David Loglisci, the former chief investment officer of the New York State Common Retirement Fund, was instructed by “senior officials” to get approval from a political powerbroker before deciding to commit to a fund.
Loglisci pleaded guilty Wednesday to charges in connection with a wide-ranging pay-to-play scandal involving New York’s massive $129 billion pension system. Loglisci has maintained his innocence since being indicted by New York’s Attorney General Andrew Cuomo last March.
No other officials from the pension or other state agencies have been charged in the scheme. During a press conference Wednesday, Cuomo declined to comment on the identity of the “senior officials”, but said Loglisci was near the top of the organisation in his role as CIO. He was outranked by former Comptroller Alan Hevesi, DiNapoli said.
With the guilty plea, Loglisci admitted he breached his “fiduciary duties” and violated “the public trust by making investment decisions according to political benefit for the Comptroller, rather than in the best interests of the [pension’s] members and beneficiaries”, Cuomo said in a statement. Loglisci operated under former Comptroller Alan Hevesi, who has not been charged with any wrongdoing in the investigation.
A culture of corruption permeated the fund and shows how vulnerable it can be to graft and exploitation without dramatic reform.
Loglisci was arrested and charged in March 2009 along with Henry Morris, a former New York State political operative. Loglisci and Morris were accused of collecting sham finder’s fees from private investment firms in exchange for commitments from the $129 billion New York State Common Retirement Fund.
“With today’s plea, a former top official overseeing the state’s single largest asset admitted that decisions were driven by politics and greed – not the best interests of the fund or its beneficiaries,” New York Attorney General Andrew Cuomo said in a statement. “Not only were pension recipients defrauded but so were the taxpayers across New York who are ultimately responsible for sustaining the fund.
“A culture of corruption permeated the fund and shows how vulnerable it can be to graft and exploitation without dramatic reform,” Cuomo said.
Loglisci served as the pension’s chief investment officer and had the power to recommend investments to the state Comptroller, who makes the ultimate decision on the pension committing capital to funds. Loglisci operated under former Comptroller Alan Hevesi, who has not been charged with any wrongdoing.
Several other people have been charged in the investigation, including Barrett Wissman, the former head of a hedge fund, and Julio Ramirez, a placement agent once affiliated with Park Hill Group.
The investigation led to public outcry about the way investment decisions are made at public pensions, and a backlash against the work of placement agents. New York Common outright banned placement agents from working with the pension to solicit commits to their fund manager clients, and the SEC has been considering a similar, nation-wide rule.
Cuomo issued subpoenas last May to more than 100 investment firms and agents after he discovered that 40 to 50 percent of agents obtaining investments from New York pension funds were unregistered.
Cuomo also has reached settlements with numerous private equity firms in which the firms, like Carlyle, Riverstone and Pacific Corporate Group, agreed to return more than $90 million associated with commitments from the pension.