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May 6, 2009

DiNapoli Sues Aldus Equity Partners and Its Principals

State Pension Fund Seeks Damages and Reimbursement of Fees

New York State Comptroller Thomas P. DiNapoli today announced that, as Trustee of the New York State Common Retirement Fund (Fund), he has filed suit against Aldus Equity Partners LP, its principals, and others for wrongful conduct, including various acts of fraud, bribery, breach of contract, and conspiracy. DiNapoli seeks, among other things, rescission of the contract with Aldus, reimbursement of more than $5 million in fees paid, and other compensatory and punitive damages.

“Last week, we terminated our relationship with Aldus. The suit we’re filing today is the next step to unravel the tangled web of misconduct we inherited from the Hevesi administration,” DiNapoli said. “The one million members of the Common Retirement Fund deserve a full accounting of, and full reparations for, the misdeeds and abuses committed against their pension fund.”

DiNapoli filed the complaint in the Supreme Court of the State of New York, Albany County. In addition to Aldus Equity, the complaint names as defendants Aldus principals Saul M. Meyer, Matthew O’Reilly, and Marcellus Taylor, and others. Day Pitney LLP is plaintiff’s counsel.

The complaint asserts defendants were knowing and willful participants in an elaborate pay-to-play kickback scheme orchestrated and operated by Henry Morris and David Loglisci. According to the complaint, Morris and Loglisci sought, obtained, or directed kickback compensation in return for the selection of fund managers, such as Aldus, that received millions of dollars in management fees from the Fund.

The complaint states, in part, that in May 2004 Aldus agreed to pay Morris, through a Morris-controlled entity, a share of fees earned from creating and managing Aldus/NY Emerging Fund to invest monies committed by the Fund. The complaint states Morris performed no legitimate services in exchange for these fees; rather, the payments represented illegal kickbacks to Morris for his arrangement with Loglisci to have Aldus selected as fund manager.

DiNapoli said he will continue to explore his legal rights and options as Trustee with regard to other participants in the alleged pay-to-play scheme and he noted that further legal action against others remains a possibility.

Click here to view the complaint.


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