April 15 (Bloomberg) -- Former New York State Comptroller Alan Hevesi, who pleaded guilty in a pay-to-play scandal at the state pension fund he once ran, will go to prison for as many as four years.
Hevesi, 71, the highest-ranking official convicted in an investigation of corruption at the pension fund, was sentenced to a minimum of one year today by State Supreme Court Justice Michael Obus in Manhattan. Hevesi, a Democrat, resigned in 2006 after four years as comptroller.
“I publicly disgraced myself,” Hevesi told the judge at his sentencing hearing. “I have only myself to blame. I will live with this shame for the rest of my life.”
Hevesi pleaded guilty in October to the crime of receiving reward for official misconduct. He admitted giving preferential treatment to Markstone Capital Partners, approving $250 million in pension-fund investments in exchange for almost $1 million in gifts, including $75,000 in travel expenses, $380,000 in sham consulting fees for a lobbyist, and more than $500,000 in campaign contributions.
“Instead of using his power to protect the pension fund, he abused his power to pad his pocket and the pockets of his friends,” Ellen Biben, the former special deputy attorney general for public integrity at the New York Attorney General’s Office, told Obus today. Biben, now the state’s inspector general, asked for the maximum sentence, or 1 1/3 years to four years, to “help restore the faith in state government.” Jail time wasn’t mandatory.
Henry “Hank” Morris, Hevesi’s former political consultant, was sent to prison for as long as four years in February. Morris, who reaped $19 million in fees through 23 state investments while acting as a middleman, admitted that the investment process at New York’s pension fund was manipulated to benefit him, his associates and contributors to Hevesi’s campaign. Morris agreed to forfeit the $19 million.
Bradley Simon, Hevesi’s lawyer, urged Obus not to jail his client. Simon noted Hevesi’s age and asked the judge “to take into account his life in entirety.”
Hevesi spent more than two decades as a state Assemblyman before he was elected city and then state comptroller.
“Mr. Hevesi personally benefited from $75,000,” Simon told the judge, referring to travel costs picked up by Elliott Broidy, the founder of Markstone Capital Partners. “There seems to be a view that he somehow lined his pockets in the amount of $1 million personally. It’s simply not true.”
Violating Public Trust
Though the judge said he took into account Hevesi’s “good works,” when a person in a position of public trust “violates that trust, the damage, though not easily quantified, is quite profound,” Obus said.
Hevesi could be released after 10 months if he completes certain programs, such as 400 hours of community work, and has good behavior while incarcerated, said Linda Foglia, a spokeswoman for the New York State Department of Correctional Services. He also is immediately eligible to apply for work-release, she said.
He was taken into custody this afternoon at the medium-security Ulster Correctional Facility in upstate Napanoch, New York, Foglia added in an e-mail.
Public Pension Fund
Former New York Attorney General Andrew Cuomo, now the state’s governor, in 2007 started to investigate New York’s Common Retirement Fund. It is the nation’s third-largest public pension fund, valued at $140.2 billion as of Dec. 31, according to the state comptroller’s office.
“It is a new day in Albany and the old way of doing business will not be tolerated,” Cuomo said today in a statement. “Hevesi was a statewide elected official who admitted violating his oath for personal and political gain, and we must continue to root out corruption wherever it may be found.”
Eight people pleaded guilty in connection with Cuomo’s probe, including Broidy. In addition to the criminal cases, at least six people and 21 firms settled with Cuomo, paying more than $170 million. Steve Rattner, a co-founder of private-equity firm Quadrangle Group LLC, agreed to a civil settlement of $10 million in December after being accused of arranging kickbacks to Morris. Quadrangle also settled.
Hevesi was sole trustee of the New York state pension fund from 2003 to 2006, the official responsible for managing and investing its money. He resigned as comptroller after pleading guilty to a felony in December 2006 for using state employees to chauffeur his disabled wife, ending his 35-year career in politics.
“Alan Hevesi was appropriately punished for abusing his position,” Attorney General Eric Schneiderman said in a statement. “Today’s sentencing decision will help achieve my office’s principal objective of restoring New Yorkers’ faith in their state government.”
State Supreme Court Justice Lewis Bart Stone, who accepted Hevesi’s plea in October, said that the ex-official would be considered a first-time felony offender at sentencing on the pension-fund charge because he “did not commit the acts which are part of this crime subsequent to the time he was convicted of a felony.”
Simon sought to have Stone recuse himself from sentencing Hevesi after learning March 1 that the judge was a trustee and executor of the estate of Simon’s estranged father. Simon argued the relationship meant the judge had a conflict of interest in sentencing his client.
Stone transferred the case for sentencing, citing publicity over his relationship with Simon’s parents.
Before his 2002 election as state comptroller, Hevesi served for eight years as New York City’s comptroller. He spent 22 years in the state Assembly, representing a district in the borough of Queens while he was a professor of political science at Queens College. He holds a doctorate in public law and government from Columbia University in New York.
Hevesi was re-elected to a second term as state comptroller in November 2006 in the face of a finding by the state ethics commission that he had violated the law.
The next month, he pleaded guilty to defrauding the government and agreed to resign from office. He admitted using state employees as drivers and personal aides for his disabled wife. Hevesi’s 2006 plea deal spared him prison time.
“It’s never been about money and wealth for Mr. Hevesi,” Simon said in court today. “He understands he violated the public trust. There are people under his watch that benefited enormously, but we should also bear in mind that the pension fund did remarkably well under his tenure.”
New York state in 2009 banned the use of placement agents or lobbyists in investments with the pension fund, and banned contributions from those who do business with the fund.
“I have changed the way the pension fund does business so history cannot repeat itself,” Comptroller Thomas DiNapoli said in a statement, while urging approval of a measure that would stiffen fines for officials who break the law while performing a public duty and strip them of taxpayer-funded pensions. “Passage of my bill would be a much-needed step in rebuilding the public’s confidence in its government.”
The case is People v. Hevesi, New York State Supreme Court, New York County (Manhattan).
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