Sept. 30 (Bloomberg) -- New York Attorney General Andrew Cuomo has alleged that an executive of Clinton Group Inc., which once managed $8 billion in assets, knew of kickbacks made to win $750 million in state pension-fund business in 2006.

Cuomo identifies the person only as a “Clinton executive” in documents detailing his investigation of a Clinton joint venture that won the business. In 2006, George Hall, founder of Clinton Group, was president, supervising executives in six divisions, his company Web site shows. The “Clinton executive” is Hall, 49, two people familiar with the matter said.

One of his partners in the joint venture, a unit of California pension adviser Pacific Corporate Group Holdings LLC, or PCG, agreed July 1 to refund $2 million in fees it earned to settle Cuomo’s probe. Another partner, Dallas hedge-fund manager Barrett Wissman, pleaded guilty in February to another kickback scheme and forfeited $12 million. Hall has not been charged.

“He’s indirectly paying bribes as he knows about the kickbacks, and he does it to induce the pension people to give him the job,” said Tamar Frankel, a corporate governance professor at Boston University School of Law, assessing the implications of the Hall allegations.

Pension-fund middleman Hank Morris, acting as a “concealed participant” in the venture, according to Cuomo, was charged in March in a 123-count indictment detailing corruption, securities fraud and related offenses. Morris, a central figure in Cuomo’s investigation, pleaded not guilty.

Hall, a frequent contributor to Democratic Party candidates, didn’t return calls and e-mails seeking comment. His attorney, Martin Perschetz, declined to comment. Hall’s company has no connection with former President Bill Clinton.

‘Ongoing’ Investigation

Asked if Hall was being investigated or was negotiating a deal with the attorney general, Cuomo spokesman Richard Bamberger said in an e-mail, “Our pension fund investigation is ongoing, so we therefore have no comment.”

Clinton Group, which had a 70 percent stake in the joint venture, managed about $8 billion in assets, according to a Jan. 4, 2006, press release. Money in Hall’s hedge funds peaked at $5.5 billion in 2003, falling to about $600 million last year, partly because of withdrawals, said an investor in April 2008 who asked not to be identified.

The $117 billion state pension fund, the retirement system for state and local government employees, paid $272.5 million in fees to investment managers in the year ended March 31, 2008, according to its annual report. In 2006, the fund committed to its biggest private-equity investment at the time, choosing the Clinton joint venture, according to a Cuomo press release.

Napa Meeting

At a meeting in Napa, California, a PCG partner and the Clinton Group executive were allegedly told that Wissman would be a minority partner and split his fees with Morris, according to PCG’s settlement agreement with Cuomo. Morris was a political adviser to then state comptroller Alan Hevesi, who ran the state pension fund.

Wissman, who got a 10 percent stake, said his and Morris’s participation in the joint venture was required to win fund investment business, the PCG settlement document states.

The Clinton executive and his two partners concealed the illicit arrangement from a firm assigned to vet the joint venture for the pension fund, according to a March U.S. Securities and Exchange Commission civil securities-fraud complaint against Morris.

‘No Experience’

Hall’s company had “little or no experience in managing the type of private-equity venture that was being proposed” for the state fund, the SEC said in the complaint.

The vetter, pension consultant Aldus Equity, asked the Clinton executive and the other partners “for a representation that there were no undisclosed agreements to pay third parties,” the SEC said in its complaint.

“In response, none of these individuals disclosed the intended payments to Morris,” the SEC said.

Hall’s venture lost $24 million for the fund’s 1 million workers and retirees, the worst performance out of 12 private- equity investments made under Hevesi, according to the comptroller’s office.

By the July 1 settlement, the fund had paid $14.5 million in fees to the venture, the settlement document states. PCG’s fee share for its 20 percent stake was $2.1 million, the document said.

Dallas-based Aldus Equity was founded by Saul Meyer, who was arrested in April and charged with securities fraud for allegedly paying kickbacks to Morris to secure money from the pension fund. Meyer pleaded not guilty.

Cuomo so far in his two-year investigation has settled charges with investment firms including Carlyle Group, the world’s second-biggest private equity firm, Riverstone Holdings LLC and PCG. They and four others agreed this year to pay New York State a combined $56.5 million and adopt Cuomo’s code of conduct, which, among other things, limits campaign contributions to officials who influence public pension funds.

“Morris and others reaped more than $30 million in undisclosed fees, gifts and bribes as a result of tainted investment deals,” Cuomo said in an April release.

The Hank Morris criminal case is People v. Morris, 00025/ 2009, New York state Supreme Court (Manhattan).

To contact the reporters on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net. Linda Sandler in New York at lsandler@bloomberg.net.

Last Updated: September 30, 2009 00:01 EDT