Ramirez Enters Pension Probe Guilty Plea

May 12, 2009 (PLANSPONSOR.com) - As expected, New York state Attorney General Andrew M. Cuomo on Tuesday announced that Julio Ramirez, an unlicensed placement agent formerly associated with Wetherly Capital Group, has pled guilty to securities fraud.

A Cuomo news release said the charge against Ramirez was filed under New York’s Martin Act and came as part of Cuomo’s ongoing investigation into corruption involving the New York State Common Retirement Fund (CRF) being undertaken with the U.S. Securities and Exchange Commission.

The Wall Street Journal reported Tuesday morning the plea was expected (see  Guilty Plea Expected from West Coast Placement Agent in Pension Probe ).

According to the Cuomo statement, Ramirez’s plea comes out of his participation in fraudulent schemes involving multiple investment transactions with the CRF while he was an unlicensed placement agent associated with Wetherly Capital, a placement agent and broker/dealer.

Cuomo charged that between 2003 and 2006, Ramirez entered into corrupt arrangements with Hank Morris, the top political adviser to then-Comptroller Alan Hevesi, to secure investments from the CRF for Wetherly clients and others. Transactions included FS Equity Partners V, the Ares Corporate Opportunities Fund II, and the Aldus/NY Emerging Fund, according to the statement.

“This investigation has uncovered a matrix of corruption – which grows more expansive and interconnected by the day,” said Cuomo, in his statement. “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. This highlights the inherent risks in the use of placement agents – especially those that are unlicensed.”

The charge indicated that beginning in January 2003, Wetherly was hired by FS Equity Partners V and the Ares Corporate Opportunities Fund II to help the funds secure investments from institutional investors, including the CRF. On behalf of Wetherly, Ramirez entered into an agreement with Hank Morris where Morris allegedly agreed to secure CRF investments in both funds, in exchange for 40% of the placement fees generated by the investments, prosecutors charged.

In late 2003 and early 2004, the CRF invested $50 million in both FS Equity Partners V and the Ares Corporate Opportunities Fund II. This generated more than $630,000 in fees for Wetherly and Ramirez, of which Morris allegedly obtained 40%, or more than $250,000, according to the charges.

Cuomo charged that Ramirez concealed Morris's role in these transactions from the CRF investment staff and the general partners of the private equity firms involved, among others. Ramirez, through Wetherly, funneled payments to Morris to avoid creating a direct money trail between Wetherly and Morris.

Instead, Wetherly issued checks to Ramirez, and Ramirez wrote checks to "PB Placement," a shell company incorporated by Morris. Ramirez was acting as an unlicensed placement agent at the time that he entered into this corrupt arrangement, according to the investigation.

In 2004, Ramirez was a part of another fraudulent scheme involving manipulation of the CRF, when the CRF was seeking to establish an "emerging manager fund," which would invest exclusively in minority-owned and women-owned funds, the Cuomo statement said.

Ramirez introduced Morris to Saul Meyer, the founding partner of Dallas-based Aldus Equity, which was trying to secure the investment mandate to manage the new fund. Once Meyer and Aldus allegedly agreed to pay Morris 35% of the fees, or over $300,000, Morris secured the $175 million investment for Aldus.

These payments are alleged to be kickbacks from Meyer to Morris, a piece of which Morris shared with Ramirez for his role in the deal, according to the charges. The payments to Ramirez were concealed from the CRF investment staff and others.

Cuomo also issued subpoenas earlier this month to over 100 investment firms and their agents after his investigation found that 40% to 50% of agents obtaining investments from New York pension funds were unregistered.

Concluded the Cuomo statement: "The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller's chief political aide and a favor bank for political allies and other friends."