In April, a judge sentenced former New York state Comptroller Alan Hevesi to a minimum of one year and a maximum of four years in prison for a state pension kickback scheme in which New York Gov. Andrew Cuomo said Hevesi “presided over a culture of corruption.”
Hevesi, a Democrat, pleaded guilty to a felony corruption charge in October in a case Cuomo had originally brought in his previous job as state attorney general. Seven others have pleaded guilty. Hevesi became the second to receive jail time.
Hevesi admitted he took luxury trips to Israel and Italy paid for by California venture capitalist Elliott Broidy. New York’s comptrollers are the sole trustees of the New York State Common Retirement Fund, the state’s $132 billion pension fund and Broidy wanted to be hired to invest some of the funds.
Michael Obus, administrative judge of the Supreme Court in New York County, handed down the sentence, which had been delayed about two weeks because Hevesi was ill. Hevesi, 71, served as New York City’s comptroller before he was first elected to the statewide position as CFO in 2002.
As city comptroller he became a powerful international player by using his leverage over bank underwriters to help wrest billions of dollars of restitution payments from Swiss banks and European financial companies for Holocaust families and victims. The luxury trips Hevesi took but did not pay for when he was state comptroller were worth $75,000.
In addition to paying for Hevesi’s travel, Broidy gave $380,000 in sham consulting fees to a lobbyist friend of Henry Morris, who was Hevesi’s top political advisor, and raised $500,000 for Hevesi’s campaign fund, according to court documents outlining Hevesi’s plea agreement.
In return for the gifts, Hevesi improperly favored a $250 million investment in Markstone Capital Partners—where Broidy was a principal—by the pension fund. The gifts from Broidy helped Markstone reap $18 million in management fees that Cuomo recovered.
Morris, who plead guilty to a felony in December 2009, was the first person to be sent to jail. In February, he was sentenced to as long as four years in prison for exploiting his ties to Hevesi to reap millions of dollars of fees paid by firms seeking to invest the pension fund.
Cuomo conducted the wide-ranging corruption probe of New York state’s pension fund that resulted in a total of eight guilty pleas.
Among those who pleaded guilty were the former head of New York’s Liberal Party, Hevesi’s CIO, money managers, and a placement agent.
The investigation by Cuomo prompted a national crackdown on placement agents and swept up high-profile players in the hedge fund and private equity world, including The Carlyle Group and Steven Rattner, who resigned as the head of the Obama administration’s auto industry task force as Cuomo’s probe intensified.
In December, Rattner, who co-founded the private equity firm Quadrangle Group, agreed to pay $10 million to resolve lawsuits brought by Cuomo over the pension “pay-to-play” probe.
Cuomo charged that kickbacks involved an agreement for a Quadrangle affiliate to distribute a DVD of “Chooch,” a low-budget film produced by a brother of the pension fund’s then-chief investment officer, David Loglisci.
New York state has won more than $170 million in settlement payments resulting from Cuomo’s investigation.
This is not Hevesi’s first brush with public disgrace. He resigned from his state office in 2006 and pleaded guilty to an unrelated charge for misusing state drivers to chauffeur his ailing wife. —Reuters