NYS COMPTROLLER'S FORMER CHIEF INVESTMENT OFFICER PLEADS GUILTY IN ONGOING PENSION INVESTIGATION
David Loglisci Describes "Culture of Corruption" within NYS Common Retirement Fund
NEW YORK, NY -- Yesterday, Attorney General Andrew M. Cuomo announced that David Loglisci, the former Chief Investment Officer at the Office of the New York State Comptroller (OSC), who was indicted last year along with co-defendant Henry "Hank" Morris, pled guilty to a Martin Act felony for his role in the corruption of the New York State Common Retirement Fund (CRF) and will cooperate in the ongoing investigation.
Today's plea is part of a more than two-year ongoing investigation into corruption involving the Office of the State Comptroller and the Common Retirement Fund. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the State pension fund was used as a piggy bank for the Comptroller's chief political aide and a favor bank for political allies and other friends.
"With today's plea, a former top official overseeing the state's single largest asset admitted that decisions were driven by politics and greed - not the best interests of the fund or its beneficiaries," said Attorney General Cuomo. "Not only were pension recipients defrauded but so were the taxpayers across New York who are ultimately responsible for sustaining the fund. A culture of corruption permeated the fund and shows how vulnerable it can be to graft and exploitation without dramatic reform."
From January 2003 through May 2007, Loglisci's position at the Office of the State Comptroller granted him the authority to recommend investments for the CRF, an authority he was duty-bound to exercise in the best interests of the CRF's members and beneficiaries. Today, Loglisci acknowledged abdicating his authority to Henry "Hank" Morris, the top political advisor to former New York State Comptroller Alan Hevesi, in order to help steer hundreds of millions of dollars worth of investment deals to Morris and to politically favored firms.
As part of his plea, Loglisci acknowledged breaching his fiduciary duties and violating the public trust by making investment decisions according to political benefit for the Comptroller, rather than in the best interests of the CRF's members and beneficiaries. Loglisci admitted that he understood, but did not disclose, that Morris played three conflicting roles at the CRF: He was the paid outside political consultant to the sole trustee; he had a financial interest in multiple proposed alternative investments; and he made investment decisions, including with respect to deals in which he had a financial interest.
Loglisci further admitted that he had been instructed by senior OSC officials to obtain Morris's approval prior to recommending or declining investment proposals and further admitted to ceding his authority over the CRF's alternative investment portfolio to Morris. Morris used this authority to corrupt the investment process at the CRF to favor those who either made contributions to the Comptroller's campaign, which he managed, or agreed to pay placement or other fees to Morris or his associates, and to punish those who would not. Morris further used this authority, as well as his position as chief political consultant and campaign fundraiser for the Comptroller, to extract campaign contributions from those doing and seeking to do business with the CRF, and to reward campaign contributors with investments, which he did.
Loglisci acknowledged breaching his duties and intentionally engaging in fraud, deception and concealment in connection with numerous investment transactions. With respect to some of these transactions, Loglisci was aware that Morris was a secret partner of Barrett Wissman, Julio Ramirez and others, with whom Morris split sham placement fees or had other financial interests which Morris concealed from the CRF.
Loglisci pleaded guilty before Justice L. Bart Stone in the State Supreme Court, New York County, Part 31, and was released on his own recognizance with travel restrictions. Loglisci faces a possible sentence of up to 1 1/3 to 4 years in prison for the charge of a felony violation of the Martin Act, a Class E felony.
The State pension fund is the biggest pool of money in the state and the third largest pension fund in the country, most recently valued at approximately $129 billion. At the time of the events charged, it was valued at approximately $150 billion. The New York State Comptroller is the sole trustee of the fund, responsible for managing and investing the pension fund solely in the best interests of the over one million current and former public employees and their families.
Attorney General Cuomo's investigation into corruption at the CRF has led to a number of criminal charges and six guilty pleas to date, including guilty pleas by former Liberal Party Chair Ray Harding, investment advisor Saul Meyer, hedge fund manager Barrett Wissman, Julio Ramirez, an unlicensed placement agent, and venture fund manager Elliott Broidy.
The indictment against Hank Morris remains pending and Morris is presumed innocent until and unless proven guilty in court.
Cuomo also issued subpoenas in May of 2009 to over 100 investment firms and agents after his investigation found that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.
Also in May of 2009, Cuomo announced his Public Pension Fund Reform Code of Conduct, which would eliminate pay to play in state public pension funds. To date, eleven firms have signed onto the Code: The Carlyle Group, Riverstone Holdings LLC, Pacific Corporate Group Holdings, LLC, HM Capital Partners I, Levine Leichtman Capital Partners, Access Capital Partners, Falconhead Capital, Markstone Capital Group, Wetherly Capital Group, Ares, and Freeman Spogli.
These firms collectively have agreed to return more than $90 million associated with New York State Common Retirement Fund investments; these funds will principally be provided to the CRF for the benefit of the pension holders. Payments from individuals bring that total to more than $120 million for the CRF and the State.
The investigation was conducted by Stacy Aronowitz, Deputy Chief of the Public Integrity Bureau, and Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision of Ellen Nachtigall Biben, Special Deputy Attorney General for Public Integrity, and Linda A. Lacewell, Special Counsel to the Attorney General.