Tuesday, October 9, 2012
David Loglisci Sentenced After "Pay To Play" Scheme
NEW YORK (Reuters) - David Loglisci, former chief investment officer at the New York state pension fund, was sentenced to a conditional discharge Tuesday for allowing a "culture of corruption" at the fund.
Loglisci is among eight people who pleaded guilty in a probe of "pay-to-play" at the New York state Common Retirement Fund under Alan Hevesi, the comptroller from 2003 to 2006, whose job it was to manage the fund. Hevesi, who admitted to abusing his position, is serving up to four years in prison.
The investigation by former New York Attorney General Andrew Cuomo, now the state's governor, revealed how politics and placement fees resulted in favored treatment for certain money managers.
More than $5 billion in alternative investments at the New York pension fund were tainted by kickbacks, the office said.
The probe also revealed similar problems at public pension funds across the country.
Loglisci, 42, who earned a law degree and MBA from the University of Notre Dame, was a vice president of investment banking at Salomon Smith Barney before he began working for the New York State Common Retirement Fund in 2002. He took a 70 percent paycut by going into public service, he said.
"I entered an environment where political considerations were a customary part of the decision-making process," Loglisci told the judge Tuesday in New York state Supreme Court in lower Manhattan. "And to my failure, I went along with it."
Unlike the other defendants, there's no evidence Loglisci received any money from the "pay-to-play" scheme, prosecutors said in court papers.
During the investigation, Cuomo said a low-budget film, "Chooch," produced by Loglisci's brother, had investments from money managers who also did business with the fund.
Loglisci, who now lives in Oklahoma, has already paid a "dear price" for going along, his attorney, Kevin Keating, told New York state Supreme Court Justice Lewis Bart Stone.
He now manages a startup car wash business in Oklahoma, Keating said. "He's done in the financial sector."
Stone said a good argument had been made to sentence Loglisci to a conditional discharge, meaning the case is closed so long as he doesn't commit other crimes.
In 2010, Loglisci had pleaded guilty to a violation of the state's business law, a felony.
"You sold out and you didn't get any money for it, which shows how naive you were," Stone said.
Loglisci ceded his authority at the pension fund to Hevesi's political consultant Hank Morris, who got $19 million in fees. Morris, who also pleaded guilty, went to prison for his role.
Loglisci's cooperation was "a seminal factor leading to the guilty pleas of Hevesi and Morris," Eric Schneiderman, now New York's attorney general, said in court papers.
Loglisci said he is also cooperating with the U.S. Securities and Exchange Commission.
With the felony conviction, Loglisci will automatically lose his license to practice law.
During his tenure, the New York state pension fund grew from $95 billion in 2003 to over $190 billion in 2007, Loglisci said, adjusting for member contributions and payments.
The case is People v. Morris, 0025/2009, New York State Supreme Court, New York County (Manhattan).
(Reporting By Karen Freifeld; Editing by Bernard Orr)