Thursday, April 30, 2009

I believe we are disclosing a national network of actors who often acted in concert and did this all across the country

TO BE NOTED: From the NY Times:


"May 1, 2009
Fraud Charge in N.Y. Pension Case

An inquiry into corruption at the New York State pension fund continued to broaden nationwide on Thursday when a top consultant to pension funds around the country was charged with a fraud-related felony by the office of Attorney General Andrew M. Cuomo.

The consultant, Saul Meyer of Aldus Equity, a Dallas-based firm, was also charged with violations of securities laws by the Securities and Exchange Commission as part of what the agency called “a multimillion-dollar kickback scheme involving New York’s largest pension fund.” The commission also charged Aldus Equity with multiple securities violations.

Mr. Meyer, 38, is a co-founder of Aldus, which has advised several of the nation’s largest pension funds, including those overseen by the states of New York and Oklahoma as well as the cities of Los Angeles, San Antonio and Fort Worth. Aldus is also among more than a dozen private equity consultants approved by the board of Calpers, the giant California pension fund, though its staff has not used Aldus’s services.

Mr. Meyer surrendered to the authorities in New York and pleaded not guilty to the fraud-related felony, a violation of the Martin Act, a sweeping state securities statute, on Thursday in Manhattan Criminal Court. A judge ordered him released on $200,000 bail.

In a teleconference on Thursday, Mr. Cuomo said his investigation, which is continuing, had uncovered what amounts to a conspiracy involving politicians, professional investors and consultants to defraud public pension funds in New York and other states by paying millions of dollars in kickbacks in exchange for access to the funds. Investment firms reap lucrative fees by managing portions of the funds.

“I believe we are disclosing a national network of actors who often acted in concert and did this all across the country,” Mr. Cuomo said.

James Clarkson, director of the S.E.C.’s New York regional office, said: “Aldus was chosen by the pension plan because of Aldus’s willingness to illegally line the pockets of others. When another investment manager refused to pay kickbacks, that firm was rejected and Aldus cashed in.”

In the wake of the charges, many Aldus clients were scrambling to sever their ties with the firm. Gov. Bill Richardson of New Mexico, caught up in a public investment scandal in his state, ordered the New Mexico State Investment Council, which manages the state’s trusts, to fire Aldus on Wednesday; the comptrollers of New York State and New York City took similar actions on Thursday.

“I learned years ago that it’s far easier for a prosecutor to file a complaint than to prevail at a trial,” said Paul L. Shechtman, Mr. Meyer’s lawyer. “Time and the evidence will show that Saul Meyer did nothing wrong.”

In a statement, a lawyer for Aldus, Matthew D. Orwig, accused the S.E.C. of conducting a “trial by news release” and called its action “appalling and careless.”

Mr. Cuomo’s office and the commission have been investigating Alan G. Hevesi, the former New York State comptroller, since 2007, and the S.E.C. recently began scrutinizing pension transactions in California. Federal investigators have also been looking into public investment funds in New Mexico. The tentacles of the various investigations increasingly appear to lead back to one another.

Aldus is accused of helping Daniel Hevesi, Mr. Hevesi’s son, profit from a deal in New Mexico at the same time that the New York comptroller’s office, then run by his father, agreed to increase by $200 million the amount of pension money overseen by Aldus.

Laura A. Brevetti, a lawyer for Daniel Hevesi, said on Thursday that her client did not have “any knowledge of a so-called quid pro quo arrangement for his benefit.” Bradley D. Simon, a lawyer for Alan Hevesi, said his client did not engage “in a quid pro quo to benefit his son.”

Hank Morris, a former political consultant to Alan Hevesi, also received money as part of deals in New Mexico and California. Mr. Morris was accused last month in an indictment of demanding millions of dollars from investment firms in exchange for access to the New York State pension fund.

He has pleaded not guilty.

“We are purposefully and aggressively looking to cooperate with other enforcement agencies across the country,” Mr. Cuomo said. “This is sort of like when you pull a thread on the sweater and that one thread starts to unravel the entire fabric.”

“We’re pulling threads and it turns out the other end of the thread is in New Mexico or Connecticut or Illinois or in California,” he said.

In court filings, the S.E.C. has described a range of improper transactions undertaken in connection with an investment pool run by Aldus for the New York State pension fund. Among other things, Aldus agreed to split fees with Mr. Morris as part of its advisory deal with the pension fund, the filings said.

Deutsche Bank, which had owned a significant minority interest in Aldus, said on Thursday that it had exercised an option to terminate its stake.

According to the complaint from Mr. Cuomo’s office, Mr. Meyer sought to sever his deal with Mr. Morris in 2006 when Deutsche Bank was considering buying a stake in Aldus. He asked a hedge fund manager to intercede on his behalf and sound out Mr. Morris about ending their arrangement.

The complaint said that Mr. Morris told the hedge fund manager: “Tell that little peanut of a man that I can take the business away as easily as I provided it.”

Mr. Cuomo said on Thursday there was more to come. “It’s an ongoing investigation,” he said, “and I would say, ‘Stay tuned.’ ”

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