April 15 (Bloomberg) -- Barrett Wissman, a Dallas hedge fund manager, pleaded guilty to securities fraud as part of an investigation of corruption at New York’s $122 billion pension fund, state officials said.

Wissman, 46, an executive of HFV Asset Management LP, also agreed to a $12 million settlement as part of the probe of illegal kickbacks to arrange pension-fund investments for hedge funds and private-equity firms, according to New York Attorney General Andrew Cuomo. Today, Cuomo announced charges against former New York State Liberal Party Chairman Ray Harding as part of the two-year-old investigation.

“This goes to the heart of public integrity,” Cuomo said today in a conference call. “It’s people’s retirement benefits that the state was holding in trust. If that fund is diminished, it’s going to have to be replenished by taxpayers.”

Wissman’s guilty plea and the complaint against Harding are directly related to claims filed last month by Cuomo and the U.S. Securities and Exchange Commission against former New York Deputy Comptroller David Loglisci and political adviser Hank Morris. Wissman is a longtime family friend of Loglisci, according to the SEC complaint.

Soliciting Millions

Loglisci, 39, and Morris, 55, Harding, 74, and Wissman are accused of soliciting millions of dollars in kickbacks from firms managing the state’s retirement fund during the tenure of then Comptroller Alan Hevesi, who resigned in 2007 amid unrelated allegations that he misused state funds.

“Wissman is a witness on this case,” Cuomo said, who added that “There are further charges coming out of this scheme.”

The felony complaint against Harding alleged he secured more than $800,000 in illegal fees on state pension fund investments as a reward for opening up a state assembly seat for Hevesi’s son and for more than 30 years of political endorsements. Harding’s lawyer denied the allegations.

“Ray Harding is innocent of these charges,” said attorney Gary Naftalis. “His work as a placement agent on behalf of highly respected firms was equally honorable and entirely lawful.”

Wissman and Harding were also sued by the SEC over claims they participated in the alleged scheme to extract kickbacks. Wissman’s lawyer, William Brewer of Dallas, said his client acted as a “finder” for pension fund investments from 2004 to 2007.

‘Full Responsibility’

Wissman “takes full responsibility for his conduct and is cooperating in the ongoing investigation by the New York attorney general’s office,” Brewer said today by e-mail.

Hevesi resigned as comptroller in January 2007 to settle allegations he improperly used state workers to chauffeur his wife. The Liberal Party endorsed Hevesi in his 2002 campaign for Comptroller.

According to the SEC’s complaint, Morris and Loglisci began arranging “sham” finder fees for Harding after he appealed to an unidentified senior official in the comptroller’s office for financial support in 2003. To let him reap fees, he was inserted into deals with Paladin Capital Management LLC and Pequot Capital Management Inc. in 2004 and 2005, even though he had no experience or training in investment management and provided no legitimate finders services, the agency said.

A Paladin affiliate paid him $300,000 as part of the pension system’s $20 million investment in a Paladin fund, the SEC said. A finder retained by Pequot paid him $505,000 as part of an agreement to invest about $100 million with the hedge-fund firm, according to the SEC. Paladin and Pequot aren’t accused of wrongdoing.

Carlyle Group, based in Washington, is also among several hedge fund and private-equity firms being investigated by New York and the SEC over whether they improperly paid intermediaries, so-called placement agents, to secure investments from the state’s pension fund.

Carlyle, which won $1.3 billion of business from the pension fund, said it is cooperating with the investigation.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net and; David Scheer in New York at dscheer@bloomberg.net.

Last Updated: April 15, 2009 13:00 EDT