NEW YORK (Reuters) - A California venture capitalist has pleaded guilty to a felony charge for bribing four senior officials who managed New York State’s pension fund, Attorney General Andrew Cuomo said on Thursday.
Elliott Broidy, chairman of Markstone Capital Partners, paid nearly $1 million in gifts to four officials in the New York State comptroller’s office and was rewarded with a $250 million investment in his fund, Cuomo said in a statement.
“This is an old-fashioned pay-off of state officials. This is effectively bribery of state officials,” the Democratic attorney general told reporters by telephone.
That’s a new development in the kickback probe which until now involved middlemen, called placement agents, who are hired by investment firms that want to manage the $126 billion state pension fund.
Markstone is still being investigated, Cuomo said.
Cuomo said Broidy is cooperating in the probe and his guilty plea — the fifth in the probe — may result in a four-year prison sentence.
Other funds Cuomo has probed, including The Carlyle Group, a private equity giant, adopted the attorney general’s reform code and paid millions of dollars to settle their roles.
Cuomo has recovered $100 million so far and Broidy will forfeit $18 million, he said.
Markstone, in a statement, said Broidy resigned and was replaced by Dan Gillerman. The firm does not expect the probe to hurt its investors’ stakes.
New York’s pension fund has reaped $64 million from its investment with Markstone and has a $156 million stake, said a spokesman for the current comptroller, Thomas DiNapoli. Broidy’s exit means the pension fund can get out of the investment if it wishes; the comptroller’s office is reviewing its options.
Broidy’s lawyer, Christopher Clark, said in a statement that “Mr. Broidy regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the NYAG and will be cooperating in the ongoing investigation.”
Cuomo did not name the four officials who accepted Broidy’s bribes, although they no longer work for the state comptroller.
Broidy’s bribes paid for medical expenses for a television actress and financed luxury travel for state officials to Israel and Italy from 2002 to 2006, Cuomo said.
Newspapers, including The Wall Street Journal, identified the actress as Peggy Lipton, who was sighted in New York with an official from the state comptroller’s office. Lipton is best known for her role on a 1960s TV show called “The Mod Squad.” Lipton’s agent declined comment.
Broidy paid $380,000 for a “sham” consulting deal with a family member of a senior state official and “funneled” $300,000 to the movie, called “Chooch,” that was produced by brothers of David Loglisci, the former state pension fund’s top investment officer, Cuomo said.
In mid-March, Loglisci and Henry Morris, who was the top fund-raiser for former comptroller Alan Hevesi, were charged with securities fraud, bribery, money laundering and other crimes in a 123-count indictment. Loglisci’s lawyer has said he is innocent and fully disclosed his $8,000 stake in the movie. Morris’ lawyer also has said he is innocent.
Cuomo declined comment on whether Hevesi, who was the Democratic comptroller during the four-year period, knew of the bribes.
A source familiar with the travel records said: “I know for a fact that Alan (Hevesi) made several luxury trips to Italy and they didn’t turn up in the travel records.”
Asked if Hevesi had paid for the trips, the source, who requested anonymity, replied: “Your theory is nice, but it’s not accurate.”
Hevesi’s lawyer declined to comment late on Thursday. In the past, the lawyer has said Hevesi did nothing wrong.
Cuomo said the pension fund could still be corrupted because it has just one trustee in the comptroller. He said the system must be reformed with a board, an inspector general and an audit committee.
“You put this culture of corruption together with no checks and balances ... and none of that has changed,” he said.
The current comptroller, Thomas DiNapoli, has banned the use of placement agents, barred investment firms from managing pension dollars if they make political contributions, and made the vetting process more stringent, his spokesman said.
DiNapoli, a Democrat, also supports public campaign financing.
“To say that there is an existing culture of corruption is flat out wrong,” the DiNapoli spokesman said.
Reporting by Joan Gralla in New York; Additional reporting by Jim Christie in San Francisco; Editing by Jan Paschal