NEW YORK (Reuters) - Fund adviser Aldus Equity has agreed to pay millions of dollars in restitution to New York’s pension fund for its part in a kickback scheme, New York Attorney General Andrew Cuomo said on Wednesday.
So far, the investigation into influence-peddling in the pension fund has recouped $160 million for New York and resulted in eight individuals pleading guilty to various charges. Included were former Democratic State Comptroller Alan Hevesi; his top fund-raiser, Henry Morris, and the pension fund’s former top investment officer.
Cuomo’s probe has spurred a national crackdown on placement agents -- politically connected middlemen who exploited their ties to get public pension funds to tap the hedge fund and private equity firms that hired them.
Aldus is making restitution for its “responsibility” for the securities fraud of one of its former principals, Saul Meyer, who pleaded guilty in October 2009 to a felony and who will be sentenced on December 16, Cuomo said.
Aldus and its current and former partners will repay fees they got for investing the state’s pension fund. Other fees will be forfeited as well as an interest in a multimillion dollar fund, Aldus/NY Emerging Fund, which the firm managed for the state pension fund, Cuomo said. New York will also be paid $1 million in cash.
The investigation by Cuomo, who is also New York’s Democratic governor-elect, also punished one of the state’s most powerful lobbyists, Patricia Lynch Associates, Inc. The firm agreed to pay the state $500,000 and its founder was banned for five years from dealing with the state comptroller’s office, said Cuomo.
Patricia Lynch is the former spokeswoman for Democratic Speaker Sheldon Silver. Cuomo said she sought to win favor at the comptroller’s office -- which runs the state pension fund -- by helping Hevesi with campaign donations and aiding the daughter of the chief of staff’s girlfriend. In addition to gifts worth thousands of dollars for the daughter, a consulting contract was arranged.
Lynch, who has hired key Democratic and Republican aides to top state politicians, also reaped $52,000 in placement fees, though she had no securities license. She repeatedly tried to get the state pension fund to hire her clients, whose proposals were deemed unsuitable for the pension fund.
“Gifts, favors, and campaign contributions are not a legitimate basis for government contracts or special treatment,” said Cuomo in a statement.
Reporting by Joan Gralla, Editing by Kenneth Barry
Our Standards: The Thomson Reuters Trust Principles.