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Ex-Hevesi Aide to Face Trial on Most Pension Counts

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July 29 (Bloomberg) -- Henry “Hank” Morris, the former chief political adviser to New York’s ex-comptroller, must go to trial on most of the 90 charges against him stemming from a probe of the state’s pension fund, a judge ruled.

Morris, who advised former Comptroller Alan Hevesi, is accused of corrupting the investment process at the pension fund to favor deals that would benefit himself, his associates and contributors to Hevesi’s campaign. Hevesi hasn’t been accused of wrongdoing in the case.

State Supreme Court Justice Lewis Bart Stone in Manhattan today threw out 13 counts, including grand larceny and falsifying documents. Morris still faces an enterprise corruption charge that carries a prison term of as long as 25 years.

The grand jury heard “sufficient evidence” to sustain most of the charges, Stone wrote in his decision. The grand jurors were given evidence that Morris created a corrupt operation in which investment funds were chosen because managers “agreed to pay placement fees or share management fees with Morris rather than solely on the prudent investor rule,” the judge said.

William Schwartz, an attorney for Morris, declined to comment as he left the courtroom.

Fund Corruption

The Morris case is at the center of New York Attorney General Andrew Cuomo’s investigation of corruption at the state retirement fund. Six people have pleaded guilty to criminal charges in the probe, including David Loglisci, former chief investment officer at the pension fund.

Fifteen firms have settled and agreed to a code of conduct drafted by Cuomo that bans so-called placement agents from obtaining investments from public pension funds and limits campaign contributions to those with the power to assign investment business.

In sustaining the criminal enterprise charge, Stone said Loglisci sometimes let it be known a fund could only win an investment by retaining Searle & Co., the broker-dealer Morris was associated with, as a placement agent.

Other times, funds seeking investments on “cold calls” to Loglisci received calls from Morris offering his services as a placement agent, according to the decision.

‘Shut Out’

“Funds which would not hire Morris or his designees were shut out” of investments, the judge wrote.

The grand jury had enough evidence to support its finding of a criminal enterprise, the judge wrote, noting the panel found Morris’s “group” participated in 19 separate alternative investments generating $35 million in placement fees, with Morris, or entities owned, taking $19 million of it.

In refusing to dismiss New York securities fraud charges against Morris, Stone said that the adviser’s “toll gate” scheme may have caused an economic loss to the state retirement fund.

The judge dismissed grand larceny counts involving Odyssey Investment Partners III and Access/NY European Fund. He said there was insufficient evidence to establish any loss to the funds.

The judge also kept counts of bribery and rewarding official misconduct involving $100,000 Morris gave to actress Peggy Lipton Jones, best known for her role in the TV show, “The Mod Squad.” He said she got some of the money through cash-filled envelopes placed on the chair of a “friend” described as a senior official in the comptroller’s office.

The judge said while Lipton Jones signed notes documenting the money as loans, she understood they were not required to be repaid.

Scott Fein, an attorney for Lipton Jones, did not immediately return a call for comment.

‘Chooch’ Movie

The judge also left intact a rewarding official misconduct charge against Morris involving the low-budget film, “Chooch,” produced by Loglisci’s brother.

The judge said he took into account “evidence of the deep involvement of the entire Loglisci family in the venture” and that the vast majority of non-Loglisci funding of “Chooch” came from people doing business with the retirement fund.

The judge added that it’s so well understood investments in entertainment enterprises may yield no return that it was the basis for the Mel Brooks’ comic movie, “The Producers.”

The case is People v. Morris, 0025/2009, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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