US - The Securities and Exchange Commission has filed charges against private equity firm Aldus Equity Partners and one of its founding principals, Saul Meyer, in connection with a "kickback" scheme involving New York pension funds.
This is the latest development in a case which saw the SEC previously charge Henry Hank Morris and David Loglisci - who served as former New York state comptroller Alan Hevesi top political advisor and chief investment officer, respectively, from 2003 to 2006 - for allegedly orchestrating a fraudulent scheme to enrich Morris and other political allies and associates.
These allegedly included New York liberal party ex-chairman Raymond Harding and hedge fund manager Barrett Wissman, who have also been charged in the case (www.globalpensions.com: 16/04/09).
SEC's New York Regional Office acting director James Clarkson said: "As alleged in our complaint, Aldus was chosen by the pension plan because of Aldus's willingness to illegally line the pockets of others.
"When another investment manager refused to pay kickbacks, that firm was rejected and Aldus cashed in."
The SEC alleged Meyer caused Aldus to pay a shell company owned by Morris approximately $320,000 in sham finder fees, in exchange for which Loglisci caused the pension fund to invest a total of $375m with Aldus from 2004 to 2006.
The complaint further alleged Loglisci ensured Aldus and certain other investment managers who were willing to make the requisite payments to Morris and others were rewarded with lucrative investment management contracts, while investment managers who declined to make such payments were denied NYSCRF business.
The SEC alleged Loglisci chose Aldus as the NYSCRF's emerging fund portfolio manager on the sole basis of Meyer's willingness to pay Morris.
On the base of the complaint filed by the SEC, New York City comptroller William Thompson urged the New York City Pension Funds to terminate their relationships with Aldus.
Thompson said: "My office last month increased its scrutiny of Aldus Equity Partners based on the New York State attorney general's issuance of an indictment and the SEC's filing of a complaint against Hank Morris and David Loglisci, and the extremely troubling allegations made against Aldus in those documents."
He added: "My office has had a lengthy discussion with principals of Aldus to discuss those allegations. Those discussions have only served to increase my office's concerns."
Last week, Thompson announced he would ask the Pension Funds to suspend the use of placement agents (www.globalpensions.com: 23/04/09), and this week trustees at NYCERS - the largest of the city's pension funds with more than $30bn in assets - unanimously voted to suspend their use in private-equity investments. The remaining Funds are expected to discuss the matter at their meetings in the coming weeks (www.globalpensions.com: 29/04/09).
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