Today, the SEC charged two former top-ranking New York political figures with orchestrating a multi-million dollar fraudulent “kick back” scheme. The SEC complaint names David Loglisci, the former New York Deputy Comptroller and chief investment officer for the New York State Common Retirement Fund, and Henry “Hank” Morris, top political advisor and chief fundraiser for former Comptroller, Alan Hevesi (who himself, in 2006, was forced from office for defrauding the state government).
According to the SEC’s allegations, Loglisci caused the Retirement Fund to invest billions of dollars with private equity firms and hedge fund managers who together paid millions of dollars in the form of “sham” finder or “placement agent” fees to obtain investments from the state’s largest pension fund. The complaint alleges Morris made “more than $15 million” in these so-called finder fees. In return for his fee, Morris made sure the investment managers were rewarded with lucrative investment management contracts, while those managers who declined to make such payments were denied fund business. (See the SEC complaint, here.)
If true, all we can say is, wow—not another financial services scandal.
In other scandal news, New York Attorney General Andrew Cuomo has yet to release the names of the Merrill Lynch bonus recipients, but he has said he would do so as early as today after a New York judge ruled on Wednesday that Bank of America must provide them, according to this story in the New York Times. Cuomo could be sensing he’s on a roll with outing bonus recipients and may seek to leverage the judge’s ruling at other institutions receiving federal funds, says the story.
Some say Cuomo’s action amounts to a Wall Street witch hunt. He also intends to out those AIG employees who received bonuses since the firm received $165 billion in government bailout money. (Want to have your name, salary and bonus published? Work on Wall Street!) Of course, if Congress has its way, 90 percent of the AIG bonuses will be taken back by the IRS—the House and Senate are moving quickly to ensure that happens, according to this update from the AP.
The death of Lehman Brothers continues to attract debate. Who is responsible? What, exactly, caused counterparties to flee from doing business with Lehman? Former CEO Richard Fuld’s exclamations that short-sellers were to blame got more ink today in this story on Bloomberg’s site, which says “naked shorting” may have contributed to the firm’s demise. Some, like Barry Ritholtz, CEO and director of equity research for Fusion IQ, an independent quantitative money manager, say that’s hogwash. Lehman killed itself with too much leverage and undercapitalization. Read the story here on Ritholtz’s popular financial blog, called The Big Picture.