One-time N.Y. Pension Overseer McCall in Cuomo Probe

(Bloomberg) -- Former New York state Comptroller H. Carl McCall, once chief fiduciary of the third-largest public- employee pension fund, said a deal he made three years after leaving office has involved him in a widening investigation of so-called placement agents.

McCall, state comptroller from 1993 to 2002, preceded Alan Hevesi, whose administration is the focus of a probe by New York Attorney General Andrew Cuomo that has produced four criminal charges, two guilty pleas and investigations from New York to California. At issue are the middlemen who secure for investment firms millions of dollars in pension business. Last week, McCall, 63, received a Cuomo subpoena.

Three years after he left office, Manhattan-based Steinberg Asset Management LLC paid him $48,000 for helping it obtain $25 million to invest for the state pension, McCall said in a telephone interview. David Loglisci, Hevesi’s chief investment officer, told him the fund needed a “small-to-mid-cap firm to manage a portfolio.”

“I was in a unique position of having this knowledge that they were looking for such a firm, and I knew a lot about this firm, so I made the referral,” McCall said.

Hevesi resigned Dec. 22, 2006 after pleading guilty to charges he used state-paid drivers as his wife’s chauffeurs. Loglisci now faces Cuomo’s 13-count indictment.

Cuomo’s Charges

Cuomo has charged Henry “Hank” Morris, 55, with orchestrating kickbacks by exploiting work he did to advance Hevesi’s political career; Loglisci, 39, for facilitating and benefiting from the arrangement; former state Liberal Party chairman Raymond Harding, 74, for pocketing illicit payments, and Saul Meyer, 38, a Dallas money manager for Aldus Equity Partners, for paying kickbacks.

Barrett Wissman, 46, a Dallas, Texas hedge fund manager, and Julio Ramirez Jr., 48, a former Blackstone Group LP employee, have pleaded guilty to charges stemming from the probe.

McCall received one of about 100 subpoenas Cuomo earlier this month seeking information about transactions in which individuals acted as “pension placement agents,” linking private equity and hedge firms with public pensions.

The last time McCall and Cuomo were at odds was in 2002, when Cuomo opposed McCall for, and later quit, the race for the Democratic gubernatorial nomination. McCall said he doesn’t resent Cuomo’s subpoena.

Understanding Subpoena

“If I had been the only person subpoenaed then I could question it, but the fact that some 100 people were subpoenaed, I could understand it,” he said in the interview.

“As far as the investigation is concerned, I think it’s a very troubling thing to have emerged, and I commend the attorney general for persisting and trying to get to the bottom of this, because the integrity of the pension fund is very important,” McCall said.

As comptroller, McCall was solely responsible for all state pension investment decisions. Politically influential acquaintances and friends approached him with deals that would benefit them and their clients, McCall said.

“This is what I struggled with in terms of people who made referrals,” he said. “Was somebody simply bringing something to you because they expected you to give them money, because you knew them? Or, were they really making recommendations that added some value? You don’t want to tell them don’t bring anything in, because something might be good.”

Selecting Investments

His office tried to focus on the merits of the deal, not the identity of the placement agent, McCall said. “We looked at it very carefully to determine whether or not this was something that made sense for us as an investment,” he said.

Restrictions on middlemen instituted by the current state Comptroller Thomas DiNapoli and city Comptroller William Thompson in the past month make sense, McCall said, in light of the abuses uncovered by Cuomo’s investigation.

McCall endorsed a code of conduct proposed by Cuomo and agreed to yesterday by the Washington-based Carlyle Group, the second-largest private equity firm. The code would ban investment firms from using placement agents or other third parties to negotiate with public pension funds. It prohibits investment firms from doing business with pension funds for two years if the firm made a campaign contribution to a public official who can influence fund investment decisions.

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