Source: http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b
Timestamp: 2017-03-29 16:47:05
Document Index: 796936427

Matched Legal Cases: ['§ 78', '§78', '§ 78', '§ 240', '§ 78', '§78', '§ 240', '§ 240', '§ 80', '§ 77', '§ 80', '§ 78', '§78', '§ 240', '§ 77', '§ 80', '§ 80', '§ 77', '§ 78', '§ 80', '§ 78', '§ 77', '§ 77', '§ 80', '§ 77', '§78', '§ 80', '§78', '§ 240', '§ 78', '§78', '§ 240', '§78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§78', '§ 78', '§78', '§ 240', '§78', '§ 240', '§ 78', '§ 240', '§ 77', '§ 77', '§ 80', '§ 80', '§ 77', '§ 77', '§ 80', '§ 80', '§ 80', '§ 80', '§ 80', '§ 80', '§ 80', '§ 80', '§ 80', '§ 41', '§ 80', '§ 80', '§ 78', '§ 240', '§ 77', '§ 80', '§ 77', '§ 80', '§ 77', '§ 80', '§ 77', '§ 78', '§ 78', '§ 78', '§ 80']

SEC complaint against Henry Morris, David J. Loglisci, Barrett N. Wissman, Raymond B. Harding, Nosemote LLC, Pantigo Emerging LLC, Purpose LLC, Flandana Holdings Ltd., Tuscany Enterprises LLC, W Inves | SEC v. Henry Morris, David J. Loglisci, Barrett N. Wissman, Raymond B. Harding, Nosemote LLC, Pantigo Emerging LLC, Purpose LLC, Flandana Holdings Ltd., Tuscany Enterprises LLC, W Investment Strategie | Doug Cornelius - JDSupra
SEC v. Henry Morris, David J. Loglisci, Barrett N. Wissman, Raymond B. Harding, Nosemote LLC, Pantigo Emerging LLC, Purpose LLC, Flandana Holdings Ltd., Tuscany Enterprises LLC, W Investment StrategieSEC complaint against Henry Morris, David J. Loglisci, Barrett N. Wissman, Raymond B. Harding, Nosemote LLC, Pantigo Emerging LLC, Purpose LLC, Flandana Holdings Ltd., Tuscany Enterprises LLC, W Inves
The SEC charged a former New York state political party leader and a former hedge fund manager in connection with a multi-million dollar kickback scheme involving New York's largest pension fund.
The SEC alleges that Raymond Harding and Barrett Wissman, a former hedge fund manager, participated in a scheme that extracted kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund. The SEC previously charged Henry "Hank" Morris and David Loglisci for orchestrating the fraudulent scheme to enrich Morris and others with close ties to them. Specifically, the SEC alleges that Wissman arranged some of the payments made to Morris, and Wissman was rewarded with at least $12 million in sham "finder" or "placement agent" fees. Harding received approximately $800,000 in sham fees that were arranged by Morris and Loglisci.
Download PDF REGIONAL DIRECTOR York Financial Center, Suite New York 10281 (212) 336-COURT DAYID J. LOGLISCI, BARRETT N. B. NOSEMOTE LLC, LLC, PURPOSE HOLDINGS LTD., TUSCANY LLC, STRATEGIES MANAGEMENT, L.P., and HFV ASSET L.P., Plaintiff Securities and Exchange Commission ("Commission"), for its amended complaint against defendants Henry Morris ("Morris"), David J. Loglisci ("Loglisci"), Barrett N. Wissman ("Wissman"), Raymond B. Harding ("Harding"), Nosemote LLC ("Nosemote"), Pantigo Emerging LLC ("Pantigo"), Purpose LLC ("Purpose"), Flandana Holdings Ltd. ("Flandana"), Tuscany Enterprises LLC ("Tuscany"), W Investment Strategies LLC ("W Investment"), HFV Management, L.P. ("HFV Management"), and HFV Asset Management, L.P. ("HFV Asset Management") (collectively, the "Defendants"), alleges as follows: J JAMES CLARKSON ACTING REGIONAL DIRECTOR Attorney for Plaintiff SECURITIES AND EXCHANGE COMMISSION New York Regional Office Three World Financial Center, Suite 400 New York, New York 10281 (212) 336-1100 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES AND EXCHANGE COMMISSION, Plaintiff, 09-CV-2518 (CM) -against-AMENDED COMPLAINT HENRY MORRIS, DAVID J. LOGLISCI, BARRETT N. WISSMAN, RAYMOND B. HARDING, NOSEMOTE LLC, PANTIGO EMERGING LLC, PURPOSE LLC, FLANDANDA HOLDINGS LTD., TUSCANY ENTERPRISES LLC, W INVESTMENT STRATEGIES LLC, HFV MANAGEMENT, L.P., and HFV ASSET MANAGEMENT, L.P., Defendants. Plaintiff Securities and Exchange Commission ("Commission"), for its amended complaint against defendants Henry Morris ("Morris"), David J. Loglisci ("Loglisci"), Barrett N Wissman ("Wissman"), Raymond B. Harding ("Harding"), Nosemote LLC ("Nosemote"), Pantigo Emerging LLC ("Pantigo"), Purpose LLC ("Purpose"), Flandana Holdings Ltd. ("Flandana"), Tuscany Enterprises LLC ('Tuscany"), W Investment Strategies LLC ("W Investment"), HFV Management, L.P. ("HFV Management"), and HFV Asset Management, L.P ("HFV Asset Management") (collectively, the "Defendants"), alleges as follows: Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b,.:.,. 1. fraudulent to extract kickbacks from firms seeking to manage held by the New York in trust for New York state employees, retirees Morris, Loglisci, Wissman and Harding initiated, directed, implemented from the During the relevant period, Loglisci served as the State ofNew Deputy Officer ("Morris was the advisor and chieffundraiser ofNew York's from January 2003 through December 2006. Wissman was a hedge fund manager during the relevant is a longtime family friend Harding is longtime associate described below, the Defendants' scheme and resulted in Retirement being invested with of enriching the Defendants. Loglisci caused of dollars with investment firms thattogether paid millions of Morris, Wissman, Harding and in the form ofsham "finder" or "placement investments from the These payments Morris, Wissman, Harding and others were, in fact, little more than kickbacks that were made quidpro or were otherwise fraudulently Morris, Wissman, Harding and others who received these sham bona fide finding, placement or other services in exchange for the payments, and SUMMARY OF ALLEGATIONS 1. This action involves a raudulent scheme to extract kickbacks rom investment management irms seeking to manage investment assets held by the New York State Common Retirement Fund ("Retirement Fund") in trust for New York state employees, retirees and other beneficiaries. Moris, Loglisci, Wissman and Harding initiated, directed, implemented and/or benefited rom the scheme. Duing the relevant peiod, Loglisci served as the State of New York's Deputy Comptroller and Chief Investment Officer ("CIO"), and Moris was the top political advisor and chief fundraiser for Alan Hevesi, who was the State of New York's Comptroller rom January 2003 through December 2006. Wissman was a hedge fund manager duing the relevant period and is a longtime family riend of Loglisci, while Harding is the former leader of the New York State Liberal Party and a longtime political associate of Morris. As descibed below, the Defendants' scheme corrupted the integrity of the Retirement Fund's investment processes and resulted in Retirement Fund assets being invested with the purpose of eniching the Defendants. 2. Pursuant to the Defendants' scheme, Loglisci caused the Retirement Fund to invest billions of dollars with investment management firms that together paid millions of dollars to Moris, Wissman, Harding and others in the form of sham "inder" or "placement agent" fees in order to obtain those investments rom the Retirement Fund. These payments to Moris, Wissman, Harding and others were, in fact, little more than kickbacks that were made pursuant to undisclosed quid pro quo arrangements or were otherwise raudulently induced by the Defendants. Moris, Wissman, Harding and others who received these sham payments did not perform bonaide inding, placement or other services in exchange for the payments, and 2 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bLoglisci would not approve a Retirement Fund investment in those instances unless Morris, were paid by the investment management firm. such instances, the investment management firm personnel knew, or were at least reckless in not that Loglisci would not approve the proposed investment absent an agreement Morris, Wissman or certain other persons. In fact, the Defendants often arranged for Morris, to receive "finder" or "placement agent" fees on deals had a relationship with negotiating an investment with Loglisci. In one instance, Wissman caused two investment management firms with which he was affiliated at the time, defendants HFV Management and Asset pay "fees Morris even though Wissman had a Loglisci and had already discussed investment 3. To avoid detection of their scheme, Morris and Wissman often directed the investment managers to make payments to multiple offshore and other entities controlled by Morris, including defendants Nosemote, Pantigo, and Purpose (collectively the "Morris Entities"), or to entities controlled by Wissman, including defendants Flandana, Tuscany, and W (collectively "Entities"). In some Loglisci, Morris and Morris's the from the investment firms paid the fees by making misrepresentations about Morris's involvement and covertly using one Morris or Wissman Entities as to Morris. 4. Although Loglisci knew the true purpose of the payments at issue, neither he nor investment firms that made the payments, the true nature of the payments or the underlying arrangements to relevant members of the 3 * Loglisci would not approve a Retirement Fund investment in those instances unless Moris, Wissman, Harding or certain others were paid by the investment management irm. In many such instances, the investment management irm personnel knew, or were at least reckless in not knowing, that Loglisci would not approve the proposed investment absent an agreement to pay Moris, Wissman or certain other persons. In fact, the Defendants oten arranged for Moris, Wissman, Harding or others to receive "inder" or "placement agent" fees on deals in which the investment manager already had a relationship with the Retirement Fund or was already negotiating an investment with Loglisci. In one instance, Wissman caused two investment management irms with which he was afiliated at the time, defendants HFV Management and HFV Asset Management, to pay "finder" fees to Moris even though Wissman had a close relationship with Loglisci and had already discussed the proposed investment with him. 3. To avoid detection of their scheme, Moris and Wissman oten directed the investment managers to make payments to multiple offshore and other entities controlled by Moris, including defendants Nosemote, Pantigo, and Purpose (collectively the "Moris Entities"), or to entities controlled by Wissman, including defendants Flandana, Tuscany, and W Investment (collectively the "Wissman Entities"). In some instances, Loglisci, Moris and Wissman concealed Moris's role in the transaction rom the investment management irms that paid the fees by making misrepresentations about Moris's involvement and covertly using one of the Moris or Wissman Entities as an intermediary to funnel payments to Moris. 4. Although Loglisci knew the true purpose of the payments at issue, neither he nor any of the Defendants, nor the investment management irms that made the payments, disclosed the true nature of the payments or the underlying arrangements to relevant members of the Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bComptroller's investment staff or to the Retirement Fund's Investment Advisory Committee lAC"), a statutory with monitoring the Comptroller's office regarding the Retirement Fund's investments, reviewing the Retirement Fund's investment policies and making any necessary recommendations. As a result of those omissions and the Defendants' scheme, relevant members of the Comptroller's investment staff and the lAC were deprived of material information that they needed to carry out their duties and the Retirement thus deprived material information when making investment decisions, Loglisci's decision to invest Retirement Fund assets with certain investment management firms was based on the firms' willingness to enrich Morris, Wissman, Harding and certain others, rather than on Loglisci's independent assessment of the merits of such an investment free from any conflicts of interest. The lAC and relevant members of the Comptroller's staffwere unaware that Loglisci ensured that those investment managers that made the requisite payments Morris, Wissman, and Harding, as as designated by Morris were rewarded with very lucrative investment management contracts and denied business to those investment managers that declined to make such payments. 5. By virtue ofthe foregoing conduct: (a) Morris, Loglisci, Wissman, the Morris Entities, and the Wissman directly or indirectly, singly or in concert, violated Section 1O(b) of the Securities Exchange Act [15 US.C. § 78j(b)] and Rule 10b-5 thereunder 17 R 240.10b5]; ofthem ofthe 15 US.c. § e»), for aiding and abetting the of Section lOeb) ofthe Exchange 15 US.§78j(b)] and Rule 10b-5 thereunder Comptroller's investment staff or to the Retirement Fund's Investment Advisory Committee ("IAC"), a statutory body charged with monitoing and advising the Comptroller's ofice regarding the Retirement Fund's investments, reviewing the Retirement Fund's investment policies and making any necessary recommendations. As a result of those omissions and the Defendants' scheme, relevant members of the Comptroller's investment staff and the IAC were depived of mateial information that they needed to carry out their duties and the Retirement Fund was thus depived of mateial information when making investment decisions, i.e. that Loglisci's decision to invest Retirement Fund assets with certain investment management irms was based on the irms' willingness to enich Moris, Wissman, Harding and certain others, rather than on Loglisci's independent assessment of the meits of such an investment ree rom any conflicts of interest. The IAC and relevant members of the Comptroller's staff were unaware that Loglisci ensured that those investment managers that made the requisite payments to Moris, Wissman, and Harding, as well as other recipients designated by Moris and Loglisci, were rewarded with very lucrative investment management contracts and denied business to those investment managers that declined to make such payments. 5. By virtue of the foregoing conduct: (a) Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities directly or indirectly, singly or in concert, violated Section 10(b) of the Secuities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R § 240.10b-5]; and each of them is also liable in the alternative, pursuant to Section 20(e) of the Exchange Act [15 U.S.C. § 78t(e)], for aiding and abetting the violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] committed by other 4 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bdescribed Act US.c. Section ofthe US.[17 C.F.R. § 240.10b-5] committed by Morris Morris, Wissman, the Morris Entities, and the Wissman 17(a) of the Securities Act of ("Securities [15 US.77q(Management 3) of Securities and Advisers 1940 [15 US.§ 80b-and Morris, Loglisci, Wissman, the Morris Entities, and the Wissman liable 206(2) of Advisers US.c. 1) and (2)] by certain persons described ofthe is permanently restrained and enjoined, they will in practices, transactions and courses ofbusiness set forth in and acts, ofbusiness of similar AND VENUE brings this action authority conferred Securities Act [15 US.c. § 77t(b)], Section 21(d) of the Exchange 15 US.c. 15 S.§ 80b-9(d)], seeking to restrain from engaging in the acts, practices, transactions and courses alleged herein. Commission also seeks a final judgment ordering 5 Defendants and by other persons descibed herein; (b) Harding is liable pursuant to Section 20(e) of the Exchange Act [15 U.S.C. § 78t(e)] for aiding and abetting violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] committed by Moris and Loglisci; (c) Moris, Wissman, the Moris Entities, and the Wissman Entities directly or indirectly, singly or in concert, violated Section 17(a) of the Secuities Act of 1933 ("Secuities Act") [15 U.S.C. § 77q(a)]; (d) HFV Management and HFV Asset Management violated Sections 17(a)(2) and 17(a)(3) of the Secuities Act and Section 206(2) of the Investment Advisers Act of 1940 ("Advisers Act") [15 U.S.C. § 80b-6(2)]; and (e) Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities are liable for aiding and abetting violations of Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. § 80b-6(l) and (2)] by certain persons described herein. 6. Unless each of the Defendants is permanently restrained and enjoined, they will again engage in the acts, practices, transactions and courses of business set forth in this complaint and in acts, practices, transactions and courses of business of similar type and object. JURISDICTION AND VENUE 7. The Commission bings this action pursuant to the authoity conferred by Section 20(b) of the Secuities Act [15 U.S.C. § 77t(b)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] and Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)], seeking to restrain and enjoin permanently the Defendants rom engaging in the acts, practices, transactions and courses of business alleged herein. The Commission also seeks a inal judgment ordeing certain of the Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87btheir ill-prejudgment interest thereon, and ordering ofthe to pay civil to 21(ofthe Act US.C. US.of of pursuant to Section 20(d) of the Securities [15 US.c. § and ofthe US.jurisdiction venue lies in this District, 20(d) and 22(a) ofthe Securities Act US.27 ofthe Exchange Act Section 214 of Act US.c. 14]. directly or indirectly, use of the means or instruments of transportation or communication or instrumentalities commerce, or of mails, ofbusiness alleged herein. Some these practices and courses of business occurred in the Southern District ofNew of the Defendants transacted business during the relevant period. ofNew York an office in New York, office during the relevant period. In addition, Morris and Harding resided and maintained offices in New York, New York, and the principal places of business ofNosemote and Purpose in New York, age 55, in New York Hampton, New York. was a registered representative associated Searle Co. ("Searle"), a broker dealer and investment adviser. Morris Defendants to disgorge their ill-gotten gains and pay prejudgment interest thereon, and ordeing certain of the Defendants to pay civil money penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and/or Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and in the case of certain of the Defendants, pursuant to Section 20(d) of the Secuities Act [15 U.S.C. § 77t(d)] and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]. 8. This Court has juisdiction over this action, and venue lies in this Distict, pursuant to Sections 20(d) and 22(a) of the Secuities Act [15 U.S.C. §§ 77t(d) and 77v(a)], Sections 21(d) and 27 of the Exchange Act [15 U.S.C. §§78u(d) and 78aa], and Section 214 of the Advisers Act [15 U.S.C. § 80b-14]. The Defendants, directly or indirectly, singly or in concert, have made use of the means or instruments of transportation or communication in, and the means or instrumentalities of, interstate commerce, or of the mails, in connection with the transactions, acts, practices, and courses of business alleged herein. Some of these transactions, acts, practices and courses of business occurred in the Southern Distict of New York, where each of the Defendants transacted business duing the relevant peiod. The Comptroller of the State of New York maintains an office in New York, New York, and Loglisci worked in that ofice duing the relevant peiod. In addition, Moris and Harding resided and maintained ofices in New York, New York, and the pincipal places of business of Nosemote and Purpose are located in New York, New York. THE DEFENDANTS 9. Morris, age 55, resides in New York City and East Hampton, New York. From June 2003 through August 2008, Morris was a registered representative associated with Searle & Co. ("Searle"), a Connecticut-based broker dealer and investment adviser. Moris holds 6 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bSeries 7 and 63 licenses. He is also an attorney licensed to practice law in New York. 10. age 39, resides in Norwalk, Connecticut. Beginning in 2003, he served as the Director of Alternative Investments for the Comptroller ofthe State ofNew York, overseeing investments in private equity funds. In April 2004, Loglisci was promoted to Deputy Comptroller and CIa and served in that position until his resignation in mid-2007. He then worked briefly for a hedge fund sponsor. From 1998 to 2002, he was an investment banker at a major Wall Street firm and held a Series 7 license. Loglisci is an attorney licensed to practice law in New York and Connecticut. II. age 46, resides in Dallas, Texas. During the relevant period, Wissman was a managing director and indirect part owner of defendants HFV Management and HFV Asset Management. Wissman is associated with and controls defendantsFlandana, Tuscany and W Investment. Wissman has been a friend of the Loglisci family since 1992. 12. age 74, resides in New York, New York and Austerlitz, New York. From 1983 through 2002, Harding was the leader ofthe New York Liberal Party. The Liberal Party endorsed Hevesi in his 2002 campaign for Comptroller. From April 2003 through January 2008, Harding held a Series 22 securities license and was associated with Potomac Capital Markets LLC ("Potomac"), a registered broker-dealer based in Frederick, Maryland. Harding is also a partner in a law firm in New York and is licensed to practice law in New York. 13. is a New York limited liability company owned by Morris with a principal place ofbusiness in New York, New York. 14. is a New York limited liability company owned by Morris with a principal place ofbusiness in East Hampton, New York and other offices in New York, New Seies 7 and 63 licenses. He is also an attorney licensed to practice law in New York. 10. Loglisci, age 39, resides in Norwalk, Connecticut. Beginning in 2003, he served as the Director of Alternative Investments for the Comptroller of the State of New York, overseeing investments in pivate equity funds. In Apil 2004, Loglisci was promoted to Deputy Comptroller and CIO and served in that position until his resignation in mid-2007. He then worked biefly for a hedge fund sponsor. From 1998 to 2002, he was an investment banker at a major Wall Street irm and held a Seies 7 license. Loglisci is an attorney licensed to practice law in New York and Connecticut. 11. Wissman, age 46, resides in Dallas, Texas. Duing the relevant peiod, Wissman was a managing director and indirect part owner of defendants HFV Management and HFV Asset Management. Wissman is associated with and controls defendants Flandana, Tuscany and W Investment. Wissman has been a fiend of the Loglisci family since 1992. 12. Harding, age 74, resides in New York, New York and Austerlitz, New York. From 1983 through 2002, Harding was the leader of the New York Liberal Party. The Liberal Party endorsed Hevesi in his 2002 campaign for Comptroller. From Apil 2003 through January 2008, Harding held a Seies 22 secuities license and was associated with Potomac Capital Markets LLC ("Potomac"), a registered broker-dealer based in Fredeick, Maryland. Harding is also a partner in a law irm in New York and is licensed to practice law in New York. 13. Nosemote is a New York limited liability company owned by Moris with a pincipal place of business in New York, New York. 14. Pantigo is a New York limited liability company owned by Moris with a pincipal place of business in East Hampton, New York and other ofices in New York, New 7 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bliability company owned by Nosemote limited company. Purpose's principal place ofbusiness 16. is a company family Flandana's Cyprus. Islands company owned, part, and by Wissman. an office in St. Croix, U.S. Virgin Islands. is a U.Islands liability company that during ofthe period. W Investment's ownership W Investment is managed an office address Islands. 19. Management is British Virgin Islands limited partnership British Virgin Islands. Asset Management is a limited partnership based in Dallas, Texas the as an adviser. PERSONS AND Fund is a public pension during the relevant in assets New York State employees, retirees .beneficiaries. The Retirement Fund is the and Pursuant statute, 8 York. 15. Purpose is a New York limited liability company owned jointly by Nosemote and another limited liability company. Purpose's pincipal place of business is located in New York, New York. 16. Flandana is a Cyprus limited company that is owned by a Wissman family trust and controlled by Wissman. Flandana's registered office is in Limassol, Cyprus. 17. Tuscany is a U.S. Virgin Islands limited liability company owned, in part, and managed by Wissman. Tuscany has an office address in St. Croix, U.S. Virgin Islands. 18. W Investment is a U.S. Virgin Islands limited liability company that was solely owned by Wissman duing a portion of the relevant peiod. W Investment's ownership was later transferred to Tuscany. W Investment is managed by Wissman and has an ofice address in St. Croix, U.S. Virgin Islands. 19. HFV Management is a Bitish Virgin Islands limited partnership with offices in Tortola, Bitish Virgin Islands. 20. HFV Asset Management is a limited partnership based in Dallas, Texas and registered with the Commission as an investment adviser. OTHER RELEVANT PERSONS AND ENTITIES 21. The Retirement Fund is a public pension fund that duing the relevant period held over $150 billion in assets for more than one million New York State employees, retirees and other beneficiaies. The Retirement Fund is the largest pension fund in New York and the third largest pension fund in the country. Pursuant to New York statute, the Comptroller is the sole trustee of the Retirement Fund. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b22. Searle, a Connecticut corporation with its principal place of business in Greenwich, Connecticut, is registered with the Commission as a broker-dealer and an investment adviser. THE DEFENDANTS' FRAUDULENT CONDUCT Background 23. Following the November 2002 election, Morris, who was a professional political strategist and had little, if any, experience in the investment field, set himself up as a purported "finder" or "placement agent" for private equity and hedge fund managers seeking investors. In mid-2003, Morris became associated with Searle and obtained his Series 7 license. The lawful receipt of finder or placement fees by an individual in connection with the purchase or sale of securities typically requires association with a registered broker-dealer. Searle agreed to let Morris keep 90 to 95 percent of the fees Morris generated. The typical role of a legitimate finder or placement agent is to identify and introduce the client to potential investors and help the client solicit the investors for business. Genuine placement agents and finders often perform a variety of specific services, such as helping to craft marketing materials and presentations to investors. Overview Of The Scheme 24. Morris made over $15 million in purported placement and finder fees and other illicit payments between January 2003 and June 2007, but Morris was rarely, if ever, paid for providing legitimate finding or placement services. Instead, Morris schemed with Loglisci, Wissman, Harding and others to extract money from investment managers seeking to do business with the Retirement Fund. Wissman received at least $12 million in sham finder fees 9 22. Searle, a Connecticut corporation with its pincipal place of business in Greenwich, Connecticut, is registered with the Commission as a broker-dealer and an investment adviser. THE DEFENDANTS' FRAUDULENT CONDUCT Background 23. Following the November 2002 election, Moris, who was a professional political strategist and had little, if any, expeience in the investment ield, set himself up as a purported "finder" or "placement agent" for pivate equity and hedge fund managers seeking investors. In mid-2003, Moris became associated with Searle and obtained his Seies 7 license. The lawful receipt of finder or placement fees by an individual in connection with the purchase or sale of secuities typically requires association with a registered broker-dealer. Searle agreed to let Moris keep 90 to 95 percent of the fees Moris generated. The typical role of a legitimate inder or placement agent is to identify and introduce the client to potential investors and help the client solicit the investors for business. Genuine placement agents and inders oten perform a vaiety of specific services, such as helping to crat marketing mateials and presentations to investors. Overview Of The Scheme 24. Moris made over $15 million in purported placement and inder fees and other illicit payments between January 2003 and June 2007, but Moris was rarely, if ever, paid for providing legitimate finding or placement services. Instead, Moris schemed with Loglisci, Wissman, Harding and others to extract money rom investment managers seeking to do business with the Retirement Fund. Wissman received at least $12 million in sham finder fees 9 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87billicit payments Harding finder and other illicit payments. variety of different transactions Morris, and clear, whether through "or other means, or their agents must pay a "fee" to Morris in other cases, Harding in order to obtain an investment from repeatedly who investment business Morris and Wissman, and signaled to the investment they first to "hire" Morris, Wissman or a certain as a finder or placement agent. Once Morris, Wissman or another designated was agreed approved deal with the investment management firm. In accordance the Loglisci to disclose, and took steps to conceal, these quidpro quo arrangements payments from of lAC. the investment managers made the payments about finders, placement third investment also failed to disclose to the lAC Retirement intended beneficiary of making investment decisions based enrich Morris, Wissman, Harding and others, Loglisci abused office and he, Morris, Wissman and Harding, among others, defrauded the Retirement Fund. 26. benefited from his role in the scheme. 10 and other illicit payments pursuant to the scheme, and Harding received approximately $800,000 in sham finder fees and other illicit payments. 25. In a vaiety of different transactions and contexts, Moris, Loglisci and Wissman made clear, whether through classic "pay to play" tactics or other means, that investment managers or their agents must pay a "fee" to Moris or, in other cases, to Wissman, Harding or certain others in order to obtain an investment rom the Retirement Fund. As detailed below, Loglisci repeatedly directed investment managers who solicited him for investment business to Moris and Wissman, and signaled to the investment managers that they first needed to "hire" Moris, Wissman or a certain other individual as a inder or placement agent. Once a fee for Moris, Wissman or another designated individual was agreed upon, Loglisci approved the proposed deal with the investment management irm. In accordance with the Defendants' scheme, Loglisci failed to disclose, and took steps to conceal, these quid pro quo arrangements and improper payments rom other members of the Comptroller's investment staff and the IAC Although the investment managers who made the payments at issue were obligated, contractually and otherwise, to make disclosures to the Retirement Fund about fees paid to inders, placement agents or other third parties in connection with the Retirement Fund's investments, those investment managers also failed to disclose to the IAC or other relevant members of the Retirement Fund's investment staff the true nature and intended beneficiary of the payments. By making investment decisions based on the investment managers' willingness to enich Moris, Wissman, Harding and others, Loglisci abused his public ofice and he, Moris, Wissman and Harding, among others, derauded the Retirement Fund. r 26. Loglisci also personally beneited rom his role in the scheme. In addition to 10 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bMorris's support for his promotion to Deputy Comptroller and benefited financially from the scheme funding and distribution for low budget film, which and In or about February of2004, Morris and the principal of a private equity firm seeking to do business with the Retirement separately invested $100,000 to help market and distribute Chooch. January affiliate of a private equity firm seeking to do business with the Retirement Fund agreed distribution deal for Chooch worth approximately $90,000. Wissman had least $100,000 in Chooch. described Loglisci steered to other investment managers. Morris, Wissman and Harding, as well as the others who received the payments did placement finder services for the investment management firms who made the underscoring the quid quo nature the Defendants or anyone else received the managers Fund and, in some cases, had already hired a finder and with when they were that to "hire" Morris, Wissman or another Morris, Wissman and others involved in the scheme anything that would members of the Comptroller's staff Morris was being paid by investment managers business thereby reveal their scheme. In fact, Morris paid the girlfriend a of staff nearly $100,000 in cash to ensure 11 receiving Moris's support for his promotion to Deputy Comptroller and CIO, Loglisci benefited inancially rom the scheme by obtaining funding and distibution for a low budget ilm, titled Chooch, which Loglisci and his brothers produced. In or about February and March of 2004, Moris and the pincipal of a pivate equity irm seeking to do business with the Retirement v: Fund each separately invested $100,000 to help market and distibute Chooch. In January 2005, the afiliate of a pivate equity irm seeking to do business with the Retirement Fund agreed to a DVD distibution deal for Chooch worth approximately $90,000. Wissman had previously also invested at least $100,000 in Chooch. As descibed below, Loglisci steered Retirement Fund k business to Wissman and arranged for Wissman to be paid by other investment managers. 27. Moris, Wissman and Harding, as well as the others who received the payments at issue, did not perform legitimate placement or finder services for the investment management irms who made the payments, underscoing the quid pro quo nature of the Defendants' arrangements. None of the Defendants or anyone else who received the payments at issue introduced the investment managers to the Retirement Fund and, in some cases, the investment managers had already hired a inder or placement agent of their own and were already negotiating an investment with Loglisci when they were told that they also needed to "hire" Moris, Wissman or another individual. 28. Loglisci, Moris, Wissman and others involved in the scheme were careful to conceal anything that would indicate to other members of the Comptroller's investment staff that Moris was being paid by investment managers doing business with the Retirement Fund and thereby reveal their scheme. In fact, Moris paid the girlfiend of a high-ranking member of the Comptroller's staff nearly $100,000 in cash to ensure that the staff member would not ask ii Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bthe scheme to others. As the scheme progressed, Morris, Loglisci, involved took to conceal the fraud, Morris's role in particular. On some transactions, Loglisci and Wissman arranged to make the payment to Wissman, and Wissman would then covertly portion to Morris. In some of those instances, and involvement from the investment manager making the payment the payments made to Morris, and Morris, and Wissman to make written including agent and finder fees, paid in connection with obtaining business from Fund. avoid disclosure the scheme, Morris often arranged for the investment managers to web of other entities owned or controlled by Morris (e.g. Nosemote, Pantigo, and W On at least Loglisci investment manager to identify Morris was being paid when the investment manager Loglisci Morris's name should disclosure form. and even disclosures by instructing to send the disclosure forms directly to Loglisci of These files when Loglisci left 2007. In any event, the to Morris, to quid pro quo with Loglisci 12 ¦-¦_ questions or otherwise reveal the scheme to others. As the scheme progressed, Moris, Loglisci, Wissman and others involved in the scheme took additional steps to conceal the raud, and Moris's role in particular. On some transactions, Loglisci and Wissman arranged for the investment manager to make the payment to Wissman, and Wissman would then covertly funnel a portion of the payment to Moris. In some of those instances, Loglisci and Wissman even hid Morris's involvement rom the investment manager making the payment to Wissman. 29. To further ensure that the payments made to Moris, Wissman, Harding and others remained secret, Moris, Loglisci, and Wissman also worked to circumvent the Retirement Fund's disclosure policy, which required investment managers to make witten disclosure of all fees, including placement agent and inder fees, paid in connection with obtaining business rom the Retirement Fund. To avoid meaningful disclosure and conceal the scheme, Moris and Wissman oten arranged for the investment managers to make the payments to a web of offshore and other entities owned or controlled by Moris (e.g. Nosemote, Pantigo, and Purpose) or to Wissman or entities owned or controlled by Wissman (e.g. Flandana, Tuscany, and W Investment). On at least one occasion, Loglisci directed an investment manager to identify only the entity through which Moris was being paid when the investment manager asked Loglisci whether Moris's name should be included on the disclosure form. Loglisci and Wissman further undercut the impact of even these opaque disclosures by instructing the investment managers to send the disclosure forms directly to Loglisci and not to copy any other members of the Comptroller's staff. These disclosure iles disappeared when Loglisci let the Comptroller's office in mid-2007. In any event, the fact that payments to Moris, Wissman, Harding and certain other individuals were made pursuant to quid pro quo arrangements with Loglisci was 12 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bnever disclosed in any of the forms submitted by the investment managers or in any other way to the lAC or other relevant members of the Retirement Fund's investment staff. 30. Neither the lAC nor other relevant members of the Retirement Fund's investment staff were aware that those investment managers that agreed to make the requisite paYments to Morris, Wissman, Harding and other recipients designated by Morris and Loglisci were rewarded by Loglisci with lucrative investment management contracts or that Loglisci denied business to those investment managers who declined to make such paYments. In some cases, Loglisci arranged for the Retirement Fund to make substantial investments with investment managers who agreed to pay Morris, Wissman and certain others even though those managers had limited or spotty track records. As a result of the Defendants' scheme, Morris, Wissman, Harding and certain other individuals received sham placement or finder fees in connection with approximately $5 billion, or more than half, of the $9.5 billion in alternative investments made by the Retirement Fund during the relevant period. Transactions 31. The following transactions illustrate how the scheme operated and the roles played by Morris, Loglisci, Wissman, and Harding: Strategy 32. In or about June of2003, Morris first met Wissman, who was associated with certain hedge fund managers, including HFV Management and HFV Asset Management. The Retirement Fund was not yet investing in hedge funds at that time, but Wissman had identified the Retirement Fund as a potential investor before he met Morris and already had a relationship with Loglisci, who was a family friend. Nevertheless, Morris solicited a paYment from 13 never disclosed in any of the forms submitted by the investment managers or in any other way to the IAC or other relevant members of the Retirement Fund's investment staff 30. Neither the IAC nor other relevant members of the Retirement Fund's investment staff were aware that those investment managers that agreed to make the requisite payments to Moris, Wissman, Harding and other recipients designated by Moris and Loglisci were rewarded by Loglisci with lucrative investment management contracts or that Loglisci denied business to those investment managers who declined to make such payments. In some cases, Loglisci arranged for the Retirement Fund to make substantial investments with investment managers who agreed to pay Moris, Wissman and certain others even though those managers had limited or spotty track records. As a result of the Defendants' scheme, Moris, Wissman, Harding and certain other individuals received sham placement or inder fees in connection with approximately $5 billion, or more than half, of the $9.5 billion in alternative investments made by the Retirement Fund duing the relevant peiod. Illustrative Transactions 31. The following transactions illustrate how the scheme operated and the roles played by Moris, Loglisci, Wissman, and Harding: HFV Multi-Strategy Fund 32. In or about June of 2003, Moris first met Wissman, who was associated with certain hedge fund managers, including HFV Management and HFV Asset Management. The Retirement Fund was not yet investing in hedge funds at that time, but Wissman had identiied the Retirement Fund as a potential investor before he met Moris and already had a relationship with Loglisci, who was a family riend. Nevertheless, Moris solicited a payment rom 13 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b"! •. for the Retirement Fund to expand its investment portfolio and to invest in fund by a firm with When Wissman asked Loglisci about Morris's Morris would need to be paid in order for Wissman to secure investment from later clearly indicated investment from the Retirement Fund, an must first agree Morris. Wissman agreed to do so and, as one of the first fund to receive business from to the foregoing among Morris, into written agreement Nosemote, one of the defendant entities owned by Morris, purported "of management and performance fees that the Retirement Fund paid to HFV for in 2005, Loglisci for the Retirement Fund to one of its by worth of shares ofHFV Strategy Fund, HFV Fund"), a fund managed in funds. the HFV Loglisci million ofRetirement Fund assets in HFV of from June January obligation to pay Nosemote was later assigned offshore to HFV with at the time. this obligation, Nosemote's right to receive payment was transferred Searle, J* * Wissman in exchange for causing the Retirement Fund to expand its investment portfolio to include hedge funds and to invest in a fund managed by a firm with which Wissman was associated. When Wissman asked Loglisci about Moris's proposition, Loglisci confirmed that Moris would need to be paid in order for Wissman to secure the desired investment rom the Retirement Fund. In later conversations, Loglisci clearly indicated to Wissman that to obtain a substantial investment rom the Retirement Fund, an investment manager must irst agree to pay Moris. Wissman agreed to do so and, as a result, HFV Management became one of the irst hedge fund managers to receive business rom the Retirement Fund. 33. Pursuant to the foregoing arrangement among Morris, Loglisci and Wissman, HFV Management, through Wissman, entered into a witten agreement in November 2004 to pay Nosemote, one of the defendant entities owned by Moris, a purported "finder fee" equal to ten percent of the net management and performance fees that the Retirement Fund paid to HFV Management for managing Retirement Fund assets. In exchange, in January 2005, Loglisci arranged for the Retirement Fund to make one of its first hedge fund investments by buying $50 million worth of shares of HFV Multi-Strategy Fund, Ltd. ("HFV Fund"), a fund managed by HFV Management that invested in hedge funds. Despite the HFV Fund's lackluster performance, Loglisci invested another $50 million of Retirement Fund assets in the HFV Fund in three further purchases of shares rom June 2006 through January 2007. 34. HFV Management's obligation to pay Nosemote was later assigned to Flandana, an offshore entity controlled by Wissman, and then transferred to HFV Asset Management, with which Wissman was also associated at the time. At the same time that HFV Asset Management assumed this obligation, Nosemote's ight to receive payment was transferred to Searle, the 14 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bbroker-dealer with which Morris was associated. In exchange for the Retirement Fund's $100 million purchase of shares in the HFV Fund, Wissman caused Flandana and HFV Asset Management together to pay Morris, through Nosemote and Searle, a total of approximately $600,000. 35. As Morris, Loglisci and Wissman fully understood and intended, the foregoing payments were, in fact, nothing more than a kickback paid to Morris in exchange for Loglisci agreeing to approve an investment with HFV Management. Morris did not perform any of the services that genuine placement agents and finders typically provide. Given Wissman's relationship with Loglisci, Wissman did not need, and did not obtain through Morris, an introduction to the Comptroller's staff. In fact, as discussed with respect to some ofthe transactions described below, Loglisci's relationship with Wissman eventually led Loglisci and Morris to include Wissman in their scheme, with Morris and Wissman often working together to extract payments from investment management firms and then splitting those payments. After Loglisci made clear to Wissman that investment management firms must pay Morris in order to secure certain types ofRetirement Fund investments, Wissman entered into an informal partnership with Morris. Wissman agreed to identify investment managers who might be soliciting the Retirement Fund and arrange for them to pay Morris. In exchange, Morris agreed to give Wissman half of any of the payments that Wissman was able to extract from such managers. Oak 36. Because the Retirement Fund had not previously invested in hedge funds, Loglisci had been required to take certain steps before approving the Retirement Fund's investment with 15 broker-dealer with which Moris was associated. In exchange for the Retirement Fund's $100 million purchase of shares in the HFV Fund, Wissman caused Flandana and HFV Asset Management together to pay Moris, through Nosemote and Searle, a total of approximately $600,000. 35. As Moris, Loglisci and Wissman fully understood and intended, the foregoing payments were, in fact, nothing more than a kickback paid to Moris in exchange for Loglisci agreeing to approve an investment with HFV Management. Moris did not perform any of the services that genuine placement agents and inders typically provide. Given Wissman's relationship with Loglisci, Wissman did not need, and did not obtain through Morris, an introduction to the Comptroller's staff. In fact, as discussed with respect to some of the transactions descibed below, lx)glisci's relationship with Wissman eventually led Loglisci and Morris to include Wissman in their scheme, with Moris and Wissman oten working together to extract payments rom investment management irms and then splitting those payments. Ater Loglisci made clear to Wissman that investment management irms must pay Moris in order to secure certain types of Retirement Fund investments, Wissman entered into an informal partnership with Moris. Wissman agreed to identify investment managers who might be soliciting the Retirement Fund and arrange for them to pay Moris. In exchange, Moris agreed to give Wissman half of any of the payments that Wissman was able to extract rom such managers. Liberty Oak Capital Fund 36. Because the Retirement Fund had not previously invested in hedge funds, Loglisci had been required to take certain steps before approving the Retirement Fund's investment with 15 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bHFV Management. Among other things, Loglisci needed to retain a hedge fund consultant to educate the investment staff about the basics ofhedge fund investing and, as required by the Retirement Fund's policies and procedures, vet the investment programs of the hedge funds in which Loglisci wished to invest Retirement Fund assets. 37. In mid-200S, the hedge fund consultant that Loglisci had retained, Consulting Services Group, LLC ("CSG"), approached Loglisci about managing a portion ofthe Retirement Fund's hedge fund portfolio. Loglisci told a managing director for CSG that CSG would first need to agree to pay Morris. Although CSG had been the Retirement Fund's hedge fund consultant since 2003 and had a close working relationship with the Comptroller's investment staff, Loglisci made it clear to CSG's managing director that CSG still needed to "hire" Morris as a "finder" in order for CSG to secure investment business from the Retirement Fund. Loglisci indicated, in substance, that while Loglisci supported an investment with CSG, all investment decisions had to be officially approved and that CSG needed to have a deal to pay Morris to obtain such approval. Loglisci ceased further discussions with the managing director for CSG concerning CSG's proposal until CSG agreed to pay Morris. 38. The managing director for CSG subsequently met with Morris and, as directed by Morris, CSG entered into a written agreement with Searle in July 2005 in which CSG agreed to pay Searle an amount equal to thirty percent ofthe management fees that CSG received from the Retirement Fund for managing Retirement Fund assets. After the managing director reported to Loglisci that CSG had agreed to pay Morris, Loglisci resumed discussions with CSG and arranged for the Retirement Fund to hire CSG to create and manage an investment fund exclusively for the Retirement Fund, named Liberty Oak Capital Fund, L.P. ("Liberty Oak 16 HFV Management. Among other things, Loglisci needed to retain a hedge fund consultant to educate the investment staff about the basics of hedge fund investing and, as required by the Retirement Fund's policies and procedures, vet the investment programs of the hedge funds in which Loglisci wished to invest Retirement Fund assets. 37. In mid-2005, the hedge fund consultant that Loglisci had retained, Consulting Services Group, LLC ("CSG"), approached Loglisci about managing a portion of the Retirement Fund's hedge fund portfolio. Loglisci told a managing director for CSG that CSG would irst need to agree to pay Moris. Although CSG had been the Retirement Fund's hedge fund consultant since 2003 and had a close working relationship with the Comptroller's investment staff, Loglisci made it clear to CSG's managing director that CSG still needed to "hire" Moris as a "inder" in order for CSG to secure investment business rom the Retirement Fund. Loglisci indicated, in substance, that while Loglisci supported an investment with CSG, all investment decisions had to be oficially approved and that CSG needed to have a deal to pay Moris to obtain such approval. Loglisci ceased further discussions with the managing director for CSG concerning CSG's proposal until CSG agreed to pay Moris. 38. The managing director for CSG subsequently met with Moris and, as directed by Moris, CSG entered into a witten agreement with Searle in July 2005 in which CSG agreed to pay Searle an amount equal to thirty percent of the management fees that CSG received rom the Retirement Fund for managing Retirement Fund assets. Ater the managing director reported to Loglisci that CSG had agreed to pay Moris, Loglisci resumed discussions with CSG and arranged for the Retirement Fund to hire CSG to create and manage an investment fund exclusively for the Retirement Fund, named Liberty Oak Capital Fund, L.P. ("Liberty Oak 16 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bPursuant to this undisclosed quidpro quo arrangement, the Retirement Fund purchased 635 million limited partnership interest in the Liberty Oak Fund between July and of2006 $130 million exchange, paid a total of $1.15 million 95 percent ofwhich went to Morris pursuant to Morris's Searle. Oak holdings consisted of the shares hedge in various securities, and the Retirement Fund CSG was the general ofthe Oak Fund, and the sole limited interest in the Liberty explicitly that CSG owed fiduciary Retir~ment Fund. described above, with the Retirement Fund and, based an investment portfolio specifically designed achieve 40. strong relationship with and of the Comptroller's by Loglisci and Morris for CSG to engage Morris as a "finder" to a kickback demand. Morris to, did not, introduce Of An Morris and Loglisci punished investment managers who refused to pay off Morris There in in breach of his duty to act the solely on the merits a Fund"). Pursuant to this undisclosed quid pro quo arrangement, the Retirement Fund purchased a $635 million limited partnership interest in the Liberty Oak Fund between July and December of 2006 and another $130 million interest in June 2007. In exchange, CSG paid a total of approximately $1.15 million to Searle, 95 percent of which went to Moris pursuant to Moris's arrangement with Searle. 39. The Liberty Oak Fund's holdings consisted of the shares of multiple hedge funds that traded in vaious secuities, and the Retirement Fund was the only limited partner in the Liberty Oak Fund. CSG was the general partner of the Liberty Oak Fund, and the contract through which the Retirement Fund purchased the sole limited partnership interest in the Liberty Oak Fund explicitly stated that CSG owed iduciary duties directly to the Retirement Fund. As descibed above, CSG consulted directly with the Retirement Fund and, based on those consultations, created an investment portfolio that was speciically designed to achieve the Retirement Fund's investment objectives. 40. Given that CSG already had a strong relationship with Loglisci and other senior members of the Comptroller's investment staff, the statements by Loglisci and Moris regarding the need for CSG to engage Moris as a "inder" amounted to a kickback demand. Moris did not need to, and did not, introduce CSG to the Retirement Fund or perform any other legitimate placement or finding services for CSG. Selection Of An Emerging Fund Manager 41. Moris and Loglisci punished investment managers who refused to pay off Moris or Wissman. There were instances in which Loglisci, in breach of his duty to act in the best interests of the Retirement Fund by making decisions based solely on the meits of a proposed 17 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87btalks with investment managers who were unwilling to cut Morris instead hired investment managers who were willing to do so. selected to manage a newly formed portfolio by minority group members and other emerging" fund managers on manager's willingness to pay Morris. 2004, Loglisci with managing director of a minority-private equity firm to explore the possibility of that firm creating and managing a "fund of would invest in minority-owned and other recentlylaunched private equity funds. After that firm had several with members of the Comptroller's staff, Wissman contacted the private equity firm's director demanded that the firm pay himself and Morris fees that the firm earn "the managing director that retaining Morris "of securing investment from Fund, but the private equity firm refused in on the deal. Upon learning ofthe private equity firm's refusal, angrily confronted the managing director and, in substance, insisted that the firm to reach an agreement with Wissman, which Loglisci a When the managing director again refused, Loglisci terminated discussions between that private equity firm. foregoing private equity firm, Morris recruited private firm, Aldus Equity Partners, L.P. ("Aldus"), which already served as private equity transactions, to manage investment, abruptly ended talks with investment managers who were unwilling to cut Moris or Wissman in on a deal and instead hired investment managers who were willing to do so. For example, Loglisci selected an investment manager to manage a newly formed portfolio of funds managed by minoity group members and other "emerging" fund managers on the basis of the investment manager's willingness to pay Moris. 42. In or about early 2004, Loglisci met with a managing director of a minoity-owned pivate equity irm to explore the possibility of that irm creating and managing "fund of funds" through which the Retirement Fund would invest in minoity-owned and other recentlylaunched private equity funds. Ater that private equity irm had several meetings with Loglisci and other members of the Comptroller's staff, Wissman contacted the pivate equity firm's managing director and demanded that the irm pay himself and Moris one-half of the management fees that the irm would earn on the proposed "emerging" fund investment. Wissman warned the managing director that retaining Moris was "very important" to the process of secuing an investment rom the Retirement Fund, but the pivate equity irm refused to cut Morris and Wissman in on the deal. Upon learning of the pivate equity irm's refusal, Loglisci angily conronted the managing director and, in substance, insisted that the irm needed to reach an agreement with Wissman, which Loglisci knew would result in a payment to Morris. When the managing director again refused, Loglisci terminated discussions between the Comptroller's staff and that pivate equity irm. 43. After rejecting the foregoing pivate equity irm, Loglisci and Moris recruited another pivate equity irm, Aldus Equity Partners, L.P. ("Aldus"), which already served as a consultant to the Retirement Fund on pivate equity transactions, to manage the Retirement 18 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bfund portfolio. Morris then informed an associate of his that Aldus was for Morris directed his associate a ofAldus Aldus must first Morris as the Morris's associate the Aldus Partner about the need for Aldus to retain Morris, the Partner in discussions with the Comptroller's staff about the proj ect. nevertheless agreed that Aldus would pay Morris after Morris's associate made Aldus, minority-owned and did not have an established his for the associate's assistance in securing this shared of the payment with the associate. to the foregoing arrangement, in May 2004, Aldus signed a written with one ofthe defendant entities owned by Morris, Aldus agreed to percent of the management fees that Aldus received from arranged The Retirement Fund a $175 million partnership AlduslNY Emerging Fund"), "emerging" fund that Aldus specifically created for the Retirement Fund, in December 2004 and an additional $200 million exchange, of$35 percent of that the Retirement Fund paid of emerging private in various securities, and only Aldus was the general the Fund, and Fund's emerging fund portfolio. Moris then informed an associate of his that Aldus was being considered for this role, and Moris directed his associate to inform a managing partner of Aldus ("Aldus Partner") that Aldus must irst retain Moris as a finder. By the time Moris's associate contacted the Aldus Partner about the need for Aldus to retain Moris, the Aldus Partner had already engaged in discussions with the Comptroller's staff about the project. The Aldus Partner nevertheless agreed that Aldus would pay Moris ater Moris's associate made clear to the Aldus Partner that Aldus, which was not minoity-owned and did not have an established track record, would not be hired by the Retirement Fund without such an agreement. To compensate his associate for the associate's assistance in secuing this payment, Morris shared a portion of the payment with the associate. 44. Pursuant to the foregoing arrangement, in May 2004, Aldus signed a witten agreement with Pantigo, one of the defendant entities owned by Moris, in which Aldus agreed to pay Pantigo an amount equal to 35 percent of the management fees that Aldus received rom the Retirement Fund. As a result, Loglisci arranged for the Retirement Fund to invest with Aldus. The Retirement Fund purchased a $175 million limited partnership interest in the Aldus/NY Emerging Fund, L.P. ("Emerging Fund"), an "emerging" fund that Aldus speciically designed and created for the Retirement Fund, in December 2004 and an additional $200 million interest in February 2006. In exchange, Aldus paid a total of $319,374 to Pantigo, which represented 35 percent of the fees that the Retirement Fund paid to Aldus. 45. The Emerging Fund's holdings consisted of shares of emerging pivate equity funds that traded in vaious secuities, and the Retirement Fund was the only limited partner in the Emerging Fund. Aldus was the general partner of the Emerging Fund, and the contract 19 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bstated that Aldus owed fiduciary the As described above, Aldus consulted directly with the Retirement Fund and, based consultations, created an investment portfolio specifically designed achieve bank and the Aldus Partner told Wissman that he wanted to extricate from its arrangement Morris. When Wissman relayed the Aldus Partner's request Morris, Morris confirmed the true nature of his role. Morris told Wissman, in substance, Partner take away from as given it The Morris and Loglisci also used their leverage amount direct investment. example, pressured the Emerging Fund invest in a certain smaller private Capital Partners II, L.P. ("Fund"), after Loglisci had already arranged private equity firm that managed the Falconhead Fund, Capital LLC Morris in exchange for such an investment. April 2006, a senior officer of Falconhead ("Falconhead a senior official Comptroller's office about investing Retirement Fund learned through which the Retirement Fund purchased the sole limited partnership interest in the Emerging Fund expressly stated that Aldus owed iduciary duties directly to the Retirement Fund. As descibed above, Aldus consulted directly with the Retirement Fund and, based on those consultations, created an investment portfolio that was speciically designed to achieve the Retirement Fund's investment objectives. 46. In or about late 2005, Aldus was contemplating an acquisition transaction with a large investment bank and the Aldus Partner told Wissman that he wanted to exticate Aldus rom its arrangement with Moris. When Wissman relayed the Aldus Partner's request to Moris, Moris conirmed the true nature of his role. Moris told Wissman, in substance, to inform the Aldus Partner that Morris could take the Retirement Fund's business away rom Aldus just as quickly as he had given it to Aldus. Other Improper Transactions Involving The Emerging Fund 47. Moris and Loglisci also used their leverage with Aldus to extract kickbacks in connection with investment opportunities that fell below the minimum amount required for the Retirement Fund to make a direct investment. For example, in 2006, Loglisci pressured the Aldus Partner to have the Emerging Fund invest in a certain smaller pivate equity fund, Falconhead Capital Partners n, L.P. ("Falconhead Fund"), ater Loglisci had already arranged for the pivate equity irm that managed the Falconhead Fund, Falconhead Capital LLC ("Falconhead"), to pay Moris in exchange for such an investment. 48. In or about Apil 2006, a senior oficer of Falconhead ("Falconhead Executive") approached a senior oficial at the Comptroller's ofice about investing Retirement Fund money with Falconhead. Once Loglisci learned of this contact, Loglisci immediately tipped Wissman 20 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bwith the Retirement Fund. after Executive the senior official the Falconhead Executive and informed him that Falconhead needed to retain Morris a finder an investment of Although large and well-investment bank as Executive agreed that Falconhead would pay Morris through Searle. Morris agreed After Falconhead agreed to pay Searle referred the Falconhead the Partner and wanted Aldus to cause ofthe received from Fund. invested $15 million ofRetirement in the Falconhead Fund, a limited by Falconhead, in November $15 million 2007 purchasing partnership demonstrates, the Retirement for the sole purpose of extracting kickback payments for Morris from Falconhead. Rather than identifying prospective investors for Falconhead, Morris and Wissman, acting tip, simply intercepted after the firm had an investment for the Retirement Fund's consideration. then used Aldus to have Aldus cause the Emerging Fund to consummate the sham "finder" for Morris and Wissman. off about Falconhead's interest in doing business with the Retirement Fund. One day ater the Falconhead Executive approached the senior official at the Retirement Fund, Wissman contacted the Falconhead Executive and informed him that Falconhead needed to retain Moris as a finder in order to secure an investment of Retirement Fund assets. Although Falconhead had already retained a large and well-known investment bank as its placement agent, the Falconhead Executive agreed that Falconhead would pay Moris through Searle. Moris agreed to split this payment with Wissman. 49. Ater Falconhead agreed to pay Searle two percent of any amount invested by the Retirement Fund, Loglisci referred the Falconhead Executive to the Aldus Partner and made clear to the Aldus Partner that Loglisci wanted Aldus to cause the Emerging Fund to invest a portion of the money that the Emerging Fund had received rom the Retirement Fund in the Falconhead Fund. As a result, the Emerging Fund invested $15 million of Retirement Fund assets in the Falconhead Fund, a limited partnership managed by Falconhead, in November 2006 and another $15 million in May 2007 by purchasing limited partnership interests in the Falconhead Fund. 50. As the foregoing demonstrates, the Defendants subverted the Retirement Fund's investment procedures for the sole purpose of extracting kickback payments for Moris and Wissman rom Falconhead. Rather than identifying prospective investors for Falconhead, Moris and Wissman, acting on Loglisci's tip, simply intercepted Falconhead ater the irm had already proposed an investment for the Retirement Fund's consideration. Loglisci then used his influence with Aldus to have Aldus cause the Emerging Fund to consummate the transaction that would generate the sham "finder" fees for Moris and Wissman. 21 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b51. the Emerging Fund to enrich Morris transaction in which Aldus and another smaller investment management firm did not even know Morris was being In April 2005, Loglisci arranged for the Aldus Partner to cause Emerging Fund to make a $20 million investment with that other firm because, unbeknownst to either the other firm or Aldus, the other firm's placement agent had already agreed to pay Morris 40 percent of any fees the placement agent received in connection with a Retirement Fund Emerging Fund's investment with the other firm, Morris was Investment Partners 52. Morris contacted investment managers and fraudulent arrangements on his own. Morris reached managing director of Odyssey Investment Partners, LLC ("Odyssey") and told the managing director that the Retirement Fund had its "own" placement agent --Searle --that investment managers had to retain in order to obtain business from the Retirement Fund. Although Odyssey had already retained a large and well-known investment bank as its placement agent, would that Odyssey received from the Retirement Fund. 53. In July 2004, Odyssey entered into a written agreement with Searle in which Odyssey agreed to pay Searle two percent of any amount that the Retirement Fund invested with Other than the contract Searle, Odyssey director nor anyone else at Odyssey ever had dealings with anyone at Searle other than Morris, and Morris never disclosed his affiliation with Searle to the Odyssey managing director or 51. Morris and Loglisci similarly misused the Emerging Fund to enich Moris in a transaction in which Aldus and another smaller investment management irm did not even know that Moris was being paid. In Apil 2005, Loglisci arranged for the Aldus Partner to cause the Emerging Fund to make a $20 million investment with that other irm because, unbeknownst to either the other irm or Aldus, the other irm's placement agent had already agreed to pay Moris 40 percent of any fees the placement agent received in connection with a Retirement Fund investment. As a result of the Emerging Fund's investment with the other irm, Moris was paid approximately $80,000. Odyssey Investment Partners Fund 52. In some instances, Moris contacted investment managers directly and negotiated the raudulent arrangements on his own. In 2004, for example, Moris reached out to a managing director of Odyssey Investment Partners, LLC ("Odyssey") and told the managing director that the Retirement Fund had its "own" placement agent ~ Searle — that investment managers had to retain in order to obtain business rom the Retirement Fund. Although Odyssey had already retained a large and well-known investment bank as its placement agent, the Odyssey managing director agreed that Odyssey would also pay Searle on any investment that Odyssey received rom the Retirement Fund. 53. In July 2004, Odyssey entered into a witten agreement with Searle in which Odyssey agreed to pay Searle two percent of any amount that the Retirement Fund invested with Odyssey. Other than by executing the contract retaining Searle, neither the Odyssey managing director nor anyone else at Odyssey ever had dealings with anyone at Searle other than Moris, and Moris never disclosed his affiliation with Searle to the Odyssey managing director or 22 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bto pay Searle, Loglisci arranged for a "fund of partnership that exclusively a $20 million partnership interest in Odyssey Investment III, by Odyssey. That transaction closed in March 2005. a paid $400,000 to Searle even though neither Morris nor anyone else at or other services in connection with one instance, Loglisci enriched Morris and Wissman demanding seeking to do business with the Retirement Fund include Morris partners in the investment managers' proposed ventures. fall of2005, Group Capital Partners ("PCG"), a private equity firm managed certain Retirement Fund investments, and Clinton Group, Inc. ("Clinton"), fund management firm, separately approached Loglisci to solicit investments from Fund. After separately speaking a senior officer of Clinton ("Clinton friends, Loglisci suggested ofthem that they forces to create would Fund money in private after discussions proposed joint venture, Loglisci met with At the meeting, made venture Morris and Wissman for the Retirement anyone else at Odyssey. 54. Shortly after Odyssey agreed to pay Searle, Loglisci arranged for a "fund of funds" limited partnership that managed certain investments exclusively for the Retirement Fund to purchase a $20 million limited partnership interest in Odyssey Investment Partners Fund HI, L.P., a fund managed by Odyssey. That transaction closed in March 2005. As a result, Odyssey paid $400,000 to Searle even though neither Moris nor anyone else at Searle ever performed any placement or other services in connection with the Retirement Fund's investment. Strategic Co-Investment Partners 55. In at least one instance, Loglisci eniched Moris and Wissman by demanding that investment managers seeking to do business with the Retirement Fund include Moris and Wissman as partners in the investment managers' proposed ventures. During the summer and early fall of 2005, Pacific Corporate Group Capital Partners ("PCG"), a pivate equity irm that already managed certain Retirement Fund investments, and Clinton Group, Inc. ("Clinton"), a hedge fund management firm, separately approached Loglisci to solicit investments rom the Retirement Fund. Ater separately speaking with a managing director of PCG ("PCG Executive") and a senior officer of Clinton ("Clinton Executive"), with whom Loglisci was riends, Loglisci suggested to both of them that they join forces to create a new co-investment vehicle that would invest Retirement Fund money in pivate equity transactions. In January 2006, ater further discussions about the proposed joint venture, Loglisci and Wissman met with the Clinton Executive. At the meeting, Loglisci made clear to the Clinton Executive that the joint venture must include both Moris and Wissman for the Retirement Fund to invest. 23 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bWissman subsequently relayed this same message to the PCG Executive as well. 56. Shortly thereafter, the Clinton Executive and the PCG Executive agreed to cut both Morris and Wissman in on the profits from the joint venture that Clinton and PCG ultimately put together in the form of a limited partnership known as Strategic Co-Investment L.P. ("Strategic Co-Investment"). which initially outright and later controlled through his ownership interest in Tuscany, received a free 10 percent ownership stake in the management entity to which the Retirement Fund paid management fees, Strategic Co-Investment Partners Management, LLC ("Strategic CoInvestment Management"), with the understanding that W Investment would pass half its profits on to Morris. In exchange, Loglisci arranged for the Retirement Fund to invest approximately $750 million in Strategic Co-Investment by acquiring a sole limited partnership interest in October 2006. As a result, in late 2006 and 2007, Strategic Co-Investment Management paid W Investment a total of $1.26 million in periodic distributions even though neither Wissman nor W Investment had provided any services in exchange for the distributions. The Clinton Executive was the sole member of Strategic Co-Investment Management's managing member and the PCG Executive, who by then had left PCG, was a managing director of Strategic Co-Investment Management's managing member and managed Strategic Co-Investment Management's day-today activities. 57. Strategic Co-Investment invested in other companies through various means, including the purchase of securities, and the Retirement Fund was the only limited partner in Strategic Co-Investment. Strategic Co-Investment Management was hired by the general partner of Strategic Co-Investment, and the contract through which the Retirement Fund Wissman subsequently relayed this same message to the PCG Executive as well. 56. Shortly thereater, the Clinton Executive and the PCG Executive agreed to cut both Moris and Wissman in on the proits rom the joint venture that Clinton and PCG ultimately put together in the form of a limited partnership known as Strategic Co-Investment Partners, L.P. ("Strategic Co-Investment"). W Investment, which Wissman initially owned outight and later controlled through his ownership interest in Tuscany, received a ree 10 percent ownership stake in the management entity to which the Retirement Fund paid management fees, Strategic Co-Investment Partners Management, LLC ("Strategic Co-Investment Management"), with the understanding that W Investment would pass half its profits on to Moris. In exchange, Loglisci arranged for the Retirement Fund to invest approximately $750 million in Strategic Co-Investment by acquiing a sole limited partnership interest in October 2006. As a result, in late 2006 and 2007, Strategic Co-Investment Management paid W Investment a total of $1.26 million in peiodic distibutions even though neither Wissman nor W Investment had provided any services in exchange for the distibutions. The Clinton Executive was the sole member of Strategic Co-Investment Management's managing member and the PCG Executive, who by then had let PCG, was a managing director of Strategic Co-Investment Management's managing member and managed Strategic Co-Investment Management's day-to¬ day activities. 57. Strategic Co-Investment invested in other companies through vaious means, including the purchase of secuities, and the Retirement Fund was the only limited partner in Strategic Co-Investment. Strategic Co-Investment Management was hired by the general partner of Strategic Co-Investment, and the contract through which the Retirement Fund 24 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bthe sole limited owed fiduciary to the Retirement and consulted directly on those consultations, created an investment portfolio that was specifically Retirement the Retirement Fund made the investment and that Morris acting contrary was a with or no experience managing ofprivate equity venture that was being proposed. Rather than engaging private equity consultant to conduct the requisite due and transaction, Loglisci the project to Aldus, was Fund as a private equity consultant (see ~ 43 above). Although Aldus initially deal, Aldus ultimately from and agreed a qualified sufficient invest and in this transaction took steps Morris's role from Aldus, which had inquired into the ownership of Strategic CoInvestment Co-Investment Management. Aldus specifically asked Executive for a representation that there to pay third response, individuals to Morris. When Aldus asked Morris was getting purchased the sole limited partnership interest in Strategic Co-Investment provided that Strategic Co-Investment Management owed iduciary duties directly to the Retirement Fund. Clinton, PCG, and Strategic Co-Investment Management consulted directly with the Retirement Fund and, based on those consultations, created an investment portfolio that was speciically designed to achieve the Retirement Fund's investment objectives. 58. To ensure that the Retirement Fund made the investment and that Moris and Wissman received their money, Loglisci ignored obvious shortcomings in the investment proposal and circumvented internal procedures, thereby acting contrary to the Retirement Fund's best interests. Clinton was a hedge fund manager with little or no experience in managing the type of pivate equity venture that was being proposed. Rather than engaging the Retirement Fund's usual pivate equity consultant to conduct the requisite due diligence and otherwise vet the proposed transaction, Loglisci instead assigned the project to Aldus, which was also used by the Retirement Fund as a pivate equity consultant (see f 43 above). Although Aldus initially balked at endorsing the deal, Aldus ultimately bowed to pressure rom Loglisci and agreed to issue a qualiied report that was nevertheless suficient to allow Loglisci to invest Retirement Fund money in Strategic Co-Investment. 59. Loglisci and the other individuals involved in this transaction took steps to conceal Moris's role rom Aldus, which had inquired into the ownership of Strategic Co-Investment and Strategic Co-Investment Management. Aldus speciically asked Wissman, the PCG Executive and the Clinton Executive for a representation that there were no undisclosed agreements to pay third parties. In response, none of these individuals disclosed the intended payments to Moris. When Aldus asked Loglisci directly whether Moris was getting paid, 25 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bMorris was to be Morris was aware of the misrepresentations made to Aldus about his role. 60. Loglisci's insistence on including Morris and Wissman as partners in Strategic Co-Investment was simply a different means of funneling kickback payments to Morris and Wissman. Morris and Wissman added no legitimate value to the venture and would not have otherwise been included. For Strategic Co-Investment Management, the inclusion of Wissman Morris, who had no investment management ofdoing business with the Retirement Fund. Capital 61. instances, Morris, Log1isci Wissman even hid Morris's from the investment managers fees. of2004, Loglisci asked Wissman to locate a European investment opportunity for the Retirement Fund, with the understanding that Wissman and Morris would be paid on the transaction. As a result, Wissman approached Access Capital Advisors Ltd. ("Access Capital"), an investment management firm specializing in the creation and management of funds that invest in European private equity funds. In March 2005, Access Capital signed written agreement Flandana, one ofthe Wissman Entities, an amount equal to 50 percent of any management and performance fees that Access Capital earned on a Retirement Fund investment. Because of Loglisci's insistence that Morris needed to be paid in connection with investments such as the proposed transaction with Access Capital, Wissman planned on splitting his fees with Morris. during period about concealing the payments to him in connection with the many Retirement Fund transactions that were in the pipeline. As Loglisci falsely denied that Moris was to be paid. Moris was aware of the misrepresentations made to Aldus about his role. 60. Loglisci's insistence on including Moris and Wissman as partners in Strategic Co-Investment was simply a different means of tunneling kickback payments to Moris and Wissman. Moris and Wissman added no legitimate value to the venture and would not have otherwise been included. For Strategic Co-Investment Management, the inclusion of Wissman and Moris, who had no investment management background whatsoever, was simply the cost of doing business with the Retirement Fund. Access Capital Partners 61. In other instances, Moris, Loglisci and Wissman even hid Moris's involvement rom the investment managers who were paying the sham fees. In or about July of 2004, Loglisci asked Wissman to locate a European investment opportunity for the Retirement Fund, with the understanding that Wissman and Moris would be paid on the transaction. As a result, Wissman approached Access Capital Advisors Ltd. ("Access Capital"), an investment management irm specializing in the creation and management of funds that invest in European pivate equity funds. In March 2005, Access Capital signed a witten agreement to pay Flandana, one of the Wissman Entities, an amount equal to 50 percent of any management and performance fees that Access Capital earned on a Retirement Fund investment. Because of Loglisci's insistence that Morris needed to be paid in connection with investments such as the proposed transaction with Access Capital, Wissman planned on splitting his fees with Moris. However, Morris was increasingly concerned duing this peiod about concealing the payments to him in connection with the many Retirement Fund transactions that were in the pipeline. As 26 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bresult, Access to share Capital with even though Wissman had every intention of splitting those fees with Morris. After Wissman informed Loglisci that Access Capital had agreed to Fund to invest over $500 million Access March 2005 and April 2007 by purchasing partnership interests AccesslNY Middle Fund, P. ("Access a fund managed that invested in European private As a result, to Flandana. Wissman then one-third of approximately $720,000, to Morris through Nosemote between Wissman and Morris, was a precondition the failed to disclose these facts to the lAC or anyone else he thereby breached his fiduciary To Political ill paYments to Morris, Morris also arranged firms finder other political for receiving Retirement Fund investments. Like Morris, Harding and these experience in investment management provided no bona fide in exchange for the paYments. As described below, Loglisci and Morris paYments from investment managers making process to ensure that those a result, Wissman repeatedly assured Access Capital that he was not going to share the fees Access Capital paid to Flandana with anyone else even though Wissman had every intention of splitting those fees with Moris. 62. Ater Wissman informed Loglisci that Access Capital had agreed to pay Wissman, Loglisci arranged for the Retirement Fund to invest over $500 million with Access Capital between March 2005 and Apil 2007 by purchasing limited partnership interests in the Access/NY European Middle Market Buyout Fund, L.P. ("Access Fund"), a fund managed by Access that invested in European pivate equity funds. As a result, Access Capital paid approximately $2.4 million to Flandana. Wissman then secretly transmitted about one-third of that amount, approximately $720,000, to Moris through Nosemote and Searle. Loglisci was not only aware of the fee-splitting arrangement between Wissman and Moris, but this arrangement was a precondition for the Retirement Fund to invest in the Access Fund. However, Loglisci failed to disclose these material facts to the IAC or anyone else at the Retirement Fund, and he thereby breached his iduciary duty to the Retirement Fund. Payments To Political Allies 63. In addition to arranging payments to Moris, Loglisci and Moris also arranged for investment management irms to pay sham inder fees to Harding and other political allies in exchange for receiving Retirement Fund investments. Like Moris, Harding and these other individuals had no expeience or training in investment management and provided no bonafide services in exchange for the payments. As descibed below, Loglisci and Moris played key roles in extracting these other payments rom investment managers and manipulated the Retirement Fund's decision-making process to ensure that those managers received Retirement 27 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bFund investments. 64. 2005, Morris and arranged of Party, and a further illicit with Fund investments. Morris and in New York politics. In April 2003, Harding became associated Potomac, broker-dealer. about time, Harding to a senior official office for financial support and to Morris. As a result of those discussions, Morris arranged investments funds managed LLC ("Capital Management, Inc. ("Pequot"). Morris and inserted into these bona fide finding or placement Paladin or Pequot. 65. Morris arranged with a senior executive for Paladin affiliate finder and agree an the Retirement Fund invested with Paladin. Loglisci was aware of this arrangement and, as a the Retirement Fund to invest with Paladin by purchasing a $20 million limited interest in the Paladin Homeland Security Fund (NY), As a 66. Morris arranged for a finder retained by Pequot, was on a Loglisci was aware of this arrangement and, as aresult, caused 28 Fund investments. 64. In 2004 and 2005, Moris and Loglisci arranged for Harding, the former leader of the New York Liberal Party, to receive phony finder fees and a further illicit payment in connection with two Retirement Fund investments. Moris and Harding were longtime associates in New York politics. In Apil 2003, Harding became associated with Potomac, a Maryland-based broker-dealer. At or about the same time, Harding appealed to a senior oficial in the Comptroller's ofice for financial support and was referred to Moris. As a result of those and subsequent discussions, Moris and Loglisci arranged for Harding to receive payments in connection with the Retirement Fund's investments in funds managed by Paladin Capital Management, LLC ("Paladin") and Pequot Capital Management, Inc. ("Pequot"). Moris and Loglisci inserted Harding into these two transactions solely for the purpose of directing money to Harding, and Harding did not perform any bonafide finding or placement services for either Paladin or Pequot. 65. Moris arranged with a senior executive at Paladin for a Paladin afiliate to retain Harding as a inder and agree to pay Harding an amount equal to 1.5 percent of any amount that the Retirement Fund invested with Paladin. Loglisci was aware of this arrangement and, as a result, he caused the Retirement Fund to invest with Paladin by purchasing a $20 million limited partnership interest in the Paladin Homeland Secuity Fund (NY), L.P. in May 2004. As a result of this transaction, the Paladin affiliate paid $300,000 to Harding. 66. In 2005, Moris arranged for a inder retained by Pequot, which was already working on a transaction with the Retirement Fund, to split his fees with Harding on that transaction. Loglisci was aware of this arrangement and, as a result, Loglisci caused the Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bto invest approximately $100 million Diversified Offshore Fund, and June 2006. Although whatsoever to Pequot or its finder, the finder to Harding, one-third of total finder Pequot's finder. and Morris also entered into an arrangement director of LLC ("GKM"), private firm, for GKM to hire another ally ("Individual A") as its placement agent in exchange receiving an from the Retirement Fund. Although GKM's managing director had already secured a investment agreed A, despite A, a political operative and fundraiser, had no experience and had as a finder. To ensure honored Loglisci clear to GKM's director that the Retirement Fund would not invest with GKM Individual fee. managing director sent an to one partners "made it clear to me that this deal is happening us one reason reason only and that is their relationship with [Individual A]." 68. Loglisci for $800 million by purchasing interests in GKMINY Fund, L.P. ("GKM run by a GKM affiliate that funds. Fund's initial under Fund's investment, GKM to which was, in substance, jointly owned by Individual Morris. Purpose then transferred to 29 Retirement Fund to invest approximately $100 million in the Pequot Diversiied Offshore Fund, Ltd., a fund run by Pequot, in October 2005 and June 2006. Although Harding provided no services whatsoever to Pequot or its finder, the inder secretly paid $505,000 to Harding, which was approximately one-third of the total inder fee received by Pequot's inder. 67. Loglisci and Moris also entered into an arrangement with a managing director of GKM Newport Management, LLC ("GKM"), a pivate equity irm, for GKM to hire another political ally ("Individual A") as its placement agent in exchange for receiving an investment rom the Retirement Fund. Although GKM's managing director had already secured a meeting with the Comptroller's investment staff, GKM agreed to retain Individual A, despite the fact that Individual A, a political operative and fundraiser, had no relevant expeience and had never acted as a inder. To ensure that GKM honored the arrangement, Loglisci made clear to GKM's managing director that the Retirement Fund would not invest with GKM unless Individual A was paid a substantial fee. GKM's managing director sent an e-mail to one of his partners stating that Loglisci "made it clear to me that this deal is happening for us for one reason and for one reason only and that is their relationship with [Individual A]." 68. Over the next three years, Loglisci arranged for the Retirement Fund to invest approximately $800 million with GKM by purchasing limited partnership interests in GKM/NY Venture Capital Fund, L.P. ("GKM Fund"), a fund run by a GKM afiliate that invested in venture capital funds. At the time of the Retirement Fund's initial investment, GKM had only $13 million under management. In exchange for the Retirement Fund's investment, GKM paid $658,000 in fees to Purpose, which was, in substance, jointly owned by Individual A and Moris. Purpose then transferred approximately $477,000 to Individual A, leaving $181,000 for Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bMorris. affiliate invested in venture capital funds, and the Retirement Fund in GKM affiliate was the general partner Fund, and the Fund limited interest in the GKM Fund expressly stated that the GKM affiliate owed fiduciary directly Retirement Fund. As described GKM its affiliate consulted with the Retirement Fund and, based on those created that was specifically designed to achieve the Retirement investment described after first informed Wissman that investment firms Morris in order to secure certain types Wissman entered into an informal partnership with Morris to extract and share from investment managers to with Retirement Fund. private equity transactions described Morris and Wissman to enrich through their relationship with Wissman received a tip from that the in the Morris would be paid on any such Wissman then contacted former banker and had recently formed a private equity firm named Riverstone"), ofwhich Wissman's neighbor was a managing Riverstone was engaged joint private equity to create private equity Moris.69. The GKM afiliate invested in venture capital funds, and the Retirement Fund was the only limited partner in the GKM Fund. The GKM afiliate was the general partner of the GKM Fund, and the contract through which the Retirement Fund purchased the sole limited partnership interest in the GKM Fund expressly stated that the GKM afiliate owed iduciary duties directly to the Retirement Fund. As descibed above, GKM and its afiliate consulted directly with the Retirement Fund and, based on those consultations, created an investment portfolio that was speciically designed to achieve the Retirement Fund's investment objectives. Carlyle/Riverstone Transactions 70. As descibed above, ater Loglisci irst informed Wissman that investment management irms must pay Moris in order to secure certain types of Retirement Fund investments, Wissman entered into an informal partnership with Moris to extract and share payments rom investment managers seeking to do business with the Retirement Fund. The pivate equity transactions descibed below further illustrate how Moris and Wissman worked together to enich themselves through their relationship with Loglisci. 71. In or about July 2003, Wissman received a tip rom Loglisci that the Retirement Fund was interested in investing in energy sector funds, with the understanding that Wissman and Moris would be paid on any such transaction. Wissman then contacted a neighbor who was a former investment banker and had recently formed a pivate equity irm named Riverstone Holdings LLC ("Riverstone"), of which Wissman's neighbor was a managing director ("Riverstone Executive"). Riverstone was engaged in a joint venture with the Carlyle Group ("Carlyle"), a larger pivate equity firm, to create a pivate equity fund that would invest 30 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bCarlyle/Riverstone Wissman advised the Riverstone investment from Morris. After meeting with Morris on Wissman's instructions, the Riverstone Executive for Carlyle to retain Morris, through Searle, finder even the marketing efforts Fund. that Morris finder fees Wissman. In August 2003, Carlyle entered written agreement two percent of any capital commitment that the Carlyle/Riverstone Fund received from According to the terms of the agreement between Carlyle and Searle, responsible for paying the first 1.5 percent ofthe to Searle fund together, Loglisci the Retirement Fund to invest a total of$500 million purchased a $150 million limited partnership interest in the Carlyle/Riverstone Fund in an additional interest in its successor total of$10 between January Searle transferred $5 million in a series of involving and 95 percent of the remaining $5 million went to Morris pursuant with Morris and Wissman to be paid on 31 in energy companies, Carlyle/Riverstone Global Energy and Power Fund II, L.P. ("Carlyle/Riverstone Fund"). Wissman advised the Riverstone Executive that the Carlyle/Riverstone Fund could obtain an investment rom the Retirement Fund if it retained Moris. Ater meeting with Moris on Wissman's instructions, the Riverstone Executive arranged for Carlyle to retain Moris, through Searle, as a inder even though Carlyle had its own in-house marketing operation and was spearheading the marketing efforts for the Carlyle/Riverstone Fund. The Riverstone Executive understood that Moris intended to split the inder fees with Wissman. In August 2003, Carlyle entered into a witten agreement to pay Searle two percent of any capital commitment that the Carlyle/Riverstone Fund received rom the Retirement Fund. According to the terms of the agreement between Carlyle and Searle, Carlyle was responsible for paying the irst 1.5 percent of the capital commitment to Searle and Riverstone was responsible for paying the other 0.5 percent. 72. Even though Riverstone and Carlyle had previously managed only one small energy fund together, Loglisci caused the Retirement Fund to invest a total of $500 million in the Carlyle/Riverstone Fund pursuant to the foregoing arrangement. The Retirement Fund purchased a $150 million limited partnership interest in the Carlyle/Riverstone Fund in November 2003 and an additional $350 million interest in its successor fund in October 2005. As a result, Riverstone and Carlyle paid Searle a total of $10 million between January 2004 and May 2007. Searle then transferred $5 million to Wissman in a seies of transfers involving Tuscany, and 95 percent of the remaining $5 million went to Moris pursuant to his usual arrangement with Searle. 73. In addition to arranging for Moris and Wissman to be paid on the Retirement 31 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bCarlylelRiverstone Executive $100,000 in Chooch to help Loglisci and his brothers market and distribute the film. Executive made this investment in March of 2004. already made its first with CarlylelRiverstone Loglisci investment in the successor fund. December also the Retirement Fund to invest an additional $30 million with Carlyle through one ofthe previously described limited in a third private managed affiliates ofRiverstone and two months before this third investment was made, agreed Morris, through Searle, an amount equal percent made in this third fund. Fund's $30 million in paid which tum in series involving and $285,000 to Morris. nor anyone else Morris and Wissman or the Riverstone investment Chooch --and --to other members of the Comptroller's staff or to the lAC. Nor members of the Comptroller's staff or to the lAC effecting payments to Morris and principal reason caused particular a DVD distribution deal for Chooch from of investment management firm wound up obtaining Fund's transactions with the Carlyle/Riverstone Fund, the Riverstone Executive personally invested $100,000 in Chooch to help Loglisci and his brothers market and distibute the ilm. The Riverstone Executive made this investment in March of 2004. Although the Retirement Fund had already made its irst investment with the Carlyle/Riverstone Fund, Loglisci had not yet committed to making the $350 million investment in the successor fund. In December 2005, Loglisci also caused the Retirement Fund to invest an additional $30 million with Riverstone and Carlyle by purchasing, through one of the previously descibed funds, a limited partnership interest in a third pivate equity fund jointly managed by afiliates of Riverstone and Carlyle. Approximately two months before this third investment was made, Carlyle agreed to pay Moris, through Searle, an amount equal to two percent of any investments that the Retirement Fund made in this third fund. As a result of the Retirement Fund's $30 million investment in this third fund, Carlyle paid $600,000 to Searle, which in turn remitted $300,000 to Wissman in a seies of transfers involving Tuscany and $285,000 to Moris. 74. Neither Loglisci nor anyone else ever disclosed the foregoing payments made to Moris and Wissman or the Riverstone Executive's investment in Chooch ~ and the resultant conflict of interest — to other members of the Comptroller's staff or to the IAC. Nor did Loglisci ever disclose to other members of the Comptroller's staff or to the IAC that effecting the payments to Moris and Wissman was a pincipal reason that Loglisci caused the Retirement Fund to make these particular investments. Quadrangle Transaction 75. Loglisci also obtained a DVD distribution deal for Chooch rom the subsidiary of an investment management irm that, at the time, was negotiating and soon wound up obtaining 32 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b$100 million from Retirement Fund. In addition, Morris as a "finder" even though Loglisci negotiating the investment directly management firm by the time the firm "retained" Morris. 76. senior executive of Group LLC private equity firm specializing in media and communications investments, an from Fund. and began taking the necessary approval for Retirement Fund investment directly Quadrangle. In or about December 2004 -after Loglisci's meeting with the Quadrangle executive --Morris met with the Quadrangle between Quadrangle and Morris. retained a placement agent, the Quadrangle affiliate that served as general partner of the private equity fund in which the Retirement Fund invested, Quadrangle Quadrangle entered a written agreement, dated January 10, 1.1% ofany amount invested by the Retirement Fund with that private IT 77. in January --very shortly after the Quadrangle GP-Searle agreement --Quadrangle affiliate, LLC, to acquire the DVD distribution rights to Chooch for $88,841. Before this transaction occurred, Loglisci had arranged a to discuss Chooch between one ofLogIisci's brothers and the same Quadrangle executive with had met to discuss When the Chooch distribution deal was agreed executive immediately notified Morris connection to Loglisci. Three a $100 million investment rom the Retirement Fund. In addition, Moris was paid as a "inder" on that transaction even though Loglisci was already negotiating the investment directly with the investment management irm by the time the irm "retained" Moris. 76. In or about October 2004, a senior executive of Quadrangle Group LLC ("Quadrangle"), a pivate equity irm specializing in media and communications investments, met with Loglisci to solicit an investment for Quadrangle rom the Retirement Fund. Loglisci reacted favorably to the solicitation and began taking the necessary steps to secure approval for a large Retirement Fund investment directly with Quadrangle. In or about December 2004 — ater Loglisci's meeting with the Quadrangle executive — Moris met with the Quadrangle executive and solicited a finder fee arrangement between Quadrangle and Morris. Even though Quadrangle had already retained a placement agent, the Quadrangle afiliate that served as the general partner of the pivate equity fund in which the Retirement Fund invested, Quadrangle GP Investors II, L.P. ("Quadrangle GP"), entered into a witten agreement, dated January 10, 2005, to pay Searle 1.1% of any amount invested by the Retirement Fund with that pivate equity fund, Quadrangle Capital Partners II Fund, L.P. ("Quadrangle Fund"). 77. Also in January 2005 ~ very shortly ater the Quadrangle GP-Searle agreement was signed ~ a Quadrangle afiliate, GT Brands LLC, agreed to acquire the DVD distibution ights to Chooch for $88,841. Before this transaction occurred, Loglisci had arranged a meeting to discuss Chooch between one of Loglisci's brothers and the same Quadrangle executive with whom Loglisci had met to discuss the proposed Retirement Fund investment. When the Chooch DVD distibution deal was agreed upon, the Quadrangle executive immediately notified Moris of that fact and the connection to Loglisci. Three weeks later, Loglisci personally informed the 33 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bQuadrangle executive that the Retirement Fund would be making a $100 million investment in the Quadrangle Fund, which was managed by an affiliate of Quadrangle GP. The Retirement Fund made the investment by purchasing a limited partnership interest in the Quadrangle Fund, which invested in other companies through the purchase of securities and other means. The investment closed in September 2005 and, as a result, Quadrangle GP paid Searle a total of 1.125 million from October 2005 through with Morris receiving 95 percent nor anyone disclosed the Chooch DVD distribution agreement with the Quadrangle affiliate --and the conflict ofinterest that it created --to the lAC or to other members of the Comptroller's staff. Nor did Loglisci or anyone else ever disclose Morris's role in the Quadrangle investment to other members of the Comptroller's staff or to the lAC. FOR RELIEF 1O(Wissman, Morris Entities, and the Wissman 78. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 79. Morris, Loglisci, Wissman, the Morris Entities, and the Wissman Entities, as certain investment management firms discussed above, directly or indirectly, singly or in concert, by use of the means or instrumentality of interstate commerce, or by the use ofthe of a securities exchange, in connection the purchase sale of securities, knowingly or recklessly, have: (a) employed devices, schemes and artifices to Quadrangle executive that the Retirement Fund would be making a $100 million investment in the Quadrangle Fund, which was managed by an afiliate of Quadrangle GP. The Retirement Fund made the investment by purchasing a limited partnership interest in the Quadrangle Fund, which invested in other companies through the purchase of secuities and other means. The investment closed in September 2005 and, as a result, Quadrangle GP paid Searle a total of $1,125 million rom October 2005 through June 2007, with Moris receiving 95 percent of the total amount. Neither Loglisci nor anyone else ever disclosed the Chooch DVD distibution agreement with the Quadrangle afiliate — and the conflict of interest that it created — to the IAC or to other members of the Comptroller's staff Nor did Loglisci or anyone else ever disclose Moris's role in the Quadrangle investment to other members of the Comptroller's staff or to the IAC. FIRST CLAIM FOR RELIEF Violations of Section 10(b) of the Exchange Act and Rule 10b-5 (Morris, Loglisci, Wissman, Harding, the Moris Entities, and the Wissman Entities) 78. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 79. Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities, as well as certain investment management irms discussed above, directly or indirectly, singly or in concert, by use of the means or instrumentality of interstate commerce, or by the use of the mails, or of the facilities of a national secuities exchange, in connection with the purchase or sale of secuities, knowingly or recklessly, have: (a) employed devices, schemes and artifices to 34 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bdefraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make statements made, in the light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of securities and upon other persons. 80. As part and in furtherance ofthe fraudulent scheme and other violative conduct described above, Morris, Loglisci, Wissman, the Morris Entities, and the Wissman Entities, as well as certain investment management firms discussed above, directly or indirectly, singly or in concert, knowingly or recklessly engaged in and/or employed the fraudulent and deceptive devices, schemes, artifices, contrivances, acts, transactions, practices and courses ofbusiness and/or made the misrepresentations and/or omitted to state the facts alleged above in paragraphs 1 -6 and 23 -77. 81. The false and misleading statements and omissions made by Morris, Loglisci, and Wissman, as well as certain investment management firms discussed above, more fully described above in paragraphs 1 -6 and 23 -77, were material. 82. Morris, Loglisci, and Wissman, as well as certain investment management firms discussed above, knew or were reckless in not knowing that these material misrepresentations and omissions, more fully described above in paragraphs 1 -6 and 23 -77, were false or misleading, and Morris, Loglisci, Wissman, the Morris Entities, and the Wissman Entities also acted with the requisite scienter by knowingly or recklessly engaging in the fraudulent scheme and other misconduct described above in paragraphs 1 -6 and 23 -77. 83. By reason of the foregoing, Morris, Loglisci, Wissman, the Morris Entities, and 35 deraud; (b) made untrue statements of mateial facts and omitted to state mateial facts necessary in order to make statements made, in the light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a raud or deceit upon purchasers of secuities and upon other persons. 80. As part and in furtherance of the raudulent scheme and other violative conduct descibed above, Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities, as well as certain investment management irms discussed above, directly or indirectly, singly or in concert, knowingly or recklessly engaged in and/or employed the raudulent and deceptive devices, schemes, artifices, contivances, acts, transactions, practices and courses of business and/or made the misrepresentations and/or omitted to state the facts alleged above in paragraphs 1-6 and 23 -77. 81. The false and misleading statements and omissions made by Moris, Loglisci, and Wissman, as well as certain investment management irms discussed above, more fully descibed above in paragraphs 1-6 and 23 -77, were mateial. 82. Moris, Loglisci, and Wissman, as well as certain investment management irms discussed above, knew or were reckless in not knowing that these mateial misrepresentations and omissions, more fully descibed above in paragraphs 1-6 and 23 -77, were false or misleading, and Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities also acted with the requisite scienter by knowingly or recklessly engaging in the raudulent scheme and other misconduct descibed above in paragraphs 1 -6 and 23-77. 83. By reason of the foregoing, Moris, Loglisci, Wissman, the Moris Entities, and 35 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bthe Wissman Entities, singly or in concert, directly or indirectly, have each violated, and unless enjoined will again violate, Section lOeb) of the Exchange Act [15 US.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 84. By reason of the foregoing and pursuant to Section 20(e) of the Exchange Act [15 US.C. § 78t(e)], Morris, Loglisci, Wissman, the Morris Entities, and the Wissman Entities, or indirectly, also aided and abetted, for, each other's primary violations, and the primary violations committed by certain investment management firms discussed above, of Section lOeb) ofthe Exchange Act [15 US.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.1 Ob-5], because they each knowingly provided substantial assistance to such other Defendants' and such investment management firms' violations of Section lOeb) ofthe Exchange Act [15 US.c. §78j(b)] and Rule 10b-5 thereunder F.R. § 240.l0b-5]. enjoined, Morris, Loglisci, the Morris Entities will again violations 1O(Act [15 US.C. § 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. § 240.10b-5]. 85. As more fully described above in paragraphs 1-6, 24 -30 and 63 -66, Harding also participated in violative conduct along with Morris and Loglisci by, among other things, Morris and officials in the Comptroller's office for payments in connection with Retirement Fund investments and knowingly receiving sham finder fees and other illicit the result of transactions that Morris the purpose of directing money to Harding. 86. of the foregoing pursuant to Section 20(e) of Exchange Act US.C. § 78t(e)], Harding aided and abetted, and therefore is also liable for, the primary or indirectly, have each violated, and will again 10(b) Act U.S.C. and [to of Act U.S.C. 78t(e)], Moris, Loglisci, Wissman, Moris Entities, and the Wissman singly or in concert, directly or indirectly, also aided and abetted, and are therefore also liable other's pimary pimary violations committed by certain irms above, of Section 10(b) of the Exchange Act [U.S.C. Rule 5 [17 C.F.R. 240.10b-they each knowingly provided to such other Defendants' and such investment management firms' 10(b) of the Act U.S.C. and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. Unless enjoined, Morris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities will again aid and abet violations of Section 10(b) of the Exchange Act [U.S.C. 10b-descibed above in paragraphs Harding participated in violative conduct along with Moris and by, among soliciting Moris and senior oficials in the Comptroller's ofice for payments in connection knowingly sham fees undisclosed illicit payments as the result of transactions that Moris and Loglisci arranged for purpose of directing 86. By reason of the foregoing and pursuant to Section 20(e) of the Exchange Act [15 U.S.C. abetted, and therefore is also liable for, the pimary 36 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bSection the 15 U.S.§78j(b)] and Rule lOb-5 thereunder 240.10b-5] committed by Morris and Loglisci as described in paragraphs Harding knowingly to their violations 1O(ofthe Act and Rule 10b-5 thereunder Harding again aid and Section 10(b) of the Exchange 15 U.S.§ 78j(b)] and Rule 10b-5 thereunder 17 CLAIM FOR of Section Morris, Wissman, the Morris Entities, and the Wissman realleges and incorporates by reference each Morris, Wissman, the Morris Entities, and the Wissman singly or in concert others, in the offer and sale securities, by use instruments of in interstate commerce and use or recklessly, have: or defraud; (b) obtained ofmaterial material facts necessary made, in light ofthe and/or (c) engaged transactions, ofbusiness which or would a fraud purchaser. ofthe fraudulent scheme described Morris, Wissman, Morris Entities, and the Wissman violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] committed by Moris and Loglisci as descibed in paragraphs 78 -83, because Harding knowingly provided substantial assistance to their violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. Unless enjoined, Harding will again aid and abet violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. SECOND CLAIM FOR RELIEF Violations of Section 17(a) of the Securities Act (Moris, Wissman, the Moris Entities, and the Wissman Entities) 87. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 88. Moris, Wissman, the Moris Entities, and the Wissman Entities, directly or indirectly, singly or in concert with others, in the offer and sale of secuities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails, knowingly or recklessly, have: (a) employed devices, schemes or artifices to deraud; (b) obtained money or property by means of untrue statements of mateial fact or omissions to state mateial facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or (c) engaged in transactions, practices or courses of business which operate or would operate as a raud or deceit upon the purchaser. 89. As part and in furtherance of the raudulent scheme and other violative conduct descibed above, Moris, Wissman, the Moris Entities, and the Wissman Entities, directly or 37 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bindirectly, singly or in concert, knowingly or recklessly engaged in and/or employed the fraudulent and deceptive devices, schemes, artifices, contrivances, acts, transactions, practices and courses of business and/or made the misrepresentations and/or omitted to state the facts alleged above in paragraphs 1 -6 and 23 -77. 90. By reason of the foregoing, Morris, Wissman, the Morris Entities, and the Wissman Entities, singly or in concert, directly or indirectly, have each violated, and unless enjoined will again violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. CLAIM FOR RELIEF of Sections (HFV Management and HFV Asset Management) 91. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 92. By reason of the conduct in which Wissman engaged, as more fully described above in paragraphs 32 -35 and elsewhere, HFV Management and HFV Asset Management, directly or indirectly, singly or in concert with others, in the offer and sale of securities, by use of the means and instruments oftransportation and communication in interstate commerce and by use of the mails: (a) obtained money or property by means ofuntrue statements ofmaterial fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made~ not misleading; and/or (b) engaged in transactions, practices or courses ofbusiness which operate or would operate as a fraud or deceit upon the purchaser. 93. By reason ofthe foregoing, HFV Management and HFV Asset Management, indirectly, singly or in concert, knowingly or recklessly engaged in and/or employed the raudulent and deceptive devices, schemes, artifices, contivances, acts, transactions, practices and courses of business and/or made the misrepresentations and/or omitted to state the facts alleged above in paragraphs 1-6 and 23-77. 90. By reason of the foregoing, Moris, Wissman, the Moris Entities, and the Wissman Entities, singly or in concert, directly or indirectly, have each violated, and unless enjoined will again violate, Section 17(a) of the Secuities Act [15 U.S.C. § 77q(a)]. THIRD CLAIM FOR RELIEF Violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act (HFV Management and HFV Asset Management) 91. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 92. By reason of the conduct in which Wissman engaged, as more fully descibed above in paragraphs 32-35 and elsewhere, HFV Management and HFV Asset Management, directly or indirectly, singly or in concert with others, in the offer and sale of secuities, by use of the means and instruments of transportation and communication in interstate commerce and by use of the mails: (a) obtained money or property by means of untrue statements of mateial fact or omissions to state mateial facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or (b) engaged in transactions, practices or courses of business which operate or would operate as a raud or deceit upon the purchaser. 93. By reason of the foregoing, HFV Management and HFV Asset Management, 38 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bhave enjoined will . l7(a)(2) and l7(a)(3) of the Securities Act US.c. FOR RELIEF 1) and 206(2) of the Advisers Act Morris, Loglisci, Wissman, the Morris Entities, and the Wissman incorponites described investment management firms, directly indirectly, or recklessly, or instrumentality while investment advisers within meaning of Act US.C. § 80b-2(11)], have: and artifices client engaged of which operate as a fraud or deceit upon a client or prospective client. firms above violated Sections 206(1) and 206(2) of Advisers Act US.c. § 80b-6(1) in of the violative described ofthe firms, directly or indirectly, or recklessly engaged fraudulent and deceptive devices, schemes, of business and/or made the material material facts alleged above paragraphs above, Morris, the Morris Entities, and Entities, directly or recklessly singly or in concert, directly or indirectly, have violated, and unless enjoined will again violate, S Sections 17(a)(2) and 17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(2) and § 77q(a)(3)]. FOURTH CLAIM FOR RELIEF Violations of Sections 206(1) and 206(2) of the Advisers Act (Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities) 94. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 95. As descibed above, certain investment management irms, directly or indirectly, knowingly or recklessly, by use of the mails or any means or instrumentality of interstate commerce, while acting as investment advisers within the meaning of Section 202(11) of the Advisers Act [15 U.S.C. § 80b-2(ll)], have: (a) employed devices, schemes, and artifices to defraud a client or prospective client; and/or (b) engaged in transactions, practices, or courses of business which operate as a raud or deceit upon a client or prospective client. As a result, certain investment management firms discussed above violated Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and 80b-6(2)]. 96. As part and in furtherance of the violative conduct descibed above, certain of the investment management firms, directly or indirectly, knowingly or recklessly engaged in and/or employed the raudulent and deceptive devices, schemes, artifices, transactions, practices and courses of business and/or made the mateial misrepresentations and/or omitted to state the mateial facts alleged above in paragraphs 23 -77. 97. As alleged above, Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities, directly or indirectly, singly or in concert, knowingly or recklessly also 39 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bin and/or employed the fraudulent and artifices, to state above paragraphs ofthe pursuant to Section 209(d) of the Advisers Act US.C. 9(d)], Morris, Loglisci, Wissman, the Morris Entities, and the Wissman indirectly, aided and abetted, liable primary violations committed by certain investment management firms discussed of 206(1) and 206(2) ofthe Advisers Act US.c. 1) and 80b-6(2)], because Morris, Loglisci, Wissman, the Morris Entities, and the Wissman knowingly to such entities' violations Act US.C. §§ 80b-6(1) 80b-6(2)]. enjoined, Morris, the Morris Entities, and again violations of 206(1) and 206(2) of the Advisers Act [15 US.C. §§ 80b-6(1) FIFfH FOR RELIEF Sections of Advisers Asset realleges reference of Wissman engaged, more fully in paragraphs 32 -35 and Asset by use the or any ofinterstate while investment advisers within of * i i engaged in and/or employed the raudulent and deceptive devices, schemes, artiices, contrivances, acts, transactions, practices and courses of business and/or made the misrepresentations and/or omitted to state the facts alleged above in paragraphs 23 -77. 98. By reason of the foregoing and pursuant to Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)], Moris, Loglisci, Wissman, the Morris Entities, and the Wissman Entities, singly or in concert, directly or indirectly, aided and abetted, and are therefore liable for, the pimary violations committed by certain investment management irms discussed above of Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and 80b-6(2)], because Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities each knowingly provided substantial assistance to such entities' violations of Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and 80b-6(2)]. Unless enjoined, Moris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities will again aid and abet violations of Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and 80b-6(2)]. FIFTH CLAIM FOR RELIEF Violations of Sections 206(2) of the Advisers Act (HFV Management and HFV Asset Management) 99. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 through 77. 100. By reason of the conduct in which Wissman engaged, as more fully described above in paragraphs 32-35 and elsewhere, HFV Management and HFV Asset Management, directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce and while acting as investment advisers within the meaning of Section 202(11) of the Advisers 40 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b[15 U.S.C. § 80b-2(11)], engaged in transactions, practices, ofbusiness which operated as a fraud or deceit upon a client or prospective client. 101. Management Asset singly or concert, directly or indirectly, have violated, and unless enjoined will again violate, 2) the Commission respectfully requests that this Court enter a Final Judgment: enjoining and restraining Morris, Loglisci, Harding, the Morris and Entities, and their agents, servants, in active concert or participation notice of injunction by personal service or otherwise, and each of them, from violating, directly or indirectly, Section 10(b) ofthe Exchange Act [15 U.S.c. 78j(b)] and Rule lOb-5 thereunder [17 C.F.R. 240. lOb5]. enjoining and restraining Morris, Morris Entities, and Wissman Entities, and their agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating, directly or indirectly, Section 17(a) of the Securities [15 U.S.§ 41 Act [15 U.S.C. § 80b-2(l 1)], engaged in transactions, practices, or courses of business which operated as a raud or deceit upon a client or prospective client. 101. By reason of the foregoing, HFV Management and HFV Asset Management, singly or in concert, directly or indirectly, have violated, and unless enjoined will again violate, Section 206(2) of the Advisers Act [15 U.S.C. § 80b-6(2)]. PRAYER FOR RELIEF WHEREFORE, the Commission respectfully requests that this Court enter a Final Judgment: I. Permanently enjoining and restraining Moris, Loglisci, Wissman, Harding, the Moris Entities, and the Wissman Entities, and their agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, rom violating, directly or indirectly, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. II. Permanently enjoining and restraining Moris, Wissman, the Moris Entities, and the Wissman Entities, and their agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, rom violating, directly or indirectly, Section 17(a) of the Secuities Act [15 U.S.C. § 77q(a)]. 41 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bPennanently enjoining and restraining Morris, Loglisci, Wissman, the Morris and agents, or participation ofthe by personal or otherwise, and each of them, from directly or indirectly violations 206(1) and 206(2) of the Advisers Act [15 U.c. §§ 80b-6(1) and 80b-IV. Pennanently Management Asset Management, and attorneys and all persons in active them who receive actual by personal each of them, from or indirectly, Sections 17(a)(2) and 17(ofthe Securities [15 U.S.C. § 77q(a)(2) and and ofthe 1) and V. Ordering each of the Defendants the ill-they received from alleged herein, and to pay interest thereon. Ordering Morris, Wissman, the Morris Entities, and the Wissman pursuant to Section 20(d) of the Securities Act c. and Act c. 42 III. Permanently enjoining and restraining Morris, Loglisci, Wissman, the Moris Entities, and the Wissman Entities, and their agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, rom directly or indirectly committing, or aiding and abetting, violations of Sections 206(1) and 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and80b-6(2)]. IV, Permanently enjoining and restraining HFV Management and HFV Asset Management, and their agents, servants, employees and attorneys and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, rom violating, directly or indirectly, Sections 17(a)(2) and 17(a)(3) of the Secuities Act [15 U.S.C. § 77q(a)(2) and (3)] and Section 206(2) of the Advisers Act [15 U.S.C. §§ 80b-6(l) and 80b-6(2)]. Ordeing each of the Defendants to disgorge the ill-gotten gains they received rom the violations alleged herein, and to pay prejudgment interest thereon. VI. Ordeing Moris, Wissman, the Moris Entities, and the Wissman Entities to pay civil monetary penalties pursuant to Section 20(d) of the Secuities Act [15 U.S.C. § 77t(d)] and Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87bOrdering Loglisci and Harding to pay civil monetary penalties pursuant to Section 21 (Act US.Management Asset monetary penalties 21(d) Act US.and ofthe US.as the deems April 15,2009 J es Securities and 10281 336-Sansone VII. Ordeing Loglisci and Harding to pay civil monetary penalties pursuant to Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. VIII. Ordering HFV Management and HFV Asset Management to pay civil monetary penalties pursuant to Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] and Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)]. IX. Granting such other and further relief as the Court deems just and proper. Dated: April 15, 2009 New York, New York By: yuJL. ¦ lafhes Clarkson Acting Regional Director New York Regional Office Secuities and Exchange Commission Three World Financial Center New York, New York 10281 (212) 336-1100 Of Counsel: David Rosenfeld George N. Stepaniuk Todd Brody Maureen F. Lewis Joseph G. Sansone 43 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=fefd20b7-a586-4330-9aa7-986fe378e87b
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