The New York Times
May 9, 2009
After Introduction From Ferrer, Firm Earned $100,000 From State Pension Fund
By DANNY HAKIM
ALBANY — When Fernando Ferrer, the former Bronx borough president, met with State Comptroller Thomas DiNapoli in May 2007, it was to make an introduction.
Mr. Ferrer brought along Alfred Villalobos, a former deputy mayor of Los Angeles and the chairman of Arvco Capital, a Nevada firm that brokers deals between investment firms and public pension funds. Mr. Ferrer, the Democratic nominee for mayor of New York City in 2005, works as a consultant for Arvco.
About seven months after Mr. Ferrer made the introduction, Arvco earned $100,000 in fees and a $10 million investment from Mr. DiNapoli’s office for one of its clients, Craton Equity Partners.
Mr. Ferrer’s role in introducing Arvco to Mr. DiNapoli was never disclosed in the reports of pension investments and brokers made public by the comptroller’s office every month, underscoring the lack of transparency that pervades the operations of the $122 billion state pension fund.
The comptroller’s office has said that it requires investment firms to reveal the names of any brokers, known as placement agents, that it uses to arrange deals with the pension fund. But it is left up to the firms to determine who is considered a placement agent. Arvco apparently did not view him as such, and a spokesman for Mr. Ferrer said he only made an introduction and did not get involved in specific deals.
Mr. DiNapoli’s office called the encounter between the comptroller and Mr. Ferrer a “meet and greet” and said it was not aware that Mr. Ferrer and Arvco had a business relationship.
“The comptroller wanted to meet Villalobos because of his extensive experience on pension fund boards in California,” said Dennis Tompkins, a spokesman for Mr. DiNapoli. “Absolutely no business — Arvco or otherwise — was discussed.”
Mr. Ferrer declined to comment for this article. His introduction of Mr. Villalobos, a former trustee of Calpers, the giant California pension fund, was revealed in documents obtained through a Freedom of Information Law request to the comptroller’s office.
Neither Mr. Ferrer nor Mercury Public Affairs, a division of the Omnicom Group that employs him, have been subpoenaed in the investigations by Attorney General Andrew M. Cuomo and the Securities and Exchange Commission into corruption at the pension fund.
One of Mr. Ferrer’s partners at Mercury, Michael McKeon, said Mr. Ferrer “was introducing a former Calpers trustee,” adding that the men had “a broad discussion on a lot of general issues.”
He insisted that Mr. Ferrer did not act as an intermediary, or placement agent, for Arvco. “We give them business advice,” Mr. McKeon said, referring to the relationship of Mercury to Arvco. “We’re a business consultant; Freddy’s a business consultant.”
Mr. Cuomo has likened the comptroller’s office to the “Wild West” of regulation. It is not covered by state lobbying laws. The S.E.C. generally requires that individuals and firms that broker deals register with the agency, but many of the firms, especially those with political connections, have not been doing so.
The concern, Mr. Cuomo said, is that “people can sell access to the largest single asset of the State of New York, the common retirement fund, without any regulation whatsoever.”
The inquiries by Mr. Cuomo and the commission have looked into allegations that friends, relatives and aides of former Comptroller Alan G. Hevesi gained millions of dollars by selling access to the pension fund. Mr. Cuomo’s investigation has already focused on Raymond B. Harding, the former leader of the state Liberal Party, who was charged last month with a felony related to securities fraud. Two Hevesi aides, Hank Morris and David Loglisci, were indicted in March on a wide range of corruption charges. All three have denied wrongdoing.
A firm run by H. Carl McCall, Mr. Hevesi’s predecessor, also has been subpoenaed in the case. So have businesses affiliated with Peter J. Powers, a deputy mayor of New York under Rudolph W. Giuliani; Susan Torricelli, a prominent Democratic fund-raiser and the ex-wife of former Senator Robert G. Torricelli of New Jersey; and Kevin McCabe, who served as chief of staff to Peter F. Vallone Sr. when he was the City Council speaker.
The central question of the investigation has been to determine whether these politically connected intermediaries were actually working to earn fees from investment firms or were being paid because of their relationships with, or access to, Mr. Hevesi’s aides.
Mr. Hevesi pleaded guilty to a felony and resigned in late 2006, but prominent officials continued to make house calls on his successor, Mr. DiNapoli.
Assembly Speaker Sheldon Silver brought the former goalie of the New York Rangers, Mike Richter, to the comptroller’s office to help him peddle a deal, an effort previously reported by The Daily News. An Assembly spokesman said the speaker never sought fees, and no deal resulted from the visit.
The pension interests of Mr. Ferrer, a power broker well-known in Democratic circles, have been the subject of speculation for months, but the details of his work have not been known.
In a brief interview with The New York Times in February, Carissa Villalobos, general counsel for Arvco, declined to discuss Mr. Ferrer. Mr. DiNapoli was asked in March during a radio interview on Talk 1300 AM in Albany, if Mr. Ferrer or other politicians were paid to bring people before him who were seeking pension business. Mr. DiNapoli did not respond directly, describing instead the disclosure requirements.
“When a transaction is completed, we require a disclosure of any placement agent fees or fees that would be involved,” he said, adding that he was not aware that any such deal had been completed. Mr. DiNapoli recently said he would ban payments to any intermediaries in pension transactions.
Arvco also brokered a deal involving the city’s pension fund last year, but the office of City Comptroller William C. Thompson Jr. said Mr. Ferrer had not approached Mr. Thompson as part of any deal or for Arvco.
Mr. DiNapoli’s office could not say whether people connected to Arvco donated to Mr. DiNapoli’s campaign, and the company declined to comment on the issue. Mr. Ferrer contributed $5,000 to the comptroller in December, and Samantha F. Adams, an employee of Arvco, according to California records, contributed $10,000 on Jan. 5, 2009. A woman identified as Darcey Villalobos also donated $10,000 on the same day. And two people who listed addresses within five miles of Arvco’s headquarters in Nevada also donated another $10,000 each on that day.
Copyright 2009 The New York Times Company