Adviser pleads guilty in NY pension fund probe

A once-powerful Democratic political consultant pleaded guilty Monday to a felony securities-fraud charge and admitted that he played a central role in an influence-peddling scandal that shook the state's massive pension fund.

"I intentionally engaged in fraud, deception (and) concealment," Henry "Hank" Morris said, his voice low but steady as he admitted being at the fulcrum of the pay-to-play scheme at the $125 billion retirement pool, one of the world's largest government pension funds.

Morris acknowledged using his ties to former state Comptroller Alan Hevesi to get millions of dollars in payouts for himself, to channel money to cronies and to solicit campaign contributions for Hevesi from firms seeking state business.

Essentially, Morris acted as an expensive go-between for firms seeking a piece of the state pension fund investment pie: They were told that their chances of sealing multimillion-dollar deals would improve if they paid "placement" fees to him or certain others, prosecutors said.

Hevesi and the retirement fund's former chief investment officer, David Loglisci, then approved investments "in part so as to generate fees to me or others known to me because of my relationship with Alan Hevesi," Morris said.

Morris, 57, faces the possibility of up to four years in prison at his sentencing, set for Feb. 1, but he could also get probation only. Manhattan State Supreme Court Justice Lewis Bart Stone said he hadn't yet decided on an appropriate sentence in a case that "involves a question of very high public policy and public concern."

Morris also agreed to forfeit $19 million in gains from the scheme, and he'll be banned for life from the securities industry in New York and from doing business with the state.

"Morris personified pay-to-play corruption," state Attorney General Andrew Cuomo said in a statement. Morris and his lawyers declined to comment as they left court.

Hevesi, Loglisci and five other officials, political figures and investment advisers have already pleaded guilty in Cuomo's sprawling probe into the pension fund. A number of investment executives and firms that haven't admitted any criminal responsibility have nonetheless paid millions of dollars in penalties. With Morris' forfeiture, the state will have recovered nearly $160 million for the pension fund, Assistant Attorney General Ellen Biben said.

The plea also wraps up a major piece of the case before Cuomo, a Democrat and New York's governor-elect, moves on to his new office in January.

Morris was the chief political adviser to Hevesi, a Democrat who oversaw the fund as comptroller from 2002 until he resigned in an unrelated scandal in 2006.

Prosecutors have said Morris was the driving force in the pension-fund shenanigans, reaping fees on more than a dozen deals that represented more than $5 billion in investments.

The investigation drew in some big financial names, including the Quadrangle Group, then run by Obama administration auto industry czar Steven Rattner, authorities said. Quadrangle Group secured a $150 million pension fund deal after agreeing to pay Morris $1 million in "placement" fees, authorities said.

Quadrangle agreed in April to pay $12 million to settle the investigation into its part in the pension fund shenanigans. The Securities and Exchange Commission announced last week that Rattner himself had agreed to a $6.2 million fine and a two-year ban from the securities industry to settle a federal probe into his role in the matter.

The same day, Attorney General Andrew Cuomo filed two lawsuits seeking a much tougher punishment for Rattner: at least $26 million and a lifetime ban from the securities business. Rattner said he wouldn't be "bullied" into accepting it.

Rattner has been a major fundraiser for Democrats.

Initially, Morris argued that since he was not a state official, it was not illegal for him to lobby the comptroller's office or to receive fees for his help landing deals.

Assistant Attorney General Ellen Biben called Morris' plea "a significant victory in establishing, once and for all, that this conduct was not only unethical but was illegal."

Hevesi, 70, pleaded guilty in October to a felony corruption charge. He acknowledged getting nearly $1 million worth of free travel, campaign contributions and other gifts and favors.

He's scheduled to be sentenced Dec. 16. His punishment could range from no jail time to up to four years in prison.

Hevesi resigned from the comptroller's job after pleading guilty to another felony charge for using state workers to chauffeur his wife.