Cuomo’s N.Y. Pension Pay-to-Play Probe Nets Guilty Plea

December 3, 2009 ( – Elliott Broidy, a founder and chairman of Los Angeles private equity firm Markstone Capital Group, has pleaded guilty to paying nearly $1 million dollars in gifts to help his company get a $250 million mandate from New York state’s pension fund.

New York Attorney General Andrew M. Cuomo said in a news release announcing the plea that Broidy’s gifts “for the benefit” of officials in former Comptroller Alan Hevesi’s office were part of a pay-to-play scheme in the New York State Common Retirement Fund to steer business to Broidy’s Markstone Capital Partners, L.P. According to Cuomo, the pension fund also paid over $18 million in management fees to Markstone

Cuomo said Broidy pleaded guilty to a felony charge of rewarding official misconduct, will cooperate in the Attorney General’s ongoing investigation, and will forfeit $18 million in connection with his plea. Broidy resigned from his management role in Markstone on Tuesday. He was also a trustee of the Los Angeles Fire and Police Pension fund from 2002 until he resigned in May 2009.

“Broidy paid nearly a million dollars in bribes to get a quarter billion dollar investment. For Broidy, this was a small price to pay. For New York taxpayers, the harm is incalculable,” said Cuomo, in the news release. “Corruption corrodes the integrity of the pension system and the public’s trust in government. That is too high a price to bear.”

Cuomo’s office has alleged that numerous officials working for Hevesi used the pension fund “as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends.”

According to the news release, Broidy acknowledged as part of the plea that he:

  • contributed $300,000 to “Chooch,” a movie produced by brothers of David Loglisci, the chief investment officer under Hevesi;
  • entered into a sham consulting agreement with a family member of an unidentified senior comptroller’s office official, paying more than $380,000 to the consultant over a period of more than two years;
  • paid over $90,000 to the girlfriend of a high-ranking official from April 2004 through October 2005; and
  • traveled to Israel with a “very high-ranking” Comptroller’s Office official on at least five occasions and on one occasion to Italy. Relatives of the Comptroller's official were present on some of the trips. To conceal these payments, Broidy financed these expenses through charities and caused false invoices to be submitted to the Comptroller’s Office.

Broidy recently won additional time in a companion federal probe of his activities to produce documents to the U.S. Securities and Exchange Commission (see Investment Manager Gets More Time in Pension Probe).