Legal News

?Chooch? and Wrong: A Biggie Falls in NY Pension Fund Probe

By Ashby Jones

Standing alone, the phrases “pension fund” and “pay-to-play” may make one’s eyes glaze over. But spice it up with tales of trips to the King David Hotel in Jerusalem and a movie called “Chooch,” and all of a sudden you’re sitting right up.

The news: The burner got turned up on New York Attorney General Andrew Cuomo’s pay-to-play investigation on Thursday when California money manager Elliott Broidy (pictured) admitted to making nearly $1 million in gifts to benefit four former top officials in the office that oversees New York state’s pension fund, including onetime state comptroller Alan Hevesi. Click here for the WSJ story, from Craig Karmin and erstwhile Law Blogger Peter Lattman.

Cuomo on Thursday said Broidy acknowledged that he paid at least $75,000 for first-class airfare, luxury hotel suites, a helicopter tour, a car and driver and a security detail on foreign trips. Those trips included Hevesi, said people familiar with the matter. Specifically, Hevesi had long expressed a desire to stay at the historic King David hotel, which overlooks Jerusalem’s Old City, and Broidy paid for a stay there, this person said. Broidy pleaded guilty on Thursday to a felony charge of rewarding official misconduct and will cooperate with the investigation, the attorney general said.

Cuomo’s multiyear probe into New York’s $116.5 billion pension fund has mostly focused on whether decisions about how to invest the money were wrongly influenced by bribes and politics.

Until now, charges have largely focused on the role of placement agents, or financial middlemen that help money managers obtain lucrative contracts to manage pension investments. But Cuomo said Broidy’s payoffs to benefit state officials were less complicated. “This is an old-fashioned case of payoff to state officials,” Cuomo said. “This case is effectively bribery.”

Did the bribe pay off for Broidy? Apparently so. The New York state pension made $250 million in investments with Broidy’s firm, Markstone Capital Group LLC.

A spokesman for Broidy said in a prepared statement: “Mr. Broidy regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the NYAG and will be cooperating in the ongoing investigation.”

And who is this Broidy fella? Click here for a quick profile from the WSJ’s private equity blog. He cut a high profile on the L.A. social circuit, hosting political and cultural fund-raisers at his Bel Air home.

Separately, Broidy invested $300,000 in a low-budget movie called “Chooch” produced by David Loglisci, then head of private equity at the New York fund, and his brothers, the attorney general has alleged. To “hide the payments,” Broidy made them through a friend, whom Broidy then reimbursed, Cuomo’s office said Thursday.

Full post as published by Law Blog - WSJ.com on December 04, 2009 (boomark / email).