DiNapoli Sues Aldus over Pay-to-Play Scheme

May 6, 2009 (PLANSPONSOR.com) - New York state Comptroller Thomas P. DiNapoli has sued beleaguered money manager Aldus Equity Partners LP, charging it was part of an elaborate pay-to-play scheme involving the New York State Common Retirement Fund of which he is trustee.

Charging fraud, bribery, breach of contract and conspiracy, the suit named Aldus, its principal owners and others and seeks a return of the more than $5 million in fees paid by the state as well as damages.

The suit charged that the defendants’ scheme, orchestrated and operated by Henry Morris and David Loglisci (see  Report: Auto Czar’s Investment Firm Focus of Pay-to-Play Probe ), obtained, or directed kickback compensation in return for the selection of fund managers, such as Aldus, that received millions of dollars in management fees.

According to DiNapoli Aldus agreed in May 2004 to pay Morris, through a Morris-controlled entity, a share of fees earned from creating and managing Aldus/NY Emerging Fund to invest money committed by the fund. The suit charged Morris performed no legitimate services for these fees; rather, the payments represented illegal kickbacks to Morris for his arrangement with Loglisci to have Aldus selected as fund manager.

“Last week, we terminated our relationship with Aldus (see  DiNapoli Bars Placement Agents for Empire State Fund ). The suit we’re filing today is the next step to unravel the tangled web of misconduct we inherited from the Hevesi administration,” DiNapoli said, in a news release. “The one million members of the Common Retirement Fund deserve a full accounting of, and full reparations for, the misdeeds and abuses committed against their pension fund.”

The DiNapoli suit is available  here .