Rattner Settles with SEC Only to be Hit with Charges by Cuomo

First Havesi, now Henry "Hank" Morris. The New York State pension fund has been the source of numerous investigations following tips that it was engaging in "Pay to Play" tactics that have become commonplace in the pension fund industry in recent years.

Henry "Hank" Morris, who pleaded guilty to a violation of New York state's Martin Act, will be required to pay $19 million and could receive up to four years in prison when he is sentenced early next year.

Mr. Morris, who pleaded guilty before State Supreme Court Justice Lewis Bart Stone, becomes the eight person convicted in the long-running probe by New York Attorney General Andrew Cuomo, the state's Democratic governor-elect.

Mr. Morris's former employer, ex-New York Comptroller Alan Hevesi, pleaded guilty last month in the same investigation.

Mr. Morris, characterized by the attorney general's office as the key figure in the alleged kickback scheme, was accused in an indictment by Mr. Cuomo of accepting sham "placement" fees as a broker for New York's $125 billion Common Retirement Fund, one of the country's largest pension funds. Rather than earning the fees, Mr. Morris simply directed the investments to people who hired him and assisted Mr. Hevesi politically, Mr. Cuomo said.

"I intentionally engaged in fraud, deception … and made material false representations and statements with intent to deceive and defraud," Mr. Morris said in a prepared statement to the court.

I wrote a recent piece detailing how many of our nation's pensioners have been using their control of billions to earn kickbacks from outsourced investment firms. If the practice is so rife throughout the industry, the question regulators must now ask themselves is what measures need to be put into place to stop it. Catching the acts "after-the-fact" should no longer be the primary objective if investigators now know that the fraud is happening all the time. One direction that should be encouraged are new regulations in the boardrooms of these pension funds in order to better sniff out potential kickback schemes. Whatever happens, however, state pensions are facing a bleak future because of growing debt and the economic downturn. If they are to survive the next crisis, they need to rid themselves of fraudulent dealings that produce inefficiency and investigations.



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