Attorney General Andrew M. Cuomo today announced an agreement with Washington, D.C. based private equity firm Paladin Homeland Security Holdings, LLC (“Paladin”) in the Attorney General’s state pension fund investigation. Paladin will adopt the Attorney General’s Public Pension Fund Reform Code of Conduct, and will reduce its management fees on its investment from the New York State Common Retirement Fund (“CRF”).
The agreement announced today arises out of Paladin’s efforts to obtain an investment from the CRF in 2003. Paladin retained former New York Liberal Party head Raymond Harding at the suggestion of Henry (“Hank”) Morris, the chief political advisor to then-Comptroller Alan Hevesi, to obtain an investment from the CRF. Paladin received a $20 million investment from the CRF in 2004, and paid $300,000 in fees to Harding.
“The state pension fund is a valuable asset held in trust for retirees and supported by taxpayers. The fund does not belong to party bosses or campaign fundraisers,” said Attorney General Cuomo. “Through this investigation, we will continue to restore and protect the integrity of the state pension fund.”
The investigation showed that Paladin initially sought to retain Morris as a placement agent to obtain an investment from the CRF. Morris instead referred Paladin to Harding. Morris’s intention, undisclosed to Paladin, was to reward Harding for his prior years of political loyalty to Hevesi. In late 2005, Morris solicited Paladin for campaign contributions for Hevesi’s reelection campaign, and Paladin partners contributed a total of $25,000 in early 2006.
Under the terms of the agreement, Paladin will adopt Cuomo’s Code of Conduct, which among other things, bans the use of placement agents to solicit investments from public pension funds. Paladin has also agreed to reduce future management fees from the CRF relating to the investment.
To view the agreement related to today’s announcement, please visit: www.ag.ny.gov/media_center/2010/dec/PALADIN_AOD_CODE_EXECUTED.pdf
BACKGROUND INFORMATION
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, nineteen 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, and Paladin Homeland Security Holdings; 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 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 $160 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.