Hevesi's Friends in Need

Political pals cashed in on pension fund business

Hank Morris was already a famous and successful political consultant when he suddenly became fascinated by high finance back in 2003. He took and passed a pair of brokerage exams, becoming Henry Morris, securities broker, license #4675685. Given the vast influence he enjoyed in the office of his close friend and political client, state comptroller Alan Hevesi, this was a fast ticket to riches. But politics remained ever at the forefront.

For instance, as charges filed against Morris and another former Hevesi aide last month by state Attorney General Andrew Cuomo and the Securities and Exchange Commission describe, when another old political ally said he needed to make some money, Morris was happy to oblige.

Why not? They had a $150 billion public pension fund at their disposal and investment firms clamoring to help manage all that money. There was plenty for all.

The friend in need was Raymond Harding, former leader of the state's once-powerful Liberal Party. Harding carried Hevesi on his ballot line throughout the Queens politician's career, even backing Hevesi's disastrous bid for mayor in 2001. A year later, the party lost its ballot line altogether after the campaign of its over-eager gubernatorial candidate—one Andrew Cuomo—imploded.

A bad time was made worse in March 2003, when—following a Voice series—Harding's son Russell was indicted on embezzlement and child-pornography charges. Things went even more sour when his once-influential law firm collapsed.

It was then, according to the complaints, that Ray Harding sought out his friends in the state comptroller's office for help.

Harding soon caught the investment bug as well. He took the same exams, obtaining his own brokerage license. Thanks to the special political magic that weaves connections into easy money, within two years the hard-luck lawyer had pulled in $800,000 in fees paid by investment firms chosen to do business with the pension fund. According to the authorities, he did no real work. The SEC says Harding—who is referred to only as "Individual C"—failed to perform "any bona fide finding or placement services." The Attorney General also omitted Harding's name, referring to him simply as one of Hevesi and Morris's "political cronies" who received "sham" fees as "rewards for political favors and endorsements."

Last week, Harding picked up the phone at his current law firm, Cozen O'Connor, only to graciously decline comment. "I am not discussing the matter, but thanks for the call," he said. Harding was only slightly more forthcoming in early January, when the Daily News' Keith Lovett reached him after rumors of his involvement in Morris's schemes first bubbled to the surface: "I thought I'd explore other avenues," Harding said then.

In fact, that's exactly what he told the Maryland-based brokerage firm that sponsored him when he obtained his license. "He wanted to sit for a securities license," said Goodloe Byron, head of Potomac Capital Markets. "We sponsored him to take the test. He took it. He passed it. It was a legitimate business relationship."

And what exactly did Harding—a brand-new broker who was 70 years old when he got his license—bring to the table? Byron answered plainly: "Well, look, obviously he knew the comptroller. He knew some of the guys on the staff there. It shouldn't be any surprise that sometimes it's hard to get meetings in some places, right? So I didn't envision him doing, you know, 30 years in the investment banking business. I thought he could help us with an account."

As it happens, Harding seems to have mainly helped himself. According to the charges, Morris and his inside fixer-ally, chief pension investment officer David Loglisci, arranged to have Harding's name sandwiched into a deal as the so-called finder who had brought an outfit called Paladin Homeland Security Holdings to the fund. A Paladin senior executive was asked to pay Harding a 1.5 percent fee on the $20 million that the pension fund invested in Paladin in May 2004. The math was done correctly, and Harding soon received $300,000.

Paladin is headed by Michael Steed, a financier who is active in Maryland's Democratic Party. The firm's executives were still happy enough two years later with Hevesi's office to donate $7,500 to his campaign. Steed did not return calls.

Harding's new career paid even bigger dividends a few months later, when the pension fund agreed to invest $100 million with the giant investment firm Pequot Capital Management. According to the charges, Morris and Loglisci persuaded the placement agent on that deal to give Harding a one-third share of his hefty $1.5 million fee. Harding's end came to a sweet $505,000.

The agreeable placement agent who shared his fees with Harding was another veteran political insider, William Howell. Although he's a Democrat, Howell was a top fundraiser for former governor George Pataki, who named him to several state posts. Since then, Howell has worked for a number of financial firms that sought and won state business. "Bill Howell has done nothing wrong," said his attorney, Gerald Shargel, last week. "Any commissions he received were disclosed. I am not expecting him to be charged."

Harding's sponsor at Potomac Capital, Goodloe Byron, said he knew nothing of the deals or the sizable fees paid to his broker. "He got what?" groaned Byron when told about them.

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