Thanks to the powerful searchlight now being wielded by State Attorney General Andrew Cuomo and his crew, we got another peek last week into those dark corners at New York’s public pension funds. Under pressure from a national press corps now chasing the story, both state and city comptrollers released lists of the self-described investment placement agents who won deals in their offices.
These are people who make a living as matchmakers, bringing money managers and big investors like pension funds together. It’s a lucrative business that was largely shrouded from public view until the Cuomo probe began. Some of them, as the attorney general has pointed out, have actually taken securities exams to become licensed brokers in order to understand what they’re selling. Others skipped the exams and licenses altogether and went straight for the deals. Since successful investments can yield fees north of $1 million, this impatience is completely understandable. Cuomo says that some 40 percent of those pushing investment deals at the city and state pension funds have been unlicensed.
Actually, as his investigation has also shown, a license alone doesn’t guarantee a straight-shooter. Those charged thus far, including political heavies Hank Morris and Ray Harding, are all bona fide, license-holding securities brokers who, nonetheless, allegedly stole with both hands. But the fact that people with zero financial training and whose only other marketing experience has been in the aisles at Gristedes have been routinely pitching huge investment deals to pension trustees isn’t exactly comforting. That goes double if it’s your pension they’re playing with.
One such lucky marketer is a former city police union official named Jack Jordan, who, despite an old criminal rap, has managed to make millions at this game.
Jordan’s firm—a corporation called J. Matthias LLC—received fees for at least three major investments made by New York City’s pension funds since 2006, according to a list released by City Comptroller William Thompson. Jordan’s company was a solo placement agent on a $65 million investment that the pension funds approved for a fund organized by HM Capital. A spokesman for HM declined to comment on Jordan’s role. But other investors are blunt about the value-added that such agents bring to the table: It’s called access.
In 2007, Jordan scored again when his firm served as co-broker on a $70 million investment that the pension funds made in a giant private equity fund called Tailwind Capital Partners. Jordan’s co-broker was a major firm called Atlantic-Pacific Capital with offices in New York, London, and Hong Kong. In a 2008 press release, Atlantic-Global described itself as Tailwind’s “exclusive global placement agent.” Exactly how Jordan fits into that alleged fact pattern is unclear. Atlantic-Global didn’t return calls.
Jordan’s third deal was the biggest of all—a whopping $150 million investment by the pension funds into another big private equity account organized by MidOcean Partners, which specializes in European investments (and which recently added ex-Governor George Pataki to its board). As listed by Thompson’s office, Jordan’s co-broker on that deal was a San Francisco–based company called Probitas Partners. But Probitas officials said they declined Jordan’s request to serve as a sub-agent on the offering and that he did his own, separate marketing push.
Just how much Jordan earned on these deals is an open question. Thompson’s office said it doesn’t know what any placement agents were paid prior to June 2008, because it began asking for the information only when the Cuomo probe heated up. Industry experts say fees can range from one-half percent to more than 2 percent of the capital invested. This would put Jordan’s end somewhere in the range of $1.25 million to $3 million.
He’s clearly done well. Last summer, he and his wife traded their longtime Stuyvesant Town apartment for a $2.35 million co-op on East 87th Street.
Jordan himself is an elusive target. His company, J. Matthias (it’s his middle name), isn’t even listed in the phone book, let alone by securities regulators. He heads a separate firm called Institutional Services Unlimited, which is licensed and makes money by trading stocks for pension funds. Jordan declined to discuss any part of his operations, ducking repeated messages.
That could be because the last time Jordan’s name hit the papers it wasn’t good news. That was in 1998, when he pled guilty to perjury before a federal grand jury. At the time, prosecutors were investigating a scheme concocted by a former transit police union official named Ron Reale to defraud the city’s campaign finance system of some $130,000. Reale, who was later convicted, had donors such as Jordan make $1,000 contributions in order to qualify for campaign matching funds. Reale then returned the original gifts. Testimony at Reale’s trial showed that Jordan solicited several of the phony donations.
Jordan, now 71, served as head of the old New York City Housing Patrolmen’s Benevolent Association from 1976 until 1992, when he was defeated for re-election. Upon taking office, the union’s new leaders promptly sued him, claiming that he had misappropriated more than $75,000 and had paid a lawyer and financial consultant for work that was never done. Jordan insisted there was nothing to it. The lawsuit was eventually dropped.
The ex–housing cop has been a fixture around the city’s pension funds for years. But apparently no one ever thought to ask him if he was a licensed broker. “Yes, Jack’s a placement agent,” said one city pension trustee who spoke on background about pension board practices. “He knows his business.”
Jordan has also been a regular on the political fundraising circuit, showing up at dinners and cocktail parties. “I could never figure out what his interest was,” said one veteran political consultant. His biggest interest appears to be the city comptroller, who oversees the city’s $82 billion in pension funds. Since 2001, Jordan, his family, and business associates have donated $15,500 to Thompson’s campaigns.
Thompson said he knew that Jordan worked as a placement agent, but was vague on specifics. “I think Jack does do some placement,” Thompson said this month. “I don’t know which ones.” The comptroller added that the men are not particularly close. “I know Jack,” said Thompson. “But I would not say Jack and I have a close relationship. Not at all.”
Thompson also sought to distance himself from two other friends whose hefty pension fund earnings the Voice detailed last week. William Howell, one of Thompson’s oldest and strongest supporters, has reaped millions as a placement agent hawking deals to the city’s pension system. Howell’s business associate is another close Thompson pal and campaign fundraiser, Brooklyn lawyer and lobbyist Norman Levy.
In a single $150 million investment deal aimed at Northern Ireland approved by the pension funds last year, Howell—who is a registered broker—received a $3 million fee. Thompson said he hadn’t been aware that his friend was handling the deal.
Thompson is campaigning for mayor these days, and last week he made the rounds of TV talk shows, on which he emphasized his concerns about abuses by placement agents, especially Morris, who was a top aide to a different comptroller, the now-disgraced Alan Hevesi. No one popped a single question to the candidate about his own friends who have grown wealthy mining the rich seam of pension deals. Meanwhile, after the Voice story appeared, Thompson’s office buttoned up tight. Officials last week insisted they had no information on any deals that Jordan handled, or others involving Howell. The reason? The comptroller’s own outside investment consultant just hasn’t provided it.