U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21487 / April 15, 2010
Securities and Exchange Commission v. Quadrangle Group LLC and Quadrangle GP Investors II, L.P., United States District Court for the Southern District of New York, 10-cv-3192 (filed April 15, 2010)
SEC CHARGES PRIVATE EQUITY FIRM IN NEW YORK PENSION FUND PROBE
The Securities and Exchange Commission today announced charges against Quadrangle Group LLC and Quadrangle GP Investors II, L.P. in connection with the Commission's ongoing investigation into a multi-billion dollar kickback scheme involving New York's largest pension fund. The Quadrangle defendants agreed to settle the SEC's charges and pay a penalty of $5 million.
The SEC previously charged Henry Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi, and David Loglisci, the former New York State Deputy Comptroller, for orchestrating a fraudulent scheme that extracted kickbacks from investment management firms seeking to manage the assets of the New York State Common Retirement Fund. In today's complaint, filed in federal district court in Manhattan, the Commission alleges that the Quadrangle defendants entered into undisclosed financial arrangements that benefited Morris and Loglisci in order to win investment business from the Retirement Fund.
Specifically, the SEC alleges that the Quadrangle defendants secured a $100 million investment from the Retirement Fund only after a former Quadrangle executive arranged for a Quadrangle affiliate to distribute the DVD of a low-budget film called "Chooch" that Loglisci and his brothers had produced and after that executive agreed to pay more than $1 million in sham "finder" fees to Morris. The scheme corrupted the integrity of the Common Fund's investment processes and resulted in the Retirement Fund's assets being invested with the undisclosed purpose of enriching Morris and Loglisci's brother.
In settling the SEC's charges without admitting or denying the allegations, Quadrangle Group LLC and Quadrangle GP Investors II, L.P. consented to the entry of a judgment that permanently enjoins them from violating Section 17(a)(2) of the Securities Act of 1933 and orders them to pay the financial penalty. The settlement is subject to court approval.
The SEC's investigation is continuing. The Commission acknowledges the assistance and cooperation of the New York Attorney General's Office which today announced an Assurance of Discontinuance with respect to the Quadrangle defendants. As part of that disposition, the defendants have agreed to repay the management fees they earned from the Retirement Fund's investment.
For further information, see Litigation Release No. 20963 (March 19, 2009); Litigation Release No. 21001 (April 15, 2009); and Litigation Release No. 21018 (April 30, 2009)
See Also: SEC Complaint; Final Consent Judgment