Securities Law Blog

According to the New York Times, an inquiry into corruption at the New York State pension fund continued to broaden nationwide when a top consultant to pension funds around the country was charged with a fraud-related felony late last week by the office of the New York Attorney General.Skip to next paragraph

The consultant, Saul Meyer of Aldus Equity, a Dallas-based firm, was also charged with violations of securities laws by the Securities and Exchange Commission as part of what the agency called “a multimillion-dollar kickback scheme involving New York’s largest pension fund.” The commission also charged Aldus Equity with multiple securities violations.

Mr. Meyer, 38, is a founder of Aldus, which has advised several of the nation’s largest pension funds, including those overseen by New York State and the city of Los Angeles. Mr. Meyer surrendered to the authorities in New York and pleaded not guilty to the fraud-related felony, a violation of the Martin Act, a sweeping state securities statute, on Thursday in Manhattan Criminal Court. A judge ordered him released on $200,000 bail.

In a teleconference on Thursday, Mr. Cuomo said his investigation, which is continuing, had uncovered what amounts to a conspiracy involving politicians, professional investors and consultants to defraud public pension funds in New York and other states by paying millions of dollars in kickbacks in exchange for access to the funds. Investment firms reap lucrative fees by managing portions of the funds.

“I learned years ago that it’s far easier for a prosecutor to file a complaint than to prevail at a trial,” said Paul L. Shechtman, Mr. Meyer’s lawyer. “Time and the evidence will show that Saul Meyer did nothing wrong.”

In a statement, a lawyer for Aldus, Matthew D. Orwig, accused the S.E.C. of conducting a “trial by news release” and called its action “appalling and careless.”

Aldus is accused of helping Daniel Hevesi, former New York Comptroller Alan Hevesi’s son, profit from a deal in New Mexico at the same time that the New York comptroller’s office, then run by his father, agreed to increase by $200 million the amount of pension money overseen by Aldus.

Laura A. Brevetti, a lawyer for Daniel Hevesi, said on Thursday that her client did not have “any knowledge of a so-called quid pro quo arrangement for his benefit.” Bradley D. Simon, a lawyer for Alan Hevesi, said his client did not engage “in a quid pro quo to benefit his son.”

Hank Morris, a former political consultant to Alan Hevesi, also received money as part of deals in New Mexico and California. Mr. Morris was accused last month in an indictment of demanding millions of dollars from investment firms in exchange for access to the New York State pension fund. He has pleaded not guilty.

“We are purposefully and aggressively looking to cooperate with other enforcement agencies across the country,” Attorney General Cuomo said. “This is sort of like when you pull a thread on the sweater and that one thread starts to unravel the entire fabric.”

“We’re pulling threads and it turns out the other end of the thread is in New Mexico or Connecticut or Illinois or in California,” he said.

In court filings, the S.E.C. has described a range of improper transactions undertaken in connection with an investment pool run by Aldus for the New York State pension fund. Among other things, Aldus agreed to split fees with Mr. Morris as part of its advisory deal with the pension fund, the filings said.

Mr. Hevesi, who resigned as comptroller in late 2006 after pleading guilty to an unrelated felony, has not been charged in the case.