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NY AG Confirms Guilty Plea Of Placement Agent
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(May 13, 2009 - Wednesday) - http://online.wsj.com/article/BT-CO-20090512-720383.html
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--New York Attorney General Andrew Cuomo confirmed Tuesday that an associate of Henry "Hank" Morris, a one-time top political adviser to the state's former comptroller, has pleaded guilty to securities fraud in a "pay to play" probe involving the state's largest pension fund.
In a statement, Cuomo said Julio Ramirez Jr., an unlicensed placement agent formerly associated with Wetherly Capital Group in Los Angeles, has pleaded guilty to a securities fraud violation under New York's Martin Act, or general business law. Wetherly hasn't been accused of wrongdoing.
A spokeswoman from Cuomo's office confirmed the charge to which Ramirez pleaded was a misdemeanor.
"This investigation has uncovered a matrix of corruption, which grows more expansive and interconnected by the day," Cuomo said. "The web of corruption spans the United States and extends into numerous industries. Here, an unlicensed intermediary working with a broker-dealer partnered with the chief political operative at the comptroller's Office in New York to split profits from corrupt pension fund deals."
Between 2003 and 2006, Ramirez, 48, of San Marino, Calif., entered into corrupt arrangements with Morris to secure investments from the $122 billion New York State Common Retirement Fund for Wetherly clients and others, Cuomo said.
"Mr. Ramirez has accepted responsibility for violating New York's Martin Act several years ago and is cooperating with the New York State Attorney General's office in its investigation," said Michael Bellinger, Ramirez's lawyer, in a statement. "Because this is an ongoing investigation, Mr. Ramirez will have no further comment other than to apologize to his family and friends for his involvement in this matter."
The Wall Street Journal, citing people with the matter, reported the plea in Tuesday's editions.
Separately, the U.S. Securities and Exchange Commission, which is conducting a parallel investigation, amended its civil lawsuit stemming from the probe to add Ramirez as a defendant Tuesday.
Bellinger called the amended SEC complaint "an ill-conceived attempt" to keep up with the law-enforcement efforts of the New York Attorney General's Office and said it was "shameful" that the SEC put out a press release announcing the complaint "virtually minutes before the SEC had scheduled a sham meeting with Mr. Ramirez's lawyers."
"I doubt this publicity stunt buoys the public's confidence in the SEC," Bellinger said. "We intend to vigorously defend against this complaint."
In March, Morris, a one-time top aide to former New York Comptroller Alan Hevesi, and David J. Loglisci, the state's former deputy comptroller and chief investment officer, were charged in a 123-count criminal indictment. They have denied wrongdoing.
Cuomo has alleged Morris and Loglisci essentially sold access to billions of dollars in money held by the New York State Common Retirement Fund to favored investment firms in exchange for kickbacks and other payments for personal and political gain. The New York comptroller's office is the sole trustee for the New York State Common Retirement Fund.
Hevesi, who resigned in 2006 after pleading guilty to an unrelated criminal charge, hasn't been charged in the matter. His lawyer has previously said Hevesi denies any wrongdoing.
Ramirez is the second person to plead guilty and the sixth person to be charged in the matter. Cuomo's office has issued subpoenas to more than 100 investment firms and their agents in the probe.
Wetherly was hired by two private-equity funds to secure investments with the New York State Common Retirement Fund about January 2003, Cuomo said.
On Wetherly's behalf, Ramirez entered into an agreement with Morris where Morris allegedly secured New York State Common Retirement Fund investments in both funds, in exchange for 40% of the placement fees generated by the investments, Cuomo said. The state pension fund ultimately invested $50 million in both private-equity funds in late 2003 and early 2004, generating $630,000 in fees for Wetherly and Ramirez, of which Morris allegedly received more than $250,000, the attorney general said.
Ramirez concealed Morris' role in the transactions from the state pension fund's investment staff and the general partners of the private-equity firms, Cuomo said. Ramirez also funneled payments to Morris through a shell company to avoid creating a direct money trial between Wetherly and Morris, Cuomo said.
A lawyer for Morris declined to comment Tuesday.
In a statement Tuesday, Dan Weinstein, Wetherly's founder, said the firm is "extremely disappointed" with the actions of Ramirez, whom he described as a "former part-time employee."
Weinstein said they engaged Morris as a sub-agent in 2003 at the recommendation of Ramirez and were told after Morris completed an initial assignment for the firm that payment should be made to Ramirez.
"Like many marketing firms, Wetherly occasionally retained sub-agents and consultants, with specialized knowledge and expertise in local markets, to assist its clients in marketing their investment products and services," Weinstein said. "When we followed Mr. Ramirez's recommendation to engage Mr. Morris, he was not the subject of any allegations of impropriety. Mr. Ramirez was always the firm's main contact with Mr. Morris. The principals of the firm had no prior acquaintance with Mr. Morris."
Weinstein said the payments to Ramirez from 2003 to 2005 didn't obligate Wetherly to make any disclosures. Weinstein said the firm disclosed all payments for work performed by Morris in response to inquiries by regulators last year.
"Wetherly has not been accused of any wrongdoing or misconduct and has been fully cooperated with regulators for many months," Weinstein said. "However, the public reference to Wetherly as a party to these transactions has unfairly done grave damage to the reputation and integrity that Wetherly has legitimately earned over the course of many years and threatens to harm the careers and businesses of dozens of innocent employees, as well as clients of the firm."
In 2004, Ramirez also allegedly introduced Morris to Saul Meyer, the managing partner of private-equity firm Aldus Equity Partners, which was trying to secure an investment from the New York State Common Retirement Fund, Cuomo said.
Meyer was charged with one felony count of violating New York's Martin Act in the matter in April. Meyer has denied wrongdoing.
Cuomo has alleged Morris was paid more than $300,000 in kickbacks through a shell company under an agreement with Meyer in connection with Aldus' efforts to secure an investment with the state pension fund.
Morris allegedly shared a piece of the kickbacks he received with Ramirez, which was concealed from the New York State Common Retirement Fund's investment staff and others, Cuomo said.
A lawyer for Meyer declined to comment Tuesday.
In its civil complaint, the SEC alleged Morris directed Ramirez to tell Meyer that Aldus must retain Morris as a "finder" in order to obtain business from the New York State Common Retirement Fund.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
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