US - Two companies have agreed to pay back a total of US$19m to resolve their roles in the ongoing investigation into pay-to-play practices at the New York State Common Retirement Fund (CRF).
Israeli venture capital firm Markstone Capital Group will return $18m to the CRF and Wetherly Capital Group and its broker-dealer DAV/Wetherly Financial will return $1m associated with CRF investments. Wetherly has also agreed to exit the placement agent business.
In December 2009, Markstone chairman Elliott Broidy acknowledged paying nearly $1m in gifts for the benefit of officials at the New York State comptroller's office to obtain a $250m investment from CRF (Global Pensions, December 4, 2009).
Wetherly represented three California-based private equity firms before the CRF and agreed to be paid with placement fees in the form of a percentage of the CRF's investments.
In each instance, Wetherly split its placement fees with Henry "Hank" Morris, then New York State comptroller Alan Hevesi's paid political adviser. The three private equity firms were not informed about Wetherly's arrangement with Morris.
According to a statement by Cuomo, the three private equity firms paid Wetherly in excess of $1.3m in placement fees. Wetherly paid approximately $140,000 of this amount to unlicensed placement agent Julio Ramirez, who had secured the relationship with Morris, and approximately $500,000 to Morris himself, leaving Wetherly with approximately $660,000.
Both firms said in different statements they signed Cuomo's Public Pension Fund Reform Code of Conduct and that they were pleased they reached an agreement with the attorney general.
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