Attorney General Cuomo Announces Agreements With Two Investment Firms In State Pension Fund Investigation
NEW YORK, NY (December 15, 2010) - Attorney General Andrew M. Cuomo today announced an agreement with Dallas-based hedge fund manager HFV Management, LP (“HFV”) and New York-based private equity firm Odyssey Investment Partners, LLC (“Odyssey”) in the Attorney General’s state pension fund investigation.
HFV and Odyssey have each adopted the Attorney General’s Public Pension Fund Reform Code of Conduct, which, among other things, bans the use of placement agents to solicit investments from public pension funds nationwide. Under today’s agreement, Odyssey will pay $400,000 to the State of New York. HFV co-founder Barrett Wissman has already agreed to pay $12 million to the State of New York as a part of his guilty plea, and HFV has previously paid a penalty of $150,000 as part of a settlement with the U.S. Securities and Exchange Commission.
“Twenty-one firms have now adopted our Code of Conduct to reform public pension funds,” said Attorney General Cuomo. “Our Code removes the influence of politically-connected finders and puts an end to the corrosive effect of campaign contributions on pension fund investments. We will continue to protect and restore the integrity of New York’s pension fund, our State’s single largest asset.”
The HFV agreement concerns a $100 million commitment HFV received from the New York State Common Retirement Fund (“CRF”). HFV obtained the investment through a corrupt arrangement between Wissman and Henry “Hank” Morris, then-Comptroller Alan Hevesi’s chief political advisor. In June 2003, Morris entered into an agreement with Wissman to introduce HFV’s multi-strategy hedge fund to the CRF and other institutional investors. At the time, the CRF did not have a hedge fund investment program and hedge funds were not recognized as an asset class by the CRF’s investment committee. Morris used his influence to start a hedge fund program at the CRF and, in December 2004, HFV was one of the first hedge funds to receive funding through that program. Morris ensured that HFV ultimately received a $100 million commitment from the CRF. Nosemote LLC, a company wholly owned by Morris, then received over $600,000 in placement fees from HFV. HFV terminated its relationship with Wissman in December 2007.
The Odyssey agreement arises out of Odyssey’s efforts to obtain an investment from the CRF. Morris falsely told Odyssey that the CRF had its “own placement agent,” Searle & Co. (“Searle”). As a result, Odyssey retained Searle to help obtain an investment in Odyssey Fund III from the CRF. Morris did not inform Odyssey that he was affiliated with Searle and would receive 95% of any fees Odyssey paid to Searle. Morris then ensured that Odyssey received a $20 million investment in Odyssey Fund III from the CRF. Odyssey ultimately paid Searle $400,000 in fees relating to the CRF investment, and Morris received $380,000 of these fees.
To date, Cuomo’s investigation has secured agreements with twenty-one firms and four individuals, garnering over $161 million for New York and the pension fund. The investigation has led to eight guilty pleas, including pleas by Hevesi, Morris, Wissman, and former Chief Investment Officer David Loglisci.
To view the agreements related to today’s announcement, please visit: http://www.ag.ny.gov/media_center/2010/dec/HFV.pdf and http://www.ag.ny.gov/media_center/2010/dec/Odyssey.pdf.
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, twenty-one 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, GKM, Paladin Homeland Security Holdings, HFV Management, and Odyssey Investment Partners; placement agent Wetherly Capital Group; political consulting firm Global Strategy Group; lobbying firms Platinum Advisors and Patricia Lynch Associates; law firm Manatt Phelps & Phillips, LLP; and pension fund advisor Aldus Equity. Four individuals have also agreed to abide by the Code of Conduct: David Leuschen of Riverstone, and unlicensed placement agents Kevin McCabe, Jerry Weiss, also a lobbyist, and William (“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 over $161 million for the pension fund and the State.
Attorney General Cuomo’s investigation into corruption at the pension fund has led to a number of criminal charges and eight guilty pleas to date, including guilty pleas by the following individuals: former Comptroller Alan Hevesi; Hevesi’s former paid political advisor Henry “Hank” Morris; 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.
The 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.
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