Seven Defendants Settle SEC Fraud Charges in "Pay to Play" Case Involving New York State Common Retirement Fund
On March 3, 2014, the Honorable Katherine Polk Failla, United States District Judge for the Southern District of New York, entered final judgments against seven defendants in the pending enforcement action arising from the "pay-to-play" scheme involving the New York State's Common Retirement Fund ("Common Fund"). Starting on March 19, 2009, the Commission filed securities fraud and related charges against several participants in the scheme, including Henry Morris ("Morris"), the top political advisor to former New York State Comptroller Alan Hevesi, and David Loglisci ("Loglisci"), formerly the Deputy Comptroller and the Common Fund's Chief Investment Officer. Morris and Loglisci orchestrated a scheme to extract sham finder fees and other payments and benefits from investment management firms seeking to do business with the Common Fund. In all, the Commission charged seventeen defendants, including various nominee entities through which payments were funneled and certain of the investment management firms and their principals. The civil action had been stayed pending the outcome of the New York Attorney General's Office's parallel criminal action against some of the defendants charged by the Commission.
In addition to the judgments entered in the federal court action, administrative orders were issued by the Commission on March 10, 2014 imposing remedial sanctions against Morris, Loglisici and Julio Ramirez ("Ramirez"), a former broker who facilitated certain of the payments made to Morris. The judgments and administrative orders imposed the following relief, to which the defendants consented:
Morris, who previously pled guilty to parallel criminal charges and was sentenced to a multi-year prison term and ordered to forfeit $19 million in fees, consented to entry of a judgment in the federal court action that permanently enjoins him from violating Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"). The Commission's administrative order also bars Morris from (i) associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; (ii) participating in any offering of a penny stock; and (iii) appearing or practicing before the Commission as an attorney.
Loglisci, who also pled guilty to parallel criminal charges and was sentenced to a term of conditional discharge due to his cooperation with law enforcement authorities, consented to entry of a judgment in the federal court action that permanently enjoins him from violating Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1) and 206(2) of the Advisers Act. The Commission's administrative order also bars Loglisci from appearing or practicing before the Commission as an attorney.
Ramirez, who also pled guilty to parallel criminal charges and was sentenced to a term of conditional discharge due to his cooperation with law enforcement authorities and ordered to forfeit $289,875 in fees, consented to entry of a judgment in the federal court action that permanently enjoins him from violating Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1) and 206(2) of the Advisers Act. In addition, the Commission's administrative order bars Ramirez from (i) associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and (ii) participating in any offering of a penny stock, subject to a right to reapply after three years.
Nosemote LLC and Pantigo Emerging LLC, two shell companies through which payments to Morris were funneled, consented to entry of a judgment in the federal court action that, like Morris, permanently enjoins them from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1) and 206(2) of the Advisers Act.
Tuscany Enterprises LLC and W Investment Strategies LLC, two entities previously associated with defendant Barrett Wissman, against whom a consent judgment was previously entered imposing permanent injunctive relief, consented to entry of a judgment that ordered them to disgorge $3,083,500 in ill-gotten gains and pay $321,272 in prejudgment interest. The judgment also permanently enjoins them from violating Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Sections 206(1) and 206(2) of the Advisers Act.
The Commission's claims against defendant Saul Meyer remain pending. The Commission acknowledges the assistance and cooperation of the New York Attorney General's Office in this matter.
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