Riverstone Holdings, the New York-based private equity firm focused on energy investment, will pay a $30 million “restitution” for its involvement in the New York pay-to-play scandal, state attorney general Andrew Cuomo announced today.
The agreement covers the firm, but co-founder David Leuschen is “carved out” of the deal, according to a source close to the matter. In a press conference call today, Cuomo reportedly said with regard to Leuschen: “It is still an open matter. . . It is still a continuing matter with the office.”
The $30 million payment will be “returned” to the New York State Common Retirement Fund, according to the terms of the restitution. Riverstone is accused by the attorney general’s office and by the Securities Exchange Commission of having paid some $10.1 million in fees to an entity controlled by political operative Henry Morris in return for Morris securing capital commitments from New York State Common. At the time the fund was overseen by Comptroller Alan Hevesi, whose chief investment officer was David Loglisci.
To date, six people have been charged in the investigation, including Morris, Loglisci and Morris associate Barrett Wissman. In addition, Saul Meyer, founder of Dallas private equity advisory firm, Aldus Equity, has been arrested and charged with entering into an allegedly fraudulent advisory arrangement with Morris and the New York pension.
The announcement comes one month after Cuomo’s office secured a $20 million payment from The Carlyle Group, resolving its own role in the scandal. It is unclear whether that payment will go to New York State Common.
As with the Carlyle arrangement, Riverstone has agreed to conform to a “code of conduct” provided by Cuomo’s office, which, among other restrictions, bans the use of placement agents when doing business with US public pensions.
Riverstone today released a statement that read in part: “Riverstone strongly supports the efforts by the Office of the Attorney General of the State of New York to implement reforms in the public pension fund investment system. . . For our investors and the firm, we believe we have reached the right decision through this resolution.”
A report in the New York Times today, sourcing an unnamed person within Cuomo’s office, said that Riverstone’s payment was larger than the one agreed to by Carlyle because Riverstone is “the focus of the activities that Mr. Cuomo was trying to root out”.
Cuomo’s office found that Riverstone hired Searle & Company, a placement business controlled by Morris, to secure a total of $530 million for three Carlyle/Riverstone funds. The two firms co-brand their energy funds, which are now called Riverstone/Carlyle.
The fees paid to Searle were later shared with Wissman, an arrangement that was not disclosed to Carlyle, according to the attorney general’s statement.
In addition, Cuomo’s office alleges that part of the pay-to-play activity includes the detail that shortly after a $150 million commitment was made to a Carlyle/Riverstone fund in 2003, an unnamed principal of Riverstone invested $100,000 in low-budget film, called “Chooch”, which was being produced by Loglisci’s brother.
Cuomo’s announcement also notes that Riverstone employees contributed a total of $40,000 to Hevesi’s re-election campaign in 2004. The code of conduct bans political donations from investment managers to politicians connected to public pensions.
In today’s conference call, Cuomo reportedly said that his investigation is in its “fourth inning” and that “new developments will be coming down the road”.
Riverstone is currently in the market with its fourth global energy and power fund, and has raised roughly $6 billion to date.