Tracking Patronage & Corruption in New York State Politics (BETA)

Monthly archives for November, 2012

Another Sweetheart Deal for Major Figure Convicted in Comptroller Investigation

Nov 28, 2012 ~ Written by admin

The New York Post reports that Elliott Broidy received a sentence with no jail time yesterday, nearly three years after admitting to “bribing four senior controller officials, including covering $75,000 in expenses for “luxury travel” to Israel and Italy for [former NY State Comptroller] Hevesi and his relatives, to get $250 million in pension fund business for his firm, Markstone Capital.”  “In addition to paying Hevesi’s extra travel costs, Broidy is said to have shelled out $90,000 in living expenses and hospital bills to the girlfriend [Mod Squad actress Peggy Lipton] of [Hevesi’s Chief of Staff Jack Chartier] and another $44,000 to the girlfriend’s family.”

Broidy had faced up to four years in jail time, but was permitted to withdraw his felony plea and instead plead guilty to a misdemeanor in exchange for his cooperation that led to guilty pleas by Hevesi and Hank Morris.

 

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Chevron’s Ethics Complaint against Comptroller DiNapoli

Nov 22, 2012 ~ Written by admin

Here is the complete copy of Chevron’s Ethics Complaint against NY Comptroller Thomas DiNapoli, which Chevron filed in New York’s Joint Commission on Public Ethics.

 

113920462-Ethical-Complaint-Against-DiNapoli-to-Joint-Commission

Chevron’s timing on this complaint is curious.  It comes on the heels of the US Supreme Court’s refusal in October 2012 to grant Chevron’s Cert Petition after the Second Circuit’s Order vacating the district court’s decision and entry of a preliminary worldwide injunction against enforcement of an $18 billion Ecuadorean judgment against the company.  (Here is a NYT summary of the case if you don’t have the time to read the district court’s 131 decision).

To be clear, as this Forbes article reports, the Supreme Court’s refusal to hear Chevron’s appeal is not a decision on the merits, and does not foreclose the relief that Chevron ultimately seeks (i.e., a ruling that the Ecuadorean judgment is unenforceable in the US).  Nor does the Second Circuit’s ruling vacating the district court’s injunction take issue with the district court’s conclusions of fact that the Ecuadorean judgment was likely procured by the plaintiff’s fraudulent conduct. It merely ruled that until the plaintiffs actually attempt to enforce the judgment in this country, Chevron can’t get an injunction under a particular statute.

Of course, DiNapoli claims that Chevron’s Ethics Complaint is “Baseless”.  But it is difficult to understand why he has publicly urged Chevron to settle the case when a Federal District Court Judge has (along with many other courts, apparently) have ruled that there are serious questions as to whether the plaintiffs procured the Ecuadorean judgment by fraud and/or whether that judgment is enforceable given that Ecuadorean courts are notoriously corrupt.  It doesn’t appear that DiNapoli has ever explained why he believes that Chevron should settle at this point, nor discussed the district court’s rulings with respect to the various frauds alleged.

Which brings us back to Chevron’s allegations that DiNapoli has criticized Chevron because the plaintiffs and plaintiffs’ lawyers in the case have contributed to his campaign and wined and dined his staff.  In his public comments, DiNapoli has dodged the point, claiming that the Comptroller’s Office had taken the same position under Hevesi.  That’s not exactly convincing, since Hevesi just got paroled after being convicted for pimping out the Comptroller’s Office to the highest bidders.

As the sole trustee of the State’s Pension Fund, DiNapoli is obligated to have a good reason.  But it simply doesn’t make much sense for DiNapoli to criticize Chevron (and potentially depress its share price and also the value of the State Pension Fund’s investment in Chevron), particular in light of the allegations that the Ecuadorean judgment was procured by the plaintiffs’ lawyers’ fraud.  How does this help the beneficiaries of the State Pension System?

 

Posted in Thomas DiNapoli, Uncategorized

Phantom Pension Reform, or The Curious Case of AG Cuomo’s T.R.U.S.T. Legislation for Pension Fund Reform

Nov 21, 2012 ~ Written by admin

In light of today’s ethics complaint against NY State Comptroller Thomas DiNapoli for alleged “pay to play” practices, I’d like to revisit the fate of the last major effort to drain the swamp of corruption otherwise known as the New York State Comptroller’s Office.

Back in October 2009, then-Attorney General Andrew Cuomo announced draft legislation with the somewhat corny acronym T.R.U.S.T., which stood for the “Taxpayers’ Reform for Upholding Security and Tranparency” Act.  Behind that awkward and somewhat vague title was a hard-hitting bill designed to completely end the “pay to play” culture that has surrounded the Fund for over 20 years.  Here is a .pdf of the Draft Trust Bill

Had the Legislature enacted the Trust Bill, it would have instituted the voluntary reforms that several major private equity firms agreed to in the wake of the pay-to-play scandals that engulfed the Hevesi administration and sent Hevesi and his top aide Hank Morris to prison.  The anti-pay to play provisions in the bill were, in large part, modeled on SEC Rule 206(4)-5, which prohibited:

  • an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees make a contribution to certain elected officials or candidates.
  • an adviser from providing or agreeing to provide, directly or indirectly, payment to any third party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third parties are registered broker-dealers or registered investment advisers, in each case themselves subject to pay to play restrictions, or
  • an adviser from soliciting from others, or coordinating, contributions to certain elected officials or candidates or payments to political parties where the adviser is providing or seeking government business

Compare that to Section 1112 of the draft TRUST Bill:

§ 1112. No campaign contributions or solicitations.

1. An investment firm shall not accept, manage or retain an investment from, or provide investment management services to, the retirement system within two years after a contribution to a retirement system official is made by:

a. the investment firm;

b. any related party or relative of a related party, including, but not limited to, a person who becomes a related party within two years after a contribution to a retirement system official; or

c. the investment firm, related party or relative of a related party to any political party to aid a retirement system official, or to any political action committee controlled by the investment firm, related party, or relative of a related party of an investment firm to aid a retirement system official.

2. An investment firm, related party, or relative of a related party shall not, directly or indirectly, solicit any person or political action committee to make, solicit or coordinate any contribution to a retirement system official if the investment firm is seeking or has accepted an investment from the retirement system or is currently providing or seeking to provide investment management services to the retirement system.

3. Subdivision two of this section shall not apply to a contribution made by a related party or relative of a related party to a retirement system official for whom the related party or relative of a related party was entitled to vote at the time of the contribution and that does not exceed three hundred dollars from each person or entity in the aggregate to any retirement system official, per election.

The truly radical reform proposed by the TRUST bill, however, was its removal of the Comptroller as the sole trustee of the Common Retirement Fund.  By replacing the Comptroller with a 13-member Board (which the Comptroller would still chair), the bill would have diffused any one person’s power and decision-making authority over the Fund and provided more transparency and expertise with respect to the Fund’s investment decisions.  In addition, the board members would be insulated from inappropriate outside influence by the fact that each member would be a fiduciary to the Fund and be required to disclose any conflicts of interest.

Of course, DiNapoli opposed this reform legislation, complaining that he had already instituted most of the reforms by his own executive orders, and threatening that he would challenge the constitutionality (under the state constitution, of course) of any attempt to remove him as the Pension Fund’s sole trustee.

A full discussion of the source of the Comptroller’s authority over the Common Retirement Fund — and the Legislature’s authority to replace the Comptroller as sole trustee with a Board of Trustees — is far beyond the scope of this humble blog.  For those who are interested in this “debate”, I recommend that you read Andria Bentley’s excellent 2009 Comment in the Albany Law Journal, which definitively establishes that the Legislature has that authority.

In short, DiNapoli and the special interests who make a handsome living off of the Common Retirement Fund (i.e., the investment firms who seek investments from the Fund and the lawyers that seek to represent the Fund in various litigations) are dead wrong that it would take an amendment to New York’s Constitution to remove the Comptroller as the Fund’s sole trustee.

So, whatever happened to the TRUST Bill?

Well, as this blogger explained back in November 2009, despite all the hoopla, the bill was never introduced by any of its supposed sponsors in the New York Senate or Assembly.  My own searches in the legislative bill databases have also turned up no record of such a bill ever being introduced in either house of the Legislature.

However, when he was running for New York Governor, Cuomo Pledged to work toward enacting legislation that would accomplish the goals of the Trust Bill.

We’re still waiting Governor!!!

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Same Old Story: DiNapoli Accused of Pay-to-Play

Nov 21, 2012 ~ Written by admin

According to the New York Post, and the Albany Times Union, oil-giant Chevron has filed a complaint with JCOPE against NY Comptroller Thomas DiNapoli.  According to the Post story, the complaint alleges that:

DiNapoli has engaged in an “apparent quid pro quo” by accepting thousands in contributions in return for his efforts on behalf of plaintiffs in an environmental case in Ecudaor.

“DiNapoli has apparently misused his official position,” according to the complaint, “Comptroller DiNapoli and his office have aided a fraud apparently in return for money, in the form of campaign contributions.”

Courtesy of the Albany Times Union, here is a helpful Summary of Chevron’s JCOPE Complaint.

Lest we be too harsh on DiNapoli, it’s best to remember that he only appears to be following in a long tradition of highly questionable — and at times downright illegal — practices at the Comptroller’s Office.  Every Comptroller since Ned Regan has come under scrutiny for engaging in pay to play of one form or another.

Here’s an 1990 opinion piece from the New York Times lambasting Ned Regan after the “disclosure of a memorandum written by one of his senior aides that proposed a fund-raising strategy under which ‘those who give will get'” and the subsequent disclosure that, in 1988, “Mr. Regan paid consultants $260,000 for helping him invest state pension funds in a $25 million Boston office building. Just three weeks before the deal closed, the firm contributed $10,000 to Mr. Regan’s campaign.”

Then, there’s this New York Times 1998 report, detailing Carl McCall’s choice of three law firms that were chosen over 11 others to represent the $105 billion state pension fund in lucrative contingency-fee cases, after which the firms and their lawyers gave “$165,000 to Mr. McCall’s re-election campaign.”

We all know what happened at the Comptroller’s Office under Alan Hevesi, who was just granted parole after his conviction for wholesale corruption.

Fast forward to DiNapoli.  Back in 2009, the New York Times took him to task for promising reform at the Comptroller’s Office, yet “routinely accept[ing] contributions from those seeking to do business with his office, from investment firms, executives and law firms to intermediaries known as placement agents” and for also “taking money from law firms that do business with or are seeking business with the fund.  Seven partners at the law firm Labaton Sucharow contributed $42,500 to DiNapoli 2010 after the firm was hired by Mr. DiNapoli to represent the office in litigation against Countrywide, the troubled mortgage lender.”

The New York Daily News reported similarly troubling news that DiNapoli, who vigorously opposes Governor Cuomo’s proposed public employee pension reforms:

Got a quarter of his campaign cash from the unions he is defending . . . . Of the $5.34 million DiNapoli has raised since taking office in 2007, labor has chipped in $1.4 million, or 26% of his total haul, according to an analysis done for the Daily News by the New York Public Interest Research Group. That percentage is three times more than the 8.5% average that labor donations made up in the fund-raising for all state candidates since 2006, the NYPIRG review found.

Long story short, DiNapoli is profiting off of the conflicts of interest that have plagued the Comptroller’s office for more than 20 years.  Until New York replaces the Comptroller as the sole trustee of New York’s pension fund — or bans contributions from those doing business with the fund — pay to play will continue at the Comptroller’s office unabated.

 

 

 

 

 

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Parole Denied for Hank Morris

Nov 17, 2012 ~ Written by admin

The NY Daily News reports that Hank Morris will remain behind bars for another year, after his parole bid was denied.

Not sure why Hevesi will be home for Christmas, while Morris is in for another year, but I won’t be crying myself to sleep over the discrepancy.

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