Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, April 15, 2010

SEC Charges Private Equity Firm in New York Pension Plan Kickback Scheme

The SEC today announced charges against Quadrangle Group LLC and Quadrangle GP Investors II, L.P. in connection with the Commission's ongoing investigation into a multi-billion dollar kickback scheme involving New York's largest pension fund. The Quadrangle defendants agreed to settle the SEC's charges and pay a penalty of $5 million.

The SEC previously charged Henry Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi, and David Loglisci, the former New York State Deputy Comptroller, for orchestrating a fraudulent scheme that extracted kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund. In today's complaint, filed in federal district court in Manhattan, the Commission alleges that the Quadrangle defendants entered into undisclosed financial arrangements that benefited Morris and Loglisci in order to win investment business from the Retirement Fund.

Specifically, the SEC alleges that the Quadrangle defendants secured a $100 million investment from the Retirement Fund only after a former Quadrangle executive arranged for a Quadrangle affiliate to distribute the DVD of a low-budget film called "Chooch" that Loglisci and his brothers had produced and after that executive agreed to pay more than $1 million in sham "finder" fees to Morris. The scheme corrupted the integrity of the Common Fund's investment processes and resulted in the Retirement Fund's assets being invested with the undisclosed purpose of enriching Morris and Loglisci's brother.

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