Hevesi Adviser Hank Morris Pleads Guilty to Fraud Charges

Faces up to four years in prison, will have to forfeit $19 million in plea deal

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    NEWSLETTERS

    AP
    Hank Morris, former top political adviser of New York Comptroller Alan Hevesi is escorted in handcuffs into Manhattan criminal court, Thursday, March 19, 2009, in New York.

    A once-powerful political consultant admitted Monday that he played a central role in an influence-peddling scandal at New York state's massive pension fund, pleading guilty to a felony securities fraud charge.

    Henry "Hank" Morris faces up to four years in prison when he is sentenced Feb. 1, but could get only probation. He also will have to forfeit $19 million.

    "I intentionally engaged in fraud, deception ... (and) corruption," 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.

    He acknowledged getting millions of dollars in fees for himself and cronies in exchange for helping money managers secure a piece of the pension fund pie, and he admitted soliciting campaign contributions for former state Comptroller Alan Hevesi from firms seeking state business.

    Hevesi and assorted other officials, political figures and investment advisers have already pleaded guilty. A number of investment executives and firms that haven't admitted any criminal responsibility have nonetheless paid millions of dollars in penalties.

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

    Money managers were told that if they wanted to get a piece of the pension fund's investment pie, they could improve their chances by paying fees to Morris and other "placement agents," state prosecutors said.

    Some big financial names did just that, including the Quadrangle Group, then run by Obama administration auto industry czar Steven Rattner, authorities said. Quadrangle Group secured a $100 million pension fund deal after agreeing to pay Morris $1 million in "placement" fees.

    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.

    Cuomo, a Democrat, is the state's governor-elect. Rattner has been a major fundraiser for Democrats.

    Morris and his lawyers declined to comment as they left court.

    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."

    Under the plea deal, Morris is permanently banned from the securities industry in New York and from doing business with the state.

    Hevesi 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.