Bill White, former president of the Intrepid Sea, Air and Space Museum, agreed to pay $1 million to end a probe of his role in an investigation of the state pension fund, according to New York Attorney General Andrew Cuomo.
White brokered investments worth more than $500 million dollars with the New York State Common Retirement Fund on behalf of firms that paid him hundreds of thousands of dollars in fees, Cuomo said in a statement.
White’s settlement is the latest development in Cuomo’s probe of “pay to play” practices at the New York State Common Retirement Fund, recently valued at $124.8 billion. Six people have pleaded guilty in connection with the investigation. Fifteen firms have settled and agreed to adopt reforms that include a ban on intermediaries known as placement agents obtaining investments from public pension funds and limits on campaign contributions to those with the power to assign investment business.
“The state pension fund, which should be safeguarded for taxpayers, was instead served up to fixers, finders, and fundraisers like Bill White, who used his access to fill his pockets,” Cuomo said in a statement. “Unlicensed placement agents, secret fees, and even the appearance of pay-to-play erode taxpayers’ trust and pose an intolerable risk to our pensioners’ retirement funds.”
Cooperating with Cuomo
White, who stepped down from the Intrepid in May, “is looking forward to putting this matter behind him and to cooperating with the New York Attorney General in his important efforts to reform the New York State pension system,” White attorneys Steven G. Kobre and Eric B. Bruce said in an e-mailed statement.
Cuomo, the Democratic candidate for governor, has been probing money managers and placement agents who used ties to officials and kickbacks to gain access to public pension funds for several years. In May 2009, he subpoenaed investment firms and their agents after a preliminary investigation showed that as many as half the placement agents used by the city and state pension funds were not licensed or registered.
White contributed $10,000 to former New York state comptroller Alan Hevesi in the fall of 2006 and bundled $50,000 in campaign contributions from the principals of a firm that got business from the fund, Cuomo said.
White also contributed $1,000 on Jan. 13, 2009, to Cuomo’s 2010 campaign, according to state board of elections records. The campaign returned the contribution on Sept. 9, 2009, nine months after it was donated, the records show. The money was given back after Bloomberg News inquired about Cuomo’s taking money from White.
“As news outlets reported more than a year ago, Mr. White’s contribution was returned out of an abundance of caution,” said Cuomo spokesman Josh Vlasto.
White, who did not become a registered securities broker until 2007, lacked the required license to broker deals during Hevesi’s tenure as comptroller, Cuomo said in his statement today.
In 2004, White became affiliated with Ariane Capital Partners LLC, a Villanova, Pennsylvania-based private equity fundraiser, according to the settlement agreement.
In January 2005, Guggenheim Advisors LLC entered into a placement agent agreement under which Ariane and New York-based Pali Capital Inc. would serve as agents to obtain an investment by the New York pension fund in the Guggenheim Partners Select State Fund L.P., a fund of hedge funds, according to the White agreement.
In February 2005, the state pension fund made an initial capital contribution of $100 million to the fund and by May 2007 had contributed $500 million. Cuomo said White “brokered” those deals.
Guggenheim Advisors paid Ariane $1.3 million in placement fees between July 7, 2005, and July 25, 2007, in connection with the state fund’s investment in the Guggenheim Fund, according to the settlement agreement. White, in turn, received more than $570,000 from Ariane.
Guggenheim refused to do business with White because he lacked a securities license, Cuomo said. White received the $570,000 “secretly,” he said.
In 2006, White donated the $10,000 to Hevesi’s campaign and bundled $50,000 in contributions from two Guggenheim principals to Hevesi’s re-election campaign after the initial investments were made, Cuomo said.
White served as a marketing consultant for Ariane before he passed the test qualifying him as a broker, Samuel Shipley, managing director and compliance officer at Ariane said in an interview several months ago.
White received other fees in connection with New York pension fund investments in the Cypress Grove International Fund and Palladium Equity Partners III, L.P., Cuomo said. Those fees were received through Ariane both before and after White obtained a securities licensed, Cuomo said.
White also received consulting fees in connection with a pension fund investment in a Fisher Brothers fund, though he did not broker that investment, Cuomo said. The Fisher Brothers, who co-sponsored the City Investment Fund, is linked to the family that founded the Intrepid.
In May 2009, state Comptroller Thomas P. DiNapoli released a list of placement agents involved in investments during the Hevesi administration. Bill White & Associates is listed as a placement agent that got a fee of $2 million for a state pension-fund investment in City Investment Fund LP.
Henry “Hank” Morris, former chief political adviser to Hevesi, whose case is at the center of Cuomo’s pension probe, is awaiting trial on some 75 charges. State Supreme Court Justice Lewis Bart Stone today encouraged Morris’s lawyer, William Schwartz, and Ellen Biben, a prosecutor in Cuomo’s office, to resolve the case without a trial, which he said would take months. Stone also set a trial date for April 26.