Embattled private equity advisor Aldus Equity has agreed to pay $1 million in restitution and pay back $5.4 million in management fees it received from New York State’s huge public pension to settle its role in state Attorney General Andrew Cuomo’s wide-ranging pension pay-to-play investigation.
The firm once advised clients like the New Mexico State Investment Council, Connecticut’s pension system and the Fort Worth city pension system on private equity. Aldus, founded by now-disgraced advisor Saul Meyer, was also sued by New York State Common Retirement Fund last year after its leading role in the pension scandal was revealed.
Aldus also faced charges by the US Securities and Exchange Commission last year, and it’s unclear if the firm has settled with the agency. At the time, an attorney for Aldus, Matthew Orwig, lambasted the SEC for the suit.
“Aldus’ recommendations are always made based on careful analysis of investment performance,” Orwig said at the time. “The SEC action against Aldus Equity was wrong, premature and, I believe, careless. It was designed to get headlines, not because investigators had completed a review of the entire record.
Meyer, the founder of Dallas-based Aldus, pleaded guilty in October 2009 to fraud charges relating to the pay-to-play investigation. He is scheduled to be sentenced 16 December.
Meyer admitted to having conducted due diligence on and recommending an investment in the Strategic Co-Investment Partners, a partnership to which his client, New York State’s $132 billion pension fund, committed $750 million. Meyer knew that political operative and friend of pension’s senior leadership, Barrett Wissman, would receive a share of the economics in the partnership.
Meyer also agreed to share economics on a separate pension commitment to the Aldus/NY Emerging Fund with Henry Morris, another political operative and supporter of New York Comptroller Alan Hevesi, and former pension chief investment officer David Loglisci.
Morris promised Aldus he could secure a pension fund investment if the firm agreed to pay fees to Morris. In total, Aldus paid Morris over $300,000 in fees.
In December 2004, the New York’s pension fund made an initial capital commitment of $175 million into the Aldus/NY Emerging Fund and subsequently committed a total of $475 million in capital.
Last month, Morris and Hevesi entered guilty pleas for their involvement in the investigation.
Morris pleaded guilty last month, agreeing to repay $19 million in fees he received for steering investments from colleagues and friends to the New York State Common Retirement Fund.
Morris also faces up to four years in prison. His sentence will be determined on 1 February.
Hevesi also pleaded guilty to a felony charge in connection to the scandal.
Hevesi, who served as New York comptroller from 2003 to his resignation in 2006, admitted to accepting nearly $1 million in exchange for approving a $250 million investment in Markstone Capital Partners from New York Common. Hevesi also acknowledged that, while serving as state comptroller, he was aware of Henry Morris’ using the pension fund for a pay-to-play scheme.