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A Culture of Corruption?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Kenneth Lovett of the New York Daily News reports that Hevesi official David Loglisci pleads guilty in pension fund scandal, agrees to sing to Cuomo:
A former top state pension fund official under ex-controller Alan Hevesi pleaded guilty Wednesday to a felony corruption charge.
David
Loglisci, who was Hevesi's chief investment officer, has agreed to dish
to investigators for Attorney General Andrew Cuomo on a culture of
corruption that existed in the office.
Loglisci had been charged
along with top Hevesi political consultant Hank Morris of steering
lucrative pension fund business to companies that agreed to pay
kickbacks.Morris is said to have received more than $25 million in pension-related fees during the four years Hevesi was in office.
Loglisci is the highest-ranking Hevesi official to plead guilty during the nearly three-year probe.
Loglisci
said he was instructed by senior office officials to obtain Morris'
approval prior to making recommendations on proposed investments.
He
also said Morris had complete control over the pension fund's
alternative investment portfolio and doled out business to those who
paid him lucrative fees or contributed to Hevesi's campaign.
Those who refused were denied business.
"With
today's plea, a former top official overseeing the state's single
largest asset admitted that decisions were driven by politics and greed
- not the best interests of the fund or its beneficiaries," Cuomo said.
"Not
only were pension recipients defrauded but so were the taxpayers across
New York who are ultimately responsible for sustaining the fund."
Loglisci's
brother, Steven, a film producer, also benefitted. Various firms paid
Loglisic hundreds of thousands of dollars to help finance a poorly
received movie, "Chooch."
And he detailed how Morris was paid as
a political consultant while also having financial interests in various
proposed investments. Morris also made investment decisions for the
office, including on deals in which he had ties, Loglisci admitted.
Loglisci
pleaded guilty before Manhattan Supreme Court Justice Bart Stone and
was released on his own recognizance with travel restrictions.
He
faces a possible sentence of up to 1 1/3 to 4 years in prison for the
charge of a felony violation of the Martin Act, a class E felony.
Dan Walters of the Sacramento Bee reports, Legislature's 'oversight' unit misses mark:
When Darrell Steinberg, the president pro tem of the state Senate, outlined his priorities last month, he included "oversight."
In Capitol jargon it means the Legislature's holding hearings or conducting investigations into how state programs are functioning.
Steinberg, in fact, has created a Senate Office
of Oversight and Outcomes and staffed it with ex-newspaper reporters,
supposedly to do the same kind of deep drilling they did in journalism.
Committees in both legislative houses are doing what they say are oversight hearings on various matters.
There have been some noteworthy oversight efforts in years past, such as investigations into former Insurance Commissioner Chuck Quackenbush's
virtual shakedowns of insurers for political slush funds, and former
Gov. Gray Davis' award of a big computer contract to a campaign
contributor.
More recently, however,
"oversight" has tended either to focus on relatively minor issues, or
be grandstanding, such as Republican Sen. Jeff Denham's hearing last week on veterans' home services in Fresno, where he's seeking a congressional seat.
Back
to Steinberg's Office of Oversight and Outcomes. He's hired some
talented journalists, but so far they haven't produced much of lasting
import. Recently, it generated a third report that was critical of Gov.
Arnold Schwarzenegger's furloughs of state employees.
That's
an important issue to public employees and their unions, and
Steinberg's Sacramento district has a heavy contingent of unionized state workers. But it's hardly a bedrock issue for 38 million Californians.
Steinberg spokesman Nathan Barankin said the unit chooses its own topics to investigate, and the importance of the findings is "in the eye of the beholder."
So
what might be more important targets for legislative gumshoes? How
about the scandal at the California Public Employees' Retirement System
over huge payments to "placement agents" who obtain multibillion-dollar
investments for their clients? Many of them have been money losers,
adding to the fund's huge value decline that taxpayers will have to
cover.
How about the anomaly of CalPERS buying a $600 million chunk of Apollo Global Management,
a conspicuous employer of placement agents, only to see that stake
decline by more than 75 percent? How about a belated examination of how
and why Apollo founder Leon Black persuaded U.S. Rep. John Garamendi,
then the state insurance commissioner, to seize the junk bond portfolio
of a big insurance company and then resell it some to some shadowy
French investors for billions less than its value?
But wait. The same unions that hate furloughs also control the CalPERS board that made those sucker bets. Just a coincidence?
When the Legislature stops wasting taxpayer- financed time on trivia and bores into the CalPERS debacle, maybe we'll take its "oversight" seriously.
The propensity for corruption at public pension funds is extremely high.
How high? I trust nobody and assume that at any given time, some senior public pension
fund managers are on the take. Oversight is meaningless unless you have
mechanisms in place to deter fraud and stop it before it occurs. I have
long argued that every unit of a public pension fund should be
subjected to an annual independent, comprehensive fraud audit,
preferably done by experienced certified fraud examiners.
The
same goes for an independent performance review of various investment
activities. If you got guys gaming their benchmarks, they're defrauding
the plan sponsor and stakeholders. Ignoring the problem only feeds a culture
of corruption, enriching pension fund managers for delivering mediocre
results. At one point, regulators have to put a stop to this gross
injustice or else they're complicit in the plundering of public pension
funds.
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Only 1 -4 years? When he gets out he could still become mayor of DC i guess. This really is sad watching the wheels fall off our society.
Did I ever tell you guys about a fund of funds manager here in Montreal who got caught running a Ponzi scheme? I did a due diligence on his fund. Went to their office, some hot secretary shows me to their board room, in walks this guy sporting a nice tan, perfect white teeth, an expensive Italian suit, manicured hands. Slick, real slick.
So he begins feeding me the bullshit. "Leo, as you can see, we have a high Sharpe ratio, one of the highest in the industry," to which I replied "Yeah, almost too good to be true."
Anyways, he was wasting my time with the slick presentation and I was getting annoyed. I asked him if I can see a list of his hedge fund managers. He takes me to a small room with a computer and tells me that he can't access the complete list because his risk manager in Florida is out playing gold that morning. I am thinking "WTF?!?" and tell him "thank you, I have to leave".
He then quietly whispers, "Leo is there any way we can facilitate this transaction", the very same bullshit other hedge fund managers have tried to pull on me. "We'll be in touch" was my reply but I should have just told him what I told someone else "sure, let me run it by my ethics committee".
What an arsehole...and there are tons of idiots like this one. Amazingly, he got money to manage from city suburbs and at one point had over $2 billion in assets. Which tells me either many city pension funds have complete fools running their pension plans or they're all on the take and corrupt to the core (many with CFAs too!).
Keep up your fine contributions to the understanding of public pension fund corruption, Leo. I appreciate your updates.
I do think it's getting more main street attention, but the whole mess is so effectively papered over with yield assumptions, it confuses the average person. All of these endangered, corrupted funds will be confronted with the reality that electeds MUST adjust the retirement formulas for future benefits to new hires....at the very least. That will kick up the shit storm with the unions and hopefully more public attention to what has transpired.
It seems the SS and Medicare shortfalls are the largest underfunded entitlement schemes in the US. Public pension funds are a very close third.
per Wiki "Alan G. Hevesi (born January 31, 1940) is a Democratic politician" ... naw couldn't be! Unions involved no way... someone call Washington!
In which line on 1040 do you enter kickbacks?
Use the line for "Miscellaneous Income"
there ought to be a set amount of theft whereby the punishment is akin to that of a murderer.
nicole simpson was judged to be worth 12.5 million dollars in the OJ civil suit.
steal more than 12.5 million or misappropriate more than that amount is murder.
steal enuf, and you get tried as a mass murderer.
still wouldnt do any good if it wasnt enforced.
justice is blind,dumb,deaf,ignorant,but it sure plays a mean pinball.
Connected or not, it's the biggest scandal that nobody is reporting on. Where are those investigative journalists from 60 Minutes? I've been sending them emails forever but they don't seem to think corruption at public pension funds is worth covering. Importantly, it happens more often than people think, especially when private equity, real estate and hedge funds are involved. Oversight is poor to non-existent.
The "journalists" at 60 minutes part of the MSM... they rely on union, democrat pandering so don't hold your breath.
Desperate problems without ready made solutions don't make good mainstream TV.
The only way out for the taxpayer is to follow in the footsteps of GM and give the pension fund assets to the Unions.
It is not a logical action for the Unions to accept this responsibility but direct signature control over hundreds of billions is seductive.
Now that would make 60 minutes!
What's missing in our children's education are universities, high schools, grade schools, kinnygardens (sic)and nursery schools that teach them how to carry out fraud without getting caught. Teach them from the get go that you can't get anywhere by playing by the rules.
It's time to admit that nothing gets done in this world unless it is instigated by criminals.
Best to learn them so that they have less chances of getting caught.
This is yet another under-reported story. Major hedge-fund and PE players are involved. Few will be brought to justice, because they are too well-connected politically and they "know too much". Under pressure, they would rat out the politicians whose bag-men collected all these bribes.
Rattner is going to settle for a slap on the wrist, as Carlyle has already done. It's quite amazing.
Leo: you should keep a record of people who settle these things "out of court". It's already a long list and it will get longer. I hope Loglisci spills all his beans. I doubt Cuomo will have the balls to indict these people, as he needs them for caampaign contributions.
This stuff was going on in almost all states.
It is a historical problem that seems to be a constant through the development of US history. If you read about the development of political machines in many of the states, corruption and bribary were a problem to be overcome. The history of the Tammany Hall in New York City is immeditally accessable on the internet. States North and South had their different versions of "machines" in their development.
WWII created a serious environment where the populace was stressed and uncomfortable for a real cause and, at least temporarily, the populace made serious selections in their leadership. Financial hankey-pankey wasn't tolerated. Salary controls and price controls were in place.
A good read.
http://www.trumanroadtrip.com/page/page/6814760.htm
People in politics today need large contributions to run their campaigns in today's mass media. Honest public servants, without financing, will be vulnerable to smear campaigns if the populace is not smart enough to stay informed. Example, the Republican primary for year 2000 in South Carolina.
Modern attention spans are short and we the people will be vulnerable until things get bad enough to cause the populace to get serious in the selection of leadership.
Have all the folks posting here sent thoughtful, polite (so as to be taken seriously) missives to their representation in Washington DC? Even if it is only one opinion, it will add to the total volume indicating an interest.
I think that glob of pond scum is packing a heater.
I think you're right. I don't think that corner showing through his jacket is his Iphone and players like him get only the best tailoring so it's not a crappy jacket.
It turns out that most corruption in Afghanistan is coming from, guess who (hint: It's not Afghans):
http://www.mcclatchydc.com/2010/01/12/82128/us-official-afghanistan-corr...
Corruption is a top down system. When the leaders are corrupt, why would you expect subordinates to play a different game? Fix it in DC and problems elsewhere will not be systemic. But it is hard to demand from others that which is not practiced by the leaders...unless you want to go all Mao on everybody.
Corruption in pension funds? LOL Next you'll be telling us that there's corruption in labor unions and Congress. My guess is Cuomo has two lists in his office. The first is a list of those he can indite. The second is a list of those he will indite.
Hang them all.