Hevesi Admits Accepting Nearly $1 Million in Benefits in Exchange for Approving $250 Million in Pension Fund Investments

Hevesi Will Cooperate in Cuomo’s Ongoing Pension Fund Investigation

NEW YORK, NY (October 7, 2010) – Attorney General Andrew M. Cuomo today announced a felony guilty plea by former Comptroller of the State of New York Alan Hevesi for his involvement in a pay-to-play kickback scheme at the Office of the New York State Comptroller.

Hevesi acknowledged receiving nearly $1 million in gifts in exchange for improperly favoring and approving a $250 million investment in Markstone Capital Partners, L.P. from the New York State Common Retirement Fund. The gifts consisted of $75,000 in travel expenses for Hevesi and his family, $380,000 in sham consulting fees for a lobbyist friend, and over $500,000 in campaign contributions as directed by Hevesi. Hevesi also acknowledged that while he served as Comptroller he was aware that Henry “Hank” Morris – his paid political adviser and campaign manager – was using the pension fund for a pay-to-play scheme in which Morris personally received fees from pension deals and steered investments to friends and political associates.

Hevesi pleaded guilty to a felony charge of receiving reward for official misconduct and faces up to four years in prison. He has also agreed to fully cooperate with Cuomo’s investigation.

Today’s announcement is the latest development in Cuomo’s three-year, ongoing investigation into corruption involving the Office of the New York State Comptroller and the pension 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. Through this scheme, Hevesi, his chief political aide, and many of their political allies and friends reaped tens of millions of dollars in kickbacks, bribes, and sham consulting and finder fees connected to pension fund investments.

To date, Cuomo’s long-running investigation into this criminal scheme has now resulted in seven guilty pleas and has garnered $138 million in recoveries for the state through agreements with fifteen firms and two individuals.

“Alan Hevesi presided over a culture of corruption and violated his oath as a public servant,” said Attorney General Cuomo. “He was solely charged with protecting our pension fund, but he exploited it for his personal benefit instead. With his guilty plea, we can now focus on the process of restoring public trust in government.”

Hevesi served as State Comptroller from January 2003 until he resigned in December 2006, after pleading guilty to one count of defrauding the government in connection with his personal use of a State-employed driver. He previously served as a New York State Assemblyman from 1971 to 1993, and as Comptroller of the City of New York from 1994 to 2001.


As part of his guilty plea, Hevesi admitted that he accepted nearly $1 million in gifts from Elliott Broidy, a principal of Markstone Capital Partners, L.P. (the “Markstone Fund”), as a reward for giving preferential treatment to their investment proposal. As Comptroller and sole trustee of the pension fund, Hevesi had a fiduciary duty to act solely in the best interests of the beneficiaries of the pension fund. In violation of this duty, Hevesi improperly favored and ultimately approved $250 million in pension fund investments in the Markstone Fund. In connection with these investments, the pension fund also paid approximately $18 million in management fees to the Markstone Fund.

Broidy was both a friend and an important political fundraiser for Hevesi. In addition to improperly promoting the pension fund’s investments in the Markstone Fund, Hevesi helped Broidy market the Markstone Fund to other public pension funds across the country.

As part of Cuomo’s investigation, Broidy pled guilty in December 2009 to a felony charge of rewarding official misconduct in connection with nearly $1 million in gifts that he bestowed upon Hevesi and other high-ranking officials at the Comptroller’s Office in order to secure pension fund investments in the Markstone Fund. Cuomo also recovered the approximately $18 million in management fees that the pension fund had paid to the Markstone Fund.

Hevesi has acknowledged his participation in the following illicit activities:
As a reward for Hevesi’s preferential treatment of the Markstone Fund, Broidy paid at least $75,000 in connection to travel expenses incurred by Hevesi, other Comptroller’s Office officials, and Hevesi’s adult children. During Hevesi’s tenure as State Comptroller, Broidy paid for at least five trips to Israel, one trip to Italy, and several trips to California for campaign fundraising purposes. The travel expenses included first class airfare, luxury hotel suites, a car and driver, a helicopter tour, and security detail. Hevesi knew that Broidy concealed his payment of some of the travel expenses through the use of charitable organizations and false invoices submitted to the Comptroller’s Office.
With Hevesi’s knowledge, Morris arranged for Broidy to enter into a sham consulting agreement with a lobbyist friend of Morris. In this arrangement, Broidy paid over $380,000 to the lobbyist for more than two years. Markstone failed to comply with its obligation to disclose to pension fund staff that these payments had been made in connection with the pension fund’s investment in Markstone.
Broidy made or arranged for over $500,000 in campaign contributions as directed by Hevesi.
Hevesi knew that Morris had solicited Hevesi campaign contributions from those doing business with the pension fund. Hevesi also admitted knowing that, during his tenure as Comptroller, Morris was simultaneously a paid placement agent in connection with pension fund investments and that Morris steered pension fund investments to friends and political associates.

Hevesi pleaded guilty before Justice Bart Stone in the State Supreme Court, New York County, Part 31, and was released on his own recognizance. Hevesi faces a possible sentence of up to 4 years in prison for the charge of receiving reward for official misconduct, a Class E felony, plus monetary sanctions.

Court documents are available at: www.ag.ny.gov/media_center/2010/oct/oct7a_10.html


Attorney General Cuomo’s investigation into corruption at the pension fund has led to a number of criminal charges and seven guilty pleas to date, including guilty pleas by the following individuals: former New York State Comptroller Alan Hevesi; former Chief Investment Officer at the Office of the State Comptroller David Loglisci; former Liberal Party Chair Ray Harding; investment advisor Saul Meyer; hedge fund manager Barrett Wissman; unlicensed placement agent Julio Ramirez; and venture fund manager Elliott Broidy. An indictment against Morris is pending and Morris is presumed innocent unless and until proven guilty in court.

In May 2009, the Attorney General’s office subpoenaed investment firms and their agents in connection with New York public pension fund investments after determining that 40 to 50 percent of agents acting to secure investments from the state and city pension funds were unlicensed.

Last year, Cuomo announced his Public Pension Fund Reform Code of Conduct, which, among other things, bans investment firms from compensating intermediaries for introductions to public pension funds. To date, fifteen firms have endorsed the Code: investment firms 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, Ares, Freeman Spogli, Quadrangle, and GKM; placement agent Wetherly Capital Group; political consulting firm Global Strategy Group; and lobbying firm Platinum Advisors. Two individuals have also agreed to abide by the Code of Conduct: unlicensed placement agents Kevin McCabe and Bill White.

These firms collectively have agreed to return more than $100 million associated with pension fund investments; these funds will principally be provided to the pension fund for the benefit of the pension holders. Payments from individuals, including criminal defendants, bring that total to $138 million for the pension fund and the State.

This investigation was conducted by Deputy Chief of the Public Integrity Bureau Stacy Aronowitz, Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, and Legal Aide Michael Ellis, under the supervision of Special Deputy Attorney General for Public Integrity Ellen Nachtigall Biben and Special Counsel to the Attorney General Linda A. Lacewell.