NY ex-comptroller gets at least 1 year in prison

NEW YORK Fri Apr 15, 2011 12:47pm EDT

Then-New York State Comptroller Alan Hevesi announces details of a settlement with ten former directors of WorldCom Inc. at a press conference in New York, January 7, 2005. REUTERS/Chip East

Then-New York State Comptroller Alan Hevesi announces details of a settlement with ten former directors of WorldCom Inc. at a press conference in New York, January 7, 2005.

Credit: Reuters/Chip East

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NEW YORK (Reuters) - A judge on Friday sentenced former New York state comptroller Alan Hevesi to a minimum of one year and a maximum of four years in prison for a state pension kickback scheme in which Governor Andrew Cuomo said Hevesi "presided over a culture of corruption."

Hevesi, a Democrat, pleaded guilty to a felony corruption charge last October in a case Cuomo had originally brought in his previous job as state attorney general. Seven others have pleaded guilty. Hevesi became the second to receive jail time.

"Although it was never my intention, I know that I caused enormous damage to the integrity of my former office," Hevesi said in court. "I will never forgive myself. I will live with this shame for the rest of my life."

Hevesi admitted he took luxury trips abroad paid for by California venture capitalist Elliott Broidy. New York's state comptroller is the sole trustee of the state's $132 billion pension fund. Broidy wanted to be hired to invest some of the funds.

"Even in times of great cynicism ... the public expects that individuals that achieve posts of public trust would be worthy of their confidence," Judge Michael Obus said before handing down the sentence.

Hevesi, 71, served as New York City's comptroller before he was first elected to the statewide position as chief financial officer in 2002.

As city comptroller, he became a powerful international player by using his leverage over bank underwriters to help wrest billions of dollars of restitution payments from Swiss banks and European financial companies for Holocaust families and victims.

The luxury trips Hevesi took were worth $75,000.

FOLLOW THE MONEY

In addition to paying for Hevesi's travel, Broidy gave $380,000 in sham consulting fees to a lobbyist friend of Henry Morris, who was Hevesi's top political advisor, and raised $500,000 for Hevesi's campaign fund, according to court documents.

In return for the gifts, Hevesi improperly favored a $250 million investment in Markstone Capital Partners -- where Broidy was a principal -- by the pension fund.

Broidy's gifts helped Markstone reap $18 million in management fees that Cuomo recovered.

Morris pleaded guilty to a felony in December 2009. In February, he was sentenced to as long as four years in prison.

Cuomo conducted the wide-ranging corruption probe of New York state's pension fund that resulted in a total of eight guilty pleas.

"Just as you cannot put a price on public integrity, you cannot quantify the harm done to the bond between the government and the people when public integrity is compromised," Cuomo said in a statement after the sentencing.

"Hevesi was a statewide official who admitted violating his oath for personal and political gain."

Among those who pleaded guilty were the former head of New York's Liberal Party, Raymond Harding; Hevesi's chief investment officer, money managers, and a so-called placement agent, a middleman hired by investment firms to win business from the pension fund.

Cuomo's investigation prompted a national crackdown on placement agents and swept up high-profile players in the hedge fund and private equity world, including The Carlyle Group and Steven Rattner, who resigned as the head of the Obama administration's auto industry task force as Cuomo's probe intensified.

In December, Rattner, who co-founded the private equity firm Quadrangle Group, agreed to pay $10 million to resolve lawsuits brought by Cuomo over the pension probe.

New York state has won more than $170 million in settlement payments resulting from Cuomo's investigation.

(Additional reporting by Joan Gralla; Editing by Daniel Trotta, James Dalgleish and Jan Paschal)

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