Pay-to-Play Plea Offers New Details
Wall Street Journal -
By CHAD BRAY
New York Attorney General Andrew Cuomo confirmed Tuesday that an associate of Hank Morris, a political adviser at the center of a pay-to-play pension probe, has pleaded guilty to securities fraud.
Mr. Cuomo said Julio Ramirez Jr., an unlicensed placement agent formerly associated with Wetherly Capital Group in Los Angeles, pleaded guilty to a misdemeanor securities fraud violation under New York's Martin Act, or general business law. Wetherly hasn't been accused of wrongdoing.
"This investigation has uncovered a matrix of corruption, which grows more expansive and interconnected by the day," Mr. Cuomo said
Between 2003 and 2006, Mr. Ramirez, 48 years old, of San Marino, Calif., entered into corrupt arrangements with Mr. Morris to secure investments from New York's $122 billion state pension fund for Wetherly clients and others, Mr. Cuomo said.
"Mr. Ramirez has accepted responsibility ... and is cooperating with the New York State Attorney General's office in its investigation," said Michael Bellinger, Mr. Ramirez's lawyer. He said Mr. Ramirez apologized "to his family and friends for his involvement in this matter."
Separately, the Securities and Exchange Commission, conducting a parallel investigation, amended its civil lawsuit stemming from the inquiry to add Mr. Ramirez as a defendant.
"We intend to vigorously defend against this complaint," Mr. Bellinger said.
Wetherly, where Mr. Ramirez formerly worked, was hired by two private-equity funds to secure investments with the New York State Common Retirement Fund about January 2003, Mr. Cuomo said.
On Wetherly's behalf, Mr. Ramirez entered into an agreement with Mr. Morris in which Mr. Morris allegedly secured pension-fund investments in both funds, in exchange for 40% of the placement, or middleman, fees generated by the investments, Mr. Cuomo said. The state pension fund ultimately invested $50 million in both private-equity funds in late 2003 and early 2004, generating $630,000 in fees for Wetherly and Mr. Ramirez, of which Morris allegedly received more than $250,000, Mr. Cuomo said.
Mr. Ramirez concealed Mr. Morris's role in the transactions from the state pension fund's investment staff and the general partners of the private-equity firms, Mr. Cuomo said. Mr. Ramirez also funneled payments to Mr. Morris through a shell company to avoid creating a direct money trial between Wetherly and Mr. Morris, Mr. Cuomo said.
A lawyer for Mr. Morris declined comment.
In a statement, Wetherly said it "has not been accused of any wrongdoing or misconduct and has been fully cooperated with regulators for many months."
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Another Thompson Supporter Rings Up a Big Pension Fund Score
Village Voice -
By Tom Robbins
Tuesday, May 12th 2009 at 2:25pm
Thanks to the powerful searchlight now being wielded by State Attorney General Andrew Cuomo and his crew, we got another peek last week into those dark corners at New York's public pension funds. Under pressure from a national press corps now chasing the story, both state and city comptrollers released lists of the self-described investment placement agents who won deals in their offices.
These are people who make a living as matchmakers, bringing money managers and big investors like pension funds together. It's a lucrative business that was largely shrouded from public view until the Cuomo probe began. Some of them, as the attorney general has pointed out, have actually taken securities exams to become licensed brokers in order to understand what they're selling. Others skipped the exams and licenses altogether and went straight for the deals. Since successful investments can yield fees north of $1 million, this impatience is completely understandable. Cuomo says that some 40 percent of those pushing investment deals at the city and state pension funds have been unlicensed.
Actually, as his investigation has also shown, a license alone doesn't guarantee a straight-shooter. Those charged thus far, including political heavies Hank Morris and Ray Harding, are all bona fide, license-holding securities brokers who, nonetheless, allegedly stole with both hands. But the fact that people with zero financial training and whose only other marketing experience has been in the aisles at Gristedes have been routinely pitching huge investment deals to pension trustees isn't exactly comforting. That goes double if it's your pension they're playing with.
One such lucky marketer is a former city police union official named Jack Jordan, who, despite an old criminal rap, has managed to make millions at this game.
Jordan's firm—a corporation called J. Matthias LLC—received fees for at least three major investments made by New York City's pension funds since 2006, according to a list released by City Comptroller William Thompson. Jordan's company was a solo placement agent on a $65 million investment that the pension funds approved for a fund organized by HM Capital. A spokesman for HM declined to comment on Jordan's role. But other investors are blunt about the value-added that such agents bring to the table: It's called access.
In 2007, Jordan scored again when his firm served as co-broker on a $70 million investment that the pension funds made in a giant private equity fund called Tailwind Capital Partners. Jordan's co-broker was a major firm called Atlantic-Pacific Capital with offices in New York, London, and Hong Kong. In a 2008 press release, Atlantic-Global described itself as Tailwind's "exclusive global placement agent." Exactly how Jordan fits into that alleged fact pattern is unclear. Atlantic-Global didn't return calls.
Jordan's third deal was the biggest of all—a whopping $150 million investment by the pension funds into another big private equity account organized by MidOcean Partners, which specializes in European investments (and which recently added ex-Governor George Pataki to its board). As listed by Thompson's office, Jordan's co-broker on that deal was a San Francisco–based company called Probitas Partners. But Probitas officials said they declined Jordan's request to serve as a sub-agent on the offering and that he did his own, separate marketing push.
Just how much Jordan earned on these deals is an open question. Thompson's office said it doesn't know what any placement agents were paid prior to June 2008, because it began asking for the information only when the Cuomo probe heated up. Industry experts say fees can range from one-half percent to more than 2 percent of the capital invested. This would put Jordan's end somewhere in the range of $1.25 million to $3 million.
He's clearly done well. Last summer, he and his wife traded their longtime Stuyvesant Town apartment for a $2.35 million co-op on East 87th Street.
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California Pulled Into Pension Inquiry
New York Times -
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New York Daily News -
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Forbes -
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