Morris’s Attorneys Challenge AG’s Case

New York Attorney General Andrew Cuomo’s criminal charges against Henry “Hank” Morris, a former placement agent for New York’s state pension fund, should be dropped because there was no “economic harm,” which is a requirement for prosecution under the state’s securities laws, Morris’s lawyers said in a court filing.

In his corruption case against Morris, the attorney general accused the broker of exploiting his ties with Alan Hevesi, the former state comptroller, to reap millions of dollars from investment firms seeking business from the New York State Common Retirement Fund.

“The question posed here is whether gaining access, and even influence, in that manner is criminal,” Morris’ lawyers, William Schwartz and Laura Grossfield Birger, wrote in a court motion filed in March. The state law “was never intended as a tool to prosecute perceived governmental corruption,” they said in the document.

A Cuomo spokesman declined comment.

Morris’ lawyers have maintained that their client did nothing wrong.

Hevesi has not been charged with any wrongdoing and his lawyer has said he is innocent.

Typically, a defendant “cheats or deceives” someone who buys a worthless security or sells one for too low a price, in cases prosecuted under the New York securities law, called the Martin Act, according to securities lawyers.

But Cuomo does not “allege that the Common Retirement Fund—or any other party—suffered any property loss or economic harm as a result of that alleged corruption,” Morris’s lawyers’ filing said.

Cuomo’s probe prompted the U.S. Securities and Exchange Commission to launch an investigation, which swept up private equity giants Quadrangle Group and The Carlyle Group and spilled over into state pension fund investment dealings in California and New Mexico.

As a result of the year-long investigation, Cuomo has obtained several guilty pleas, while New York and other states have curbed the activities of pension fund placement agents.

Among those who have pleaded guilty are David Leuschen, co-founder of private equity firm Riverstone Holdings, who agreed late last year to pay $20 million in restitution to resolve his role in the kickback probe of New York’s state pension fund.

Other guilty pleas have come from Saul Meyer, founding partner of Dallas-based private equity advisor Aldus Equity, and Ray Harding, former head of the New York Liberal Party, who both pleaded guilty in the kickback scandal. Elliott Broidy, co-founder of Los Angeles-based Markstone Capital Partners, last year pleaded guilty to a felony charge of bribing four senior officials who managed the New York pension fund.

All of the people who have pleaded guilty are still awaiting sentencing, which will be determined by a judge at the case’s conclusion. —Joan Gralla, Reuters