Ex-NY pension fund investment chief pleads guilty

NEW YORK (Reuters) - The former chief investment officer for New York State's comptroller on Wednesday pleaded guilty to helping favored firms gain access to the state's $129 billion pension fund.

David Loglisci, who had reported directly to onetime Democratic Comptroller Alan Hevesi, admitted to violating the state's Martin Act and will cooperate in the "pay-to-play" investigation into the New York State Common Retirement Fund.

Loglisci is the sixth person to plead guilty in the probe. He could face up to four years in prison.

The case "symbolizes the corruption that has gone on for decades in Albany," New York Attorney General Andrew Cuomo said on a conference call with reporters. "The comptroller's office, I think, is symbolic of the depth, the virulence of it."

Loglisci and Henry "Hank" Morris, a former political adviser and fund raiser for Hevesi, were charged last March in a 123-count indictment over the alleged steering of hundreds of millions of dollars of investments in exchange for kickbacks.

HEVESI IMPACT

It was not immediately clear how Loglisci's cooperation might affect Hevesi, who resigned as comptroller in December 2006. Hevesi later pleaded guilty to an unrelated charge, but has not been charged in the pension fund probe.

"Alan Hevesi never instructed David Loglisci or anyone at the comptroller's office to obtain Hank Morris' approval prior to recommending or declining proposed alternative investments," said Bradley Simon, a lawyer for Hevesi, on Wednesday.

"Furthermore, Mr. Hevesi never directed Mr. Loglisci to cede his authority to Hank Morris," Simon added. "Any implication or suggestion to the contrary is patently false."

Morris has also maintained his innocence. A lawyer representing him was not immediately available to comment.

States are now clamping down on the use of "placement agents," who are typically politically-connected individuals, like Morris, who place business with pension funds.

New York's current comptroller, Thomas DiNapoli, in a statement said he has revamped the Common Retirement Fund's operations, banning pay-to-play and the use of placement agents and lobbyists in investments. He called Loglisci's plea a "welcome step" toward moving past prior "transgressions."

"IMPOSSIBLE SITUATION," LAWYER SAYS

Cuomo said Loglisci had authority to recommend how to invest pension money but violated the public trust by making decisions based on the "political benefit for the comptroller" rather than for fund's best interest.

The attorney general said Loglisci's actions helped turn the fund into a "piggy bank" for Morris and his allies.

Cuomo, nevertheless, said that while Loglisci's powerful position made his job "a career-maker," there were "no signs" he was taking kickbacks.

"David Loglisci found himself in a nearly impossible situation," his lawyer, Kevin Keating, said on Wednesday. "The facts are now clear. While those around him made millions, Loglisci never asked for a single cent from anyone."

The probe has also caught up prominent financial firms, including private equity firms Quadrangle Group and The Carlyle Group.

The U.S. Securities and Exchange Commission is conducting its own civil probe into the matter. The investigation has swept into other states, including California and New Mexico.

CLAMPING DOWN

Cuomo said the pension fund probe has resulted in the return of more than $120 million, most of which goes to the Common Retirement Fund, with the rest to the state treasury.

Cuomo, a Democrat, is widely expected to run for governor this year. He used much of the conference call to demand changes to help protect the Common Fund.

"This situation will not be fully remedied until we change the rules, and we change the laws," Cuomo said. "The same scam could happen today."

Loglisci was released on Wednesday after entering his plea, but was subjected to travel restrictions. He could be sentenced in mid-June.

The case is New York v. Morris et al, New York State Supreme Court, New York County, No. 000025/2009.

(Editing by Jan Paschal, Padraic Cassidy, Leslie Adler and Diane Craft)