NEW YORK (Legal Newsline) - New York Attorney General Andrew Cuomo announced on Wednesday that a hedge fund manager and an equity firm have agreed to adopt his Public Pension Fund Reform Code of Conduct.
The Dallas-based hedge fund manager HFV Management LP and the New York-based private equity firm Odyssey Investment Partners LLC will join 19 other firms that have already adopted the code.
"Twenty-one firms have now adopted our Code of Conduct to reform public pension funds," Cuomo said.
"Our code removes the influence of politically-connected finders and puts an end to the corrosive effect of campaign contributions on pension fund investments. We will continue to protect and restore the integrity of New York's pension fund, our State's single largest asset."
HFV co-founder Barrett Wissman has agreed to pay $12 million to the state of New York as a part of a guilty plea he entered with the U.S. Securities and Exchange Commission. The company has already paid a penalty of $150,000 as part of that settlement.
The HFV agreement concerns a $100 million commitment HFV received from the New York State Common Retirement Fund, which allegedly was obtained through a corrupt arrangement between Wissman and Henry Morris, then-Comptroller Alan Hevesi's chief political advisor.
The suit alleged that in June 2003, Morris and Wissman agreed to introduce HFV's multi-strategy hedge fund to the CRF and other institutional investors, even though the CRF did not have a hedge fund investment program in place. Additionally, hedge funds were not recognized as an asset class by the CRF's investment committee at that time, Cuomo says.
In December 2004, Morris used the power of his position to start a hedge fund program at the CRF, Cuomo says.
Cuomo says HFV was one of the first hedge funds to receive funding through the new program. Allegedly, Morris ensured that HFV ultimately received a $100 million commitment from the CRF. A company owned by Morris called Nosemote LLC allegedly received over $600,000 in placement fees from HFV, which was illegal.
In December 2007, HFV ended its relationship with Wissman.
Under terms of the agreement with Odyssey, the company will pay $400,000 to the state of New York for its alleged efforts to obtain an investment from the CRF.
Morris misrepresented to Odyssey that the CRF had its "own placement agent," Searle & Co., so Odyssey allegedly retained Searle to help obtain an investment in Odyssey Fund III from the CRF, Cuomo says.
Odyssey was never informed that Morris was affiliated with Searle or that he would collect 95 percent of any fees that Searle collected, Cuomo says.
Furthermore, Morris allegedly told Odyssey that he received a $20 million investment in Odyssey Fund III from the CRF. That led to Odyssey paying Searle $400,000 in fees relating to the CRF investment, of which Morris collected $380,000, Cuomo says.
Cuomo's Public Pension Fund Reform Code of Conduct, among other things, bans investment firms from compensating intermediaries for introductions to public pension funds.
To date, Cuomo has secured more than $161 million for New York and the State Pension Fund.