Exec pleads guilty to bribing NY pension officials

AP News
Posted: Dec 03, 2009 6:04 PM

A California venture capitalist pleaded guilty Thursday to charges that he helped his company land a lucrative deal with New York's public pension fund by giving nearly $1 million worth of illegal gifts to state officials.

Markstone Capital Partners chairman Elliott Broidy made an unannounced appearance in a Manhattan courtroom to admit to a felony charge of rewarding official misconduct.

Prosecutors said the state invested $250 million in Markstone after Broidy showered them with gifts and favors, including trips, payouts to friends and relatives, and a secret investment in an obscure movie called "Chooch," produced by an official's brother.

"This is an old fashioned payoff of state officials," said New York Attorney General Andrew Cuomo. "This is effectively bribery of state officials, and not just one, but a number of state officials in the comptroller's office."

Broidy is the latest in a string of private equity executives and investment advisers to plead guilty in connection with Cuomo's investigation of pension fund activities during the tenure of former state Comptroller Alan Hevesi.

More arrests seem likely.

Cuomo announced Thursday that four high-level officials in the comptroller's office had improperly accepted gifts or other lucrative benefits from Broidy.

He would name only one, the pension fund's former chief financial officer, David Loglisci, who already faces charges in the case.

Cuomo said he couldn't talk about the three others because the investigation was not yet complete.

However, the Attorney General's office said Broidy had subsidized five trips to Israel, and one to Italy, by a "very high ranking" official in the comptroller's office in connection with Markstone's attempt to get business from the pension fund.

Those trips included first class air travel, luxury hotel suites, a helicopter tour, a car and driver and a security detail, all at a cost of about $75,000.

The official was not named in court, but state travel records show that Hevesi himself made several trips to Israel in 2005 and 2006 during the period when Broidy is alleged to have arranged for travel. The records also show taxpayers picked up some at least some expenses associated with those trips, including $20,894 in airfare.

Hevesi's lawyer, Bradley Simon, declined to comment.

Previously, Hevesi has denied accepting any improper gifts or bribes. He resigned in late 2006 after pleading guilty in an unrelated scandal involving the improper use of a state chauffeur and security detail.

A Broidy spokesman, Christopher Clark, said in a written statement that his client "regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the NYAG and will be cooperating in the ongoing investigation."

In court Thursday, Broidy described other gifts to higher-ups in Hevesi's administration, including an official who he said arranged for him to pay $90,000 to cover his girlfriend's rent and hospital bills, plus another $44,000 in payments to the girlfriend's relative.

While that official has also not been identified in court filings, a person familiar with the investigation said he is former Hevesi chief of staff Jack Chartier. The woman who received the money, the person said, was the actress Peggy Lipton.

The person spoke with The Associated Press on the condition of anonymity because Chartier hasn't been charged.

Chartier was named publicly, years ago, as a subject of the investigation. He has not commented publicly on his role in the probe.

Lipton, famous for starring in the 1960s TV show "The Mod Squad," hasn't been accused of any wrongdoing.

Another state official, prosecutors said, was rewarded indirectly by Broidy when his relative was given a "sham" consulting contract worth more than $380,000.

Additionally, Broidy put up $300,000 that was ultimately invested through an intermediary in "Chooch," a low budget independent film set in Mexico and Queens produced by Loglisci's brother.

The movie was financed with contributions from a number of businessmen trying to land investments from the state pension fund, valued in May at $109.9 billion. It was distributed on DVD by a company owned by the Quadrangle Group, the private equity firm founded by Steven Rattner, now the former head of the Obama administration's auto industry task force.

Logslici has pleaded not guilty and denied any wrongdoing.

Following his guilty plea, Broidy resigned from all operational and supervisory roles at Markstone, one of the largest private equity firms investing in Israel.

As part of his plea bargain, he has agreed to forfeit $18 million. He was freed on bail after entering his plea Thursday and will be allowed to travel, with restrictions. He could get up to four years in prison, but his cooperation could lead to a lighter sentence.

Broidy resigned in the spring from the board of the Los Angeles Fire and Police Pensions fund after the Securities and Exchange Commission made inquiries related to the case.

Markstone said in a statement that it didn't expect the case to effect its investments. The company said it was appointing Dan Gillerman, Israel's former ambassador to the United Nations, as its new chairman.