SEC Amends Its Complaint In NY Political Corruption/Kickback Case

In what is essentially a New York state political corruption case, the SEC amended its complaint adding two more individuals and three more entities as defendants. Last month, as discussed here, the SEC filed an action against Henry Morris, David Loglisci and three entities controlled by Mr. Morris. The complaint alleged a fraudulent scheme running 2003 to 2006 to obtain sham finder or placement agent fees in connection the investment of billions of dollars of New York state retirement funds with private equity firms and hedge fund managers. Mr. Loglisci is the former Deputy Comptroller and Chief Investment Officer of the New York State Common Retirement Fund. Mr. Morris is a top political advisor and chief fundraiser for former New York State Comptroller Alan Hevsi. SEC v. Morris, Civil Action No. 09 CV 2518 (S.D.N.Y. Filed Mar. 19, 2009).

The amended complaint adds as defendants Raymond Harding, Barrett Wissman and three entities allegedly used by Mr. Wissman in the scheme — Flandana Holdings Ltd., Tuscany Enterprises LLC and W Investment Strategies LLC.

According to the amended complaint, Mr. Wissman is a long time family friend of defendant Loglisci. He worked with Messrs. Loglisci and Morris to extract sham finder fee payments from the investment managers. Mr. Wissman, the SEC claims, was paid million of dollars in sham fees. Mr. Harding, a political ally netted $800,000 in sham fees through deals he was inserted into by defendants Morris and Loglisci. Some fee payments were funneled through off shore entities to conceal them.

In partial settlement of this action, defendants Wissman and Flandana Holdings consented to the entry of permanent injunctions prohibiting future violations of the antifraud provisions. Issues regarding disgorgement and penalties were deferred. HFV Management and HFV Asset Management also consented to the entry of permanent injunctions prohibiting future violations of Securities Act Sections 17(a)(2) and (3) and Section 206(2) of the Advisers Act. The two entities also agreed to pay a penalty in the aggregate amount of $150,000.

The amended complaint filed by the Commission follows the filing of criminal charges against Raymond Harding and Barrett Wissman by New York Attorney General Andrew Cuomo. It is based on essentially the same allegations. In that action, Mr. Wissman pled guilty to criminal violations of the New York Martin Act. Mr. Wissman will pay $12 million in penalties and forfeiture to New York State. His sentencing date has not been set.