More than a dozen hedge funds and private equity firms allegedly paid $35 million in phony fees to Morris and his conspirators, according to the indictments. Most prominent thus far has been Quadrangle, the private equity firm founded by auto czar Steve Rattner. But Aldus was different because the retirement was paying for its advice -- meaning its fiduciary responsibility was to the pension. Aldus had similar consulting relationships with numerous other public pension funds, including the retirement funds of firefighters in Los Angeles and the teachers in New Mexico, both of which are also under investigation for pay-to-play practices.
New Mexico Gov. Bill Richardson officially fired Aldus yesterday after relying on the firm's advice for private equity investment decisions since 2004. No one has been charged in New Mexico, but the former chief investment officer of the teachers retirement fund filed a massive whistleblower lawsuit last year alleging that the fund's board steered money to politically-connected investment vehicles -- in one case forcing teachers to eat a 95% loss on a "toxic" CDO.
Another firm mentioned (but not charged) in today's indictment that would have been the legal fiduciary of the fund when it got caught up in Morris' alleged scam is Pacific Corporate Group. PCG "already managed certain Retirement fund investments," according to the indictment, when the pension fund's now-indicted chief investment officer David Loglisci suggested that his PCG contact form a joint venture with a friend of his into which the retirement fund agreed to invest $750 million in exchange for passing back an alleged $1.26 million in fees back to Morris, Loglisci and Dallas hedge fund manager Barrett Wissman, who earlier this month pleaded guilty to fraud charges in the scheme and agreed to repay $13 million in fees.
The Pacific Corporate Group executive, who is not named in the indictment, no longer works for PCG. But as we explained yesterday, the La Jolla, California-based advisory firm is no stranger to public pension money -- or conflict-of-interest accusations: in 1994 PCG founder Chris Bower advised California's biggest public pension fund to invest $100 million in the Dallas private equity firm Hicks, Muse, Tate & Furst. A few months later, firm co-founder Tom Hicks bought Bower's two-year-old yacht for $45,000 more than Bower had paid. That firm, now known as HM Capital, was also named in the New York indictment for paying fees to Morris in exchange for investments. Two years ago, Aldus Equity advised the New Mexico Educational Retirement Board to invest $20 million in an HM Capital Fund.