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Sell Their Influence,
But Is That Criminal?
By Henry J. Stern
April 24, 2009
Recent disclosures about the role of placement agents in arranging investments for the city and state pension funds have raised serious issues of improper influence.
As a result, State Comptroller Thomas J. DiNapoli (selected by Speaker Sheldon Silver, with the concurrence of the State Assembly and Senate on February 7, 2007, after Alan Hevesi resigned just before he was to begin his second term), has announced that he will no longer deal with middlemen in making decisions about where the state pension fund will invest.
City Comptroller William Thompson is moving in the same direction, and has asked Attorney General Andrew Cuomo to look into his office procedures. General Cuomo requires no invitation to investigate anything, but he is likely to be gentle in his treatment of Thompson, who has not even been accused of any wrongdoing. The remedy in this
case could well be the abolition of the business, which is inherently sleazy, rather than the selective prosecution of its more successful practitioners. A gifted and talented public official could try to pursue both goals.
Hank Morris, a political intimate of Hevesi for many years, is said to have been paid thirty million dollars for his services as an intermediary. These were concealed under the name of a Connecticut firm, Searle & Co., which paid Morris 95 per cent of the funds they received for him, 5 per cent being a reasonable tariff for a laundry. Even people in politics, who are used to insiders reaping some financial reward if their horse wins, were astounded at the size of the bonanza alleged to have been paid here.
The other shoe in this drama would drop if it were discovered that Morris had, in some way, shared some of his good fortune with his lifelong friend and client, and the man who made it possible for him to receive such vast sums.
Even if this were so, those accomplished numbers crunchers could find a way to make the transaction opaque. There has been no published accusation or evidence of such a transfer of funds. Some people believe that it would require great restraint on the part of the Comptroller to allow his hireling to enrich himself by thirty million dollars (give or take a few million), and not take a sou that might have been left at the table – the table in Morris’ consulting office where he regularly met with Hevesi.
It would be preposterous for anyone to believe that Morris’ services were worth eight-figures without recognizing that his principal contribution to the process was the indispensable influence he exerted to induce the Comptroller, the sole trustee of the fund, to make the investment in the first place, or to hire his client as a money manager for the fund. Morris’ clients were rich, or very much wanted to be. They sought substantial state investments or assignments. He was the man to see.
There is a problem, however, in criminalizing the sale of influence, even though it is apparent to many that that is what happened here in a particularly egregious manner. For one thing, where is the certainty necessary to prove the case beyond a reasonable doubt? Is there a smoking gun? Does Andrew Cuomo have that gun in his drawer? Assume Morris was given power because of his prior services to Hevesi. Should the Comptroller have elevated his enemies? Mario Cuomo, Barack Obama, didn’t they appoint people they knew and trusted?
What would have been a reasonable fee for Morris to charge, evaluating the expertise and insight he may have contributed to the transaction? Don’t salesmen and brokers receive commissions on real estate transactions, and people who connect business owners and managers receive finders’ fees? Lawyers are selected in part because of their reputed influence with judges and their ability to persuade juries. For lobbyists, relationships they have acquired over their years are their stock in trade.
The problem a writer has in defending a political figure is that sometimes you find out that the man has done much worse things than the one he was accused of. In the fall of 2006 we did not believe that Alan Hevesi, who had just been re-elected Comptroller by voters largely aware of his lapses, should be driven from public office for using his chauffeur to drive his handicapped wife. However, subsequent revelations have persuaded us that he was unfit to serve as Comptroller.
On the other hand, at some level of avarice that reasoning turns sour. Even if he did not receive a nickel from Hank Morris, allowing his aide to reap such enormous rewards for selling his influence was unconscionable. It is difficult to maintain that this Ph.D. college professor was totally unaware of what was going on within his office. Hevesi has been wise to stay out of the limelight since his departure from public office. In that regard, he has done better than Eliot Spitzer, who has declared himself rehabilitated after a year’s silence and begun to issue pronouncements on public issues.
Spitzer may have received encouragement from a recent Siena poll which
reported: “Given a choice of the four most recent governors to serve today, more voters chose Spitzer (14 per cent) than the incumbent Paterson (8 per cent). Both, however, badly trailed Mario Cuomo (39 per cent) and George Pataki (33 per cent).”
Wherever the line of propriety may be drawn, the Morris scheme appears to exist beyond it. But impropriety, distasteful as it may be, is not criminality. What Morris did should be banned by law or regulation. That is not the same as saying he should go to jail for it. If he did share his fees in any way with Hevesi, they are both guilty of a crime. If he did not, that presents a more difficult issue. We do not argue that he is blameless, or that he committed no crime; we await the evidence which will be presented if the case survives motions to dismiss.
It was the modus operandi of former Attorney General Eliot Spitzer to threaten to prosecute people for business practices of which he disapproved. The terrified companies would agree to stop the practices, and paid substantial sums to charitable causes sometimes selected by the Attorney General. The companies knuckled under because in those days they had market value, and that value would be substantially reduced if they were sued by the AG, even if in the end they prevailed. The use of the media to intimidate the targets of Spitzer and his press secretary Darren Dopp violated standards of fairness, Attorney General being a semi-judicial position. But then again, who sets the standards? How do they apply when one is a candidate for governor, watching the incumbent self-destruct through his daily utterances?
There is no question that the popularity Spitzer gained through his vigorous and well publicized assaults against unsavory business practices led to his overwhelming victory over Tom Suozzi in the 2006 Democratic primary and his election as governor in November with 69% of the vote. His inaugural, on January 1, 2007, was very well done. We reported it in this article. But who would have imagined that that day was his high point, and that his fourteen-month tenure would be so discouraging.
We do not have the time or space to recount the bitter controversies, false steps, personal attacks, and changes in position which punctuated his administration. People should know, however, that the true cause of his resignation was more than his frolic with the elegant prostitute, which was embarrassing but survivable. It was the fact that not one Democrat would rise to defend him because most of them loathed him. He may in fact have been a better man than most legislators, certainly he was smarter, but they detested him, in part because he had treated them with contempt, abuse and intimidation for fourteen months. They were bright enough to have recognized that.
Speaker Sheldon Silver may or may not have a modest view of the talents of his 108 followers, but if he does he wisely keeps it to himself. That is elementary in politics. For scholars, we will cite two rules that cover this issue. They are Rule 19- “Be kind to man and beast,” and Rule 20-E “Everything is personal.” StarQuest
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