Email Article Print Article

Keeping A Watchful Eye On Your Pension Funds

By John Dietz - Email Editor

Date : April 28, 2009

Dear Valued Reader,

As history teaches us when the hammer swings for prosecution, what generally follows is a chain reaction of more investigations, indictments and subsequent prosecutions. We know the insurance and the banking system have been recent targets. Pensions are next on the list for heavy government scrutiny. Pension issues, similarly to the banking and insurance industry, are complicated.

Last week, current New York Comptroller, Thomas DiNapoli banned both the “middle man” and the “lobbyists” from New York State’s pension fund.

This current investigation is prompted by the role of Wetherly Capital Group, which allegedly funded a $314,000 transaction to Hank Morris. The transaction was consideration for political connections along with other transactions involving kickbacks of millions of pension fund dollars. Daniel N. Weinstein who is a prominent Democratic fundraiser in California, and former union political operative, founded the LA investment firm Wetherly.

So who is Hank Morris?

Known as a political connector, Mr. Morris “created” or was "employed” by half a dozen companies whose main purpose was to help hedge funds and private equity firms handle the investments of the New York State’s $154 billion pension fund. Past New York State Comptroller, Alan Hevesi had sole authority over the fund, and Mr. Morris appears to have been paid for making political introductions with the involvement of Mr. Hevesi.

Here is the part where I advise you to sit down. The numbers are shocking for intermediary pay and for political connections.

State investigators believe that at least $25 million in fees were paid to Mr. Morris’s business interest over the four-year tenure of Mr. Hevesi. So far, the state probe netted three indictments and one guilty plea. In a plea agreement, Alan Hevesi, a Democrat, plead guilty in return for avoiding incarceration and probably an offer of investigation cooperation. Nevertheless, he was ousted from his position for misusing state resources.

Attorney General Andrew Cuomo brought the arrest of Morris, resulting in his plea of guilty on a 123-count grand jury indictment. Wetherly has not been accused of a crime.

The scandal runs deep in politics and as the investigation unfolds more indictments are sure to occur, some will be to those who hold political offices. Public opinion will most likely force the elimination of the comptroller as the sole trustee of the state system.

These placement fund services, currently under examination, are offered to hedge funds by many banks and investment institutions. Citigroup, Credit Suisse, Deloitte, among others, list these services on their websites. They may be referred to as “placement fund agents.” Defenders say the placement agents provide important marketing support, but critics say they operate in an obscure world that is prone to fraud.

The pension fund story, one of many, in this epic financial saga, is a gripping tale of "who has your money." At this juncture, Groucho, Chico and Harpo are running the show.

The good news part is that the bad actors are being ousted, and a much needed review of the system is now taking place. The bad news is that all current solutions are being politicized; decision makers have the power to call the shots to the benefit of their choosing. There is very little say from the person on the street; that means you, and that means me.

The reality check again brings us back to the ongoing endeavor of diversification, Asset Protection and wealth preservation.

It takes a lot of effort and diligence to sort out whom you can trust and whom you should not. This is to remind you that there are good advisors, attorneys and accountants out there representing good investments. This situation is a case of government fraud intertwined with advisor fraud. For all of these reasons, we strongly suggest that you never put all of your eggs into one basket.

Until next time,

RELATED ARTICLES:

• Protect the equity in your home
• Asset Protection Plans
• C.A.L.M. Introduction
• Get educated on Asset Protection