US government joins growing pay-to-play investigation

The US attorney in New Mexico is demanding documents from New Mexico’s $11.8bn State Investment Council relating to investment activity and specifically in connection to Aldus Equity, the embattled financial advisor caught up in pension pay-to-play scandal rocking the private equity world.

The US federal government has subpoenaed the $11.8 billion New Mexico State Investment Council for documents relating to its investment activities, including those related to Aldus Equity, which has been charged in a wide-ranging pension kick-back scandal.

The US attorney’s office in Albuquerque issued the subpoena at the end of April, according to a spokesperson for the SIC.

New Mexico SIC, which is made up of the state’s severance tax fund, land grant fund and other endowment funds, is determining whether the subpoena is a public document, the spokesperson said, declining to go into details about the request.

The US attorney’s subpoena broadens an investigation launched by New York attorney general Andrew Cuomo. Some members of the SIC staff have spoken to the Federal Bureau of Investigation and the SEC, the spokesperson said.

The SIC found itself caught up in a growing kick-back scandal that has resulted in charges lodged against six people so far. Allegedly, Henry Morris, a former political operative of former New York comptroller Alan Hevesi, worked with David Loglisci, former chief investment officer of the $122 billion New York State Common Retirement Fund, to collect sham finder’s fees from investment firms looking for commitments from the pension.

Morris and Loglisci allegedly also worked the scheme in New Mexico with Aldus Equity, which was hired by New York Common to run the pension’s emerging managers fund in 2004 in exchange for providing Morris with kick-backs on fees.

In New Mexico, Aldus’ founder, Saul Meyer, is accused of helping one of Hevesi’s sons, Dan Hevesi, secure a $25 million commitment from the SIC while Aldus was employed as a private equity advisor to the endowment. Aldus allegedly assisted Hevesi’s son at the same time the firm was looking for business from New York Common, controlled by Hevesi at the time.

Aldus has been charged by the SEC and Meyer is charged criminally by New York attorney general Andrew Cuomo. New Mexico SIC fired Aldus and Governor Bill Richardson ordered the endowment to create policies for more disclosure. Until the policies are in place, Richardson has banned the endowment from making alternative investments.

New Mexico will unveil its disclosure policies at its board meeting 26 May, the spokesperson said.