Cuomo Subpoenas 100 Hedge Funds, Enlists 36 States In Mushrooming Pension Probe

Moe Tkacik | May 1, 2009, 5:42PM

What did we tell you? The New York state pension fund scandal is starting to look pretty national. New York AG Andrew Cuomo just issued 100 subpoenas to investment firms in his expanding investigation of pay-to-play schemes that defraud public employee retirement funds, and announced the participation of 100 officials in 36 states' attorney general offices in the probe.

Who are the 14 holdouts? We suspect they're states that already regulate placement agents or ban them altogether, as New York did last week.

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Topics: Andrew Cuomo

Marc Correra

Marc Correra: The Link Between New York's Pension Scandal And "Toxic Waste" In New Mexico?

Moe Tkacik | May 1, 2009, 4:59PM

Three weeks ago we told you about accusations that the New Mexico State Investment Council had been under political pressure to invest teachers' retirement funds in risky investments like a $90 million "toxic waste" CDO backed by subprime mortgages -- and wondered if any of the other intensifying corruption investigations across the country might involve some of the same pay-for-players.

Sure enough, a few names emerged last week to link the New Mexico pension fund scandal to the alleged conspiracy to defraud the New York general pension fund under investigation by the state attorney general's office. One was Obama car czar Steve Rattner, who paid alleged ringleader Hank Morris more than a million dollars for securing investments in both states' pension funds. Morris was indicted in March for collecting $30 million in fraudulent "finder's fees" as a top adviser to the former state comptroller Alan Hevesi, in collusion with the pension fund's manager David Loglisci. But the indictment didn't address Morris's "placement" services in other states; his name turned up on a list of placement agents released by the New Mexico State Investment Council as the broker of a $20 million investment in Rattner's private equity firm Quadrangle.

The other thread running through both the New York and New Mexico pension funds was the advisory firm Aldus Equity, whose founder Saul Meyer was charged yesterday with participating in the New York conspiracy and which also until this week advised similar investments in New Mexico.

The further we looked, the wider and farther-back the suspicions of public pension fund pay-to-play seemed to extend, as Cuomo noted himself at yesterday's press conference:

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Topics: Aldus Equity, Bill Richardson, Dan Weinstein, Jerry Cremins, Marc Correra, pension scandals

Psychotic Debt Collectors

The "Fatal Attraction" Method Of Debt Collection

Moe Tkacik | May 1, 2009, 12:18PM

Remember James Ricobene, the suburban Chicago man who fell behind on his Mercedes payments and found a threatening wall post on his daughter's MySpace page a few weeks later? Yeah, we thought that was bad, but some of you had much worse tales from the collection agency annals.

But the tale of Phoenix's Jennifer Dicks and her delinquent Chevy Cavalier is so beyond we fully expect Lifetime to option the story for a film. Last year Dicks (allegedly) bought a Chevy Cavalier with a loan from the Auto Financing Network, a local auto loan company that claims to approve 100% of applicants for loans. AFN's website claims its Top 3 Priorities of 2008 are #1 Treat Customer Right #2 Treat Customer Right #3 Treat Customer Right.

A new motto for 2009 might be in order. ("Treat Customer Like Psycho Ex-Girlfriend"?) In a lawsuit filed against the company in an Arizona superior court Dicks claims the collection agency went so far as to buy the url that matches her name and create a "Jennifer Dicks isn't paying for her Cavalier!" website.

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Topics: Psychotic Debt Collectors

Andrew Cuomo

Cuomo Charges Dallas Money Manager, Says NY Pension Scammers Are Part Of A "National Network"

Moe Tkacik | April 30, 2009, 4:00PM

New York AG Andrew Cuomo added a new name to the growing list of indictments in the New York Pension Fund scandal: Saul Meyer, the (youthful-looking) 38-year-old founder of the private equity fund Aldus Equity. Meyer won't be the last, Cuomo assured reporters at a press conference announcing the charges today:

"I believe we are disclosing a national network of actors who often acted in concert and did this all across the country," Mr. Cuomo said. "They collaborated, they often partnered and victimized states and taxpayers across the country. It's also an ongoing scam."

We said as much yesterday, when we showed you how a key figure in the pension scandals in New Mexico and New York was a direct descendant-in-law of a key figure in a California pension scam of the nineties. And we told you about Aldus, a key name linking the New York fraud to a suspected scheme to scam the teachers' retirement fund in New Mexico and possibly other public pension funds, last week.

Aldus's usual business was advising state pension funds on private equity investments. But it went a step further in New York, using its access to the pension's billions to arrange a $375 million investment to create its own private equity fund. The idea was hatched by Hank Morris, the top adviser to former state comptroller Alan Hevesi who is charged with defrauding the pension fund in a scheme to collect phony "finder's fees." According to the indictment, Aldus paid Morris about $320,000 to secure itself a $375 million investment from the pension fund. Not bad for a private equity firm that, according to this Dallas Business Journal puff profile that ran (all of) two months ago: "started in 2003 with no clients."

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Topics: Aldus Equity, All Muck is Local, Andrew Cuomo, Barrett Wissman, Bill Richardson, CalPERS, Calpers, Saul Meyer, Steve Rattner

Chrysler Before And After Chapter 11: What Changed?

Moe Tkacik | April 30, 2009, 1:56PM

So Chrysler is filing for Chaper 11 bankruptcy protection. But the terms of the "prepackaged" bankruptcy the government is proposing look...suspiciously exactly like the deal the Treasury was negotiating in hopes of averting bankruptcy.

Here's the difference: outside the bankruptcy process, secured creditors -- meaning holders of bonds secured by collateral like plants and machinery -- have to essentially give unanimous consent to any deals, because of the risk the deal would be threatened in court. Inside bankruptcy court, they only need half of the creditors representing more than two thirds of the dollar value of the loans to "cram down" a deal.

The Obama Administration, in a deal already accepted by the four big banks holding 70% of that secured debt, was offering $2 billion to those secured creditors -- a figure it raised last night to $2.25 billion.

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Topics:

Ken Lewis

Ken Lewis Keeps Job At Bank Of America; Chrysler's Bob Nardelli Loses His To Italians And Unions

Moe Tkacik | April 29, 2009, 7:08PM

It's a bittersweet happy hour for Bank of America CEO Ken Lewis. As of a few minutes ago, he gets to keep one of his two jobs -- the one with all the work. At the bank's annual meeting today shareholders voted by a razor-thin margin to keep Lewis in the CEO post and sack him as chairman. Walter Massey, a director at the bank and the president of Morehouse College, will replace him in the latter position. Lewis kept his job by a 50.3% vote in part on his strength among brokers who vote on behalf of their clients, bucking calls for reform by a formidable minority including one shareholder who referenced Psalm 83 at today's meeting.

But one name on the Endangered Executives list moved closer to gilded retirement today, according Washington Post report that the Treasury Department is hammering out a bankruptcy plan for the automaker that would replace CEO Bob Nardelli with the management of the Italian auto company Fiat and hand over majority ownership to the company's retirement fund, in exchange for the union's agreement to cut in half the $10 billion it is owed by the company. Chrysler sales were down 39% in March from the year earlier, as compared with 35% at GM, whose CEO Rick Wagoner was asked by the Obama Administration down last month. It's about time: while Lewis and Wagoner both had/have broad bases of support, Nardelli, who pulled down a high nine figure pay package while slashing veteran workers as CEO of Home Depot, doesn't appear to have much at all.

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Topics: Bob Nardelli, Ken Lewis

CDR

The Pension Scandals: Six Degrees Of How "Toxic Waste" Lands In Teachers' Retirement Funds

Moe Tkacik | April 29, 2009, 3:31PM

LATE UPDATE: An earlier version of this post misidentified New Mexico State Investment Council portfolio manager Kay Chippeaux as being Frank Foy's replacement; Foy had held various titles including chief investment officer at the state's Education Retirement Board.

In June 1997 Tom Flanigan, the chief investment officer of the California State Teachers Retirement System, wrote a letter to his old mentor, then-SEC chief Arthur Levitt. He was under political pressure, he said, to gamble with teachers' savings. The state comptroller was demanding he allocate a bigger portion of the fund to venture capital firms and hedge funds in what he thought to be an overheated market.

Meanwhile, hedge funds and private equity firms were hiring politically connected "placement agents" to descend upon his board of directors, who had final approval over his investment decisions. He had just watched the Texas investment firm Hicks, Muse, Tate and Furst secure a $100 million investment from the state employees' general retirement fund CalPERS after paying a $750,000 "finders fee" to a former board member and longtime Los Angeles politico named Alfred Villalobos. Villalobos had a questionable history with Hicks -- as a board member he'd already approved another $100 million investment in the firm on the advice of the fund's paid adviser Chris Bower. Nine months later, Bower sold his two-year-old yacht to Hicks founder Tom Hicks for a $45,000 profit. And there was other smoke around the deal, if no clear fire: Villalobo, for one had just filed for personal bankruptcy over gambling debts. And the board had initially rejected the deal -- when another LA politico on the board, a labor leader named Jerry Cremins, changed their minds. There was something "unseemly if not unethical" going on, Flanigan wrote. The SEC proposed rules regulating the placement agencies.

A few months later, Flanigan was sacked.

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Topics: Bill Richardson, CDR, Calpers, pension scandals

Ken Lewis

The Campaign To Oust Bank Of America CEO Ken Lewis: But How Would Jesus Vote?

Moe Tkacik | April 29, 2009, 1:16PM

We feel a bit better about our own conflicted feelings about Bank of America's embattled CEO (and happy hour enthusiast) Ken Lewis after reading the Charlotte Observer's live Twitter feed of the bank's annual meeting. Dozens of shareholders are currently giving short speeches for and against ousting him today, and it is clear the bank's owners divided as well. The quintessential annual meeting muckraker Evelyn Y. Davis (the quintessential Evelyn Y. Davis profile is here) just spoke -- and she gave Lewis her full support.

As we noted earlier, the movement to oust Lewis has made bedfellows of MoveOn.org and McCain donors, and the camp that wants to let him stay is equally diverse. Davis, Habitat For Humanity, and the widely-worshiped bank analyst Meredith Whitney are all on Lewis' side. So who did John Moore, the sole shareholder thus far to be reported quoting the Bible, support?

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Topics: Ken Lewis

Hillary Clinton

Hillary Clinton Rents Out Donor List To... Hillary Clinton

Moe Tkacik | April 29, 2009, 12:20PM

Here's a cool way to get out of debt most Americans probably wish they had as an option: Hillary Clinton's presidential campaign made $2.5 million this year renting out its list of supporters to Hillary Clinton's campaign for Senate, the Wall Street Journal reports today, following up on last week's Politico item. That's enough to pay back the $2.3 million the campaign still owes to her campaign strategist Mark Penn.

Clinton's now-dormant political action committee, Hill PAC, also paid $822,000 to rent the list, and the William J. Clinton Foundation paid "more than $274,000" to rent the list. Why the sweetheart deal for her husband? Maybe it wasn't as valuable to an entity that already has a 2,922-page list of its own. The campaign tells the Journal the prices were set by outside appraisers. It made another $1 million renting out the list to 18 other customers, which paid an average of $50,000 apiece.

The significance of this, apart from "campaign finance is complicated," according to the Journal, is that Hillary is "holding onto" the list in "part of a plan that looks to retain an element of [her] political operation while she serves as secretary of state."

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Topics: Hillary Clinton

Tim Geithner

Dissecting Tim Geithner's 658-Page Schedule

Moe Tkacik | April 27, 2009, 6:27PM

As Treasury Secretary, Tim Geithner's public image has generally seemed "not quite ready for prime time." But his PR acumen as president of the New York Fed was in large part credited for landing him the job -- and now we know why. Geithner made one-on-one coffee dates, luncheons, tennis games, dinners and conference calls with reporters a major part of his job at the New York Fed, from the looks of the official schedule posted this morning by the New York Times. In addition to regular press briefings, backgrounders and whatever Geithner slipped in on his own time, Geithner scheduled one-on-one time for more than 68 journalists from 2007 to 2008, including twelve from the New York Times, ten from the Wall Street Journal and eight from the Financial Times. His favorite journalist by far appears to be Krishna Guha, an editorial page writer at the Financial Times, to whom he granted 12 interviews.

The Journal's Jon Hilsenrath and David Wessel, the FT's Gillian Tett and Chrystia Freedland and House of Cards author William Cohan also make a lot of appearances on Geithner's schedule, in addition to professional pundits Fareed Zakariah and Tom Friedman. What's particularly striking about Geithner's media schedule is how willing he seemed to be to speak individually with multiple reporters from the same media outlet: some days he would speak separately with three different FT journalists. As the Times has pointed out, Geithner wasn't necessarily satisfied with his press; the schedule shows three meetings with a publicist who represents Citigroup, and a few others with New York PR patriarch Howard Rubenstein.

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Topics: Tim Geithner

Tim Geithner

The New, Amended Case Against Tim "Magical Thinking" Geithner

Moe Tkacik | April 27, 2009, 1:34PM

On the face of it, the lengthy Tim Geithner profile in today's New York Times is not quite as unflattering as last Friday's cover story in Portfolio -- but it's pretty close. Both perpetuate a slightly altered narrative about the Treasury Secretary: where earlier hit jobs depicted Geithner as a limp-wristed bureaucrat who took marching orders from the plutocrats who appointed him to head the New York Fed, the latest stories further the notion of Geithner as precocious, fundamentally unprepared child -- a sort of Sarah Palin of Clinton-anointed technocrats. A structured finance expert accuses him of "magical thinking" in the Times; Portfolio quotes Mike Barnicle's "eyes of a shoplifter" observation. "Think Bambi looking into the headlights on an 18-wheeler," says one economist of Geithner's fumbling through a question-and-answer session in 2006. "People thought, 'Whoa, that's kind of out there,'" says comptroller of the currency John C. Dugan of a short-lived proposal Geithner advanced last June to guarantee all bank debt. Management expert Peter Cohan suggests Geithner is flailing because he isn't very "good at math."

Between the lines of both stories, tough, are some more tangibly problematic signs for Geithner's future in the post.

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Topics: Tim Geithner