback scheme with money in the state's pension fund. From 2003 to 2006, Morris was a political adviser and fundraiser for the former comptroller Alan Hevesi, and Loglisci was the chief investment officer for the state pension system, which was worth $150 billion at the time.

The SEC also filed civil charges of securities fraud against the two men today.

Hevesi, who resigned after fessing up to using state funds to pay for his wife's chauffer, was not charged today.

According to the indictment, the two officials gave money managers a piece of the pension pie in exchange for bribes and fees totaling $30 million. The money was allegedly used for personal use, campaign contributions, and political favors.

Cuomo made it clear that this is only the first shoe to drop in this case and that the investigation will continue. Other high level state officials may have also benefited from the scheme.

The indictment lists more than twenty investment deals that were allegedly tainted by illegal kickbacks, including five investments involving the Carlyle Group. Cuomo claims that Carlyle managed $730 million of the pension's funds, for which Morris obtained $13 million in placement fees.

Under another scenario, Loglisci had a private equity fund manager seeking business arrange for a contract to distribute the DVD of his brother's low budget movie, Chooch. Morris allegedly gave gifts and bribes to an unnamed high level official in the comptroller's office that he then used to provied "rent payments for his female companion's luxury Manhattan apartment, a sham $100,000 loan for her, and a job and other benefits for her daughter."

by Megan Barnett