Alan G. Hevesi, the former state comptroller, is poised to plead guilty to a felony corruption charge after a lengthy investigation into his office’s rewarding of pension investment business to firms that provided financial benefits to Mr. Hevesi and his aides, people with knowledge of the case said on Tuesday.
Barring an 11th-hour change of heart, Mr. Hevesi would become the highest-ranking state official convicted in the case and one of the most likely to serve time in prison: in 2006, he pleaded guilty to a separate felony after admitting he had used state workers to chauffeur his ailing wife, but avoided jail time in that case after he agreed to resign.
The pension investigation, conducted by the office of Attorney General Andrew M. Cuomo, is one of the longest running in Albany and came to symbolize the ethically troubled culture of the capital. It has focused on allegations that Mr. Hevesi’s friends, family and associates sold access to the state’s $125 billion pension fund, one of the world’s largest, to reward allies, pay back political favors and reap millions of dollars for themselves.
The deal comes as Mr. Cuomo, the Democratic nominee for governor, is seeking to burnish his credentials as a reformer who can clean up state government, and his office has been in plea negotiations with Mr. Hevesi’s lawyer.
Mr. Hevesi, a Democrat, has long maintained that he did not know of the wrongdoing taking place among his subordinates, and he has not been formally implicated in the scandal.
But last December, a California money manager, Elliott Broidy, admitted paying nearly $1 million in gifts in exchange for a $250 million investment from the pension fund. Mr. Broidy, according to the attorney general’s office, paid at least $75,000 to send a “very high-ranking” official in the comptroller’s office and the official’s relatives on five trips to Israel, including first-class airfare, luxury hotel accommodations and a security detail. The high-ranking official was Mr. Hevesi, people with knowledge of the investigation have said.
A guilty plea by Mr. Hevesi would not end the broader investigation. His former political consultant and confidant, Hank Morris, was indicted last year on 123 counts; he has denied wrongdoing and remains determined to fight the charges.
Also unresolved is the fate of Steven J. Rattner, the New York financier who led the Obama administration’s rescue of the auto industry. This year, the Quadrangle Group, the investment fund Mr. Rattner founded, paid $12 million to settle allegations that it paid kickbacks to win pension fund business, and said it was publicly disavowing conduct engaged in by Mr. Rattner.
Bradley Simon, Mr. Hevesi’s lawyer, was traveling in Europe and declined to comment. Mr. Cuomo’s office had no immediate comment. People with knowledge of the matter said no plea agreement had been signed yet.
It remains unclear what specific offense Mr. Hevesi would plead guilty to, or what wrongdoing he would admit.
But it appears that it was the fate of Mr. Hevesi’s two sons, Assemblyman Andrew Hevesi and former State Senator Daniel Hevesi, that led him to accept the plea deal. Their role in the investigation, and potential prosecution, have been a part of discussions over the plea agreement, people with knowledge of the case said.
Documents in the case have suggested that Mr. Morris, Mr. Hevesi’s most trusted political adviser, was the architect of the corruption in the comptroller’s office and reaped millions of dollars by acting as a gatekeeper for private equity firms and hedge funds looking to do business with the pension fund.
But the activities of Mr. Hevesi’s sons have also drawn scrutiny: investigators have questioned why an obscure firm operated by Daniel Hevesi was paid more than $1 million in fees for deals with pension funds in New York City and New Mexico, and whether any legitimate work was done for the payments.
Andrew Hevesi had more limited exposure in the case: Prosecutors say the state’s former Liberal Party boss, Raymond B. Harding, maneuvered to force a vacancy in an Assembly seat in Queens so that Andrew Hevesi could assume the position. Mr. Harding pleaded guilty last year after accepting more than $800,000 for doing political favors, prosecutors said, including securing a private sector job for Andrew Hevesi’s Assembly predecessor, Michael Cohen.
Andrew Hevesi did not return calls Tuesday.
The investigation by Mr. Cuomo’s office, and a parallel inquiry by the Securities and Exchange Commission, led to a nationwide re-evaluation of public pension practices and the role of placement agents, the middlemen who brokered business for the investment firms from the comptroller’s office. Last year, the current comptroller, Thomas P. DiNapoli, banned placement agents and other paid intermediaries from doing business with the state fund. The city comptroller, John C. Liu, has taken a less rigid approach; this year he ended a ban on placement agents put in place by his predecessor, but established other safeguards to curb abuses.
A number of other Hevesi lieutenants have been implicated in the investigation, which began in 2007 amid allegations that Mr. Hevesi’s former chief of staff, Jack Chartier, had obtained, among other things, a loan from Mr. Broidy for his friend, the actress Peggy Lipton from TV’s “Mod Squad.” Mr. Chartier has been cooperating with investigators, people with knowledge of the case have said.
In March, David J. Loglisci, the former chief investment officer in the comptroller’s office, pleaded guilty to securities fraud, saying he helped steer pension money to Mr. Hevesi’s political contributors and to companies that paid kickbacks to Mr. Morris.
The case has also entangled prominent New York figures and institutions. Last year, theCarlyle Group, the private equity firm that once employed the first President Bush, paid $20 million to settle charges related to the investigation.
The inquiry has also extended into Mr. DiNapoli’s office; a meeting between Mr. DiNapoli and a prominent Democratic fund-raiser and money manager has been the subject of scrutiny. Mr. DiNapoli has denied doing anything improper.
For some time, it has been clear that Mr. Hevesi was the ultimate target of the investigation. This year, after Mr. Loglisci pleaded guilty, he said in court that senior officials in the comptroller’s office had instructed him to clear investment decisions with Mr. Morris, an alarming admission since Mr. Morris was Mr. Hevesi’s outside political consultant.
At the time, Mr. Cuomo declined to discuss whether Mr. Hevesi was one of the senior officials, but said: “This is the chief investment officer. He did report directly to the comptroller, at that time Mr. Hevesi.”
Danny Hakim reported from Albany and William K. Rashbaum from New York.