Attorney General Cuomo Announces Agreement With Private Equity Firm In State Pension Fund Investigation

NEW YORK, N.Y. (December 10, 2010) - Attorney General Andrew M. Cuomotoday announced an agreement with Washington, D.C. based private equityfirm Paladin Homeland Security Holdings, LLC ("Paladin") in the Attorney General's state pension fund investigation. Paladin willadopt the Attorney General?s Public Pension Fund Reform Code of Conduct, and will reduce its management fees on its investment from theNew York State Common Retirement Fund ("CRF").

The agreement announced today arises out of Paladin?s efforts toobtain an investment from the CRF in 2003. Paladin retained former NewYork Liberal Party head Raymond Harding at the suggestion of Henry("Hank") Morris, the chief political advisor to then-Comptroller Alan Hevesi, to obtain an investment from the CRF. Paladin received a$20 million investment from the CRF in 2004, and paid $300,000 in feesto Harding.

"The state pension fund is a valuable asset held in trust forretirees and supported by taxpayers. The fund does not belong to partybosses or campaign fundraisers," said Attorney General Cuomo. " Through this investigation, we will continue to restore andprotect the integrity of the state pension fund."

The investigation showed that Paladin initially sought to retain Morrisas a placement agent to obtain an investment from the CRF. Morrisinstead referred Paladin to Harding. Morris's intention, undisclosedto Paladin, was to reward Harding for his prior years of politicalloyalty to Hevesi. In late 2005, Morris solicited Paladin for campaigncontributions for Hevesi?s reelection campaign, and Paladin partnerscontributed a total of $25,000 in early 2006.

Under the terms of the agreement, Paladin will adopt Cuomo's Code ofConduct, which among other things, bans the use of placement agents tosolicit investments from public pension funds. Paladin has also agreedto reduce future management fees from the CRF relating to theinvestment.

To view the agreement related to today's announcement, please visit:www.ag.ny.gov/media_center/2010/dec/PALADIN_AOD_CODE_EXECUTED.pdf

BACKGROUND INFORMATION

In May 2009, the Attorney General's office subpoenaed investmentfirms and their agents in connection with New York public pension fundinvestments after determining that 40 to 50 percent of agents acting tosecure investments from the state and city pension funds wereunlicensed.

Last year, Cuomo announced his Public Pension Fund Reform Code ofConduct, which, among other things, bans investment firms fromcompensating intermediaries for introductions to public pension funds.To date, nineteen firms have endorsed the Code: investment firms TheCarlyle Group, Riverstone Holdings, LLC, Pacific Corporate GroupHoldings, LLC, HM Capital Partners I, Levine Leichtman Capital Partners,Access Capital Partners, Falconhead Capital, Markstone Capital Group,Ares, Freeman Spogli, Quadrangle, GKM, and Paladin Homeland SecurityHoldings; placement agent Wetherly Capital Group; political consultingfirm Global Strategy Group; lobbying firms Platinum Advisors andPatricia Lynch Associates; law firm Manatt Phelps & Phillips, LLP; andpension fund advisor Aldus Equity. Four individuals have also agreed toabide by the Code of Conduct: David Leuschen of Riverstone, andunlicensed placement agents Kevin McCabe, Jerry Weiss and William("Bill") White.

These firms collectively have agreed to return more than $100 millionassociated with pension fund investments; these funds will principallybe provided to the pension fund for the benefit of the pension holders.Payments from individuals, including criminal defendants, bring thattotal to over $160 million for the pension fund and the State.

Attorney General Cuomo's investigation into corruption at the pensionfund has led to a number of criminal charges and eight guilty pleas todate, including guilty pleas by the following individuals: formerComptroller Alan Hevesi; Hevesi's former paid political advisor Henry "Hank" Morris; former Chief Investment Officer at the Office of theState Comptroller David Loglisci; former Liberal Party Chair RayHarding; investment advisor Saul Meyer; hedge fund manager BarrettWissman; unlicensed placement agent Julio Ramirez; and venture fundmanager Elliott Broidy.

The investigation was conducted by Deputy Chief of the Public IntegrityBureau 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 PublicIntegrity Ellen Nachtigall Biben and Special Counsel to the AttorneyGeneral Linda A. Lacewell.