NEW YORK, USA - The former head of New York's Liberal Party and a founding partner of Aldus Equity have pleaded guilty to taking part in a kickback scheme that corrupted how the state pension fund chose investment managers, state Attorney General Andrew Cuomo said on Tuesday.

The two-year probe, joined by the US Securities and Exchange Commission and federal prosecutors, has cast a spotlight on how pension funds in New York and other states may have favored fund managers that hired politically-connected middlemen, called placement agents.

Cuomo told reporters that he has so far collected US$70 million (S$98 million) from firms that wished to end their involvement in his investigation, a list that includes The Carlyle Group, one of the world's biggest private equity funds.

Four of the six individuals charged have now pleaded guilty.

Raymond Harding, a lawyer whose leadership of the Liberal Party made him an influential figure in state politics, admitted to scheming with political advisor Hank Morris and David Loglisci, a former top investment officer, Cuomo said in a statement.

Both Morris and Loglisci have been indicted and their lawyers say their clients are innocent. Morris was charged with collecting millions of dollars in kickbacks; Loglisci's only tie was a stake in his brother's movie, "Chooch," which he disclosed. Some investment managers also invested in the movie.

Morris "rewarded" Harding for political favors by helping him collect US$800,000 in fees for serving as a "sham" placement agent, Cuomo said.

New York's US$116 billion pension fund is run solely by the state comptroller. Cuomo's probe focused on the former state comptroller's tenure though he told reporters on a conference call that the corruption of the system dates back 30 years.

The favors Harding did for Morris included helping to create a vacant seat in the state Assembly so that Andrew Hevesi, the son of former state comptroller Alan Hevesi, could run for that office, Cuomo said.

Neither Assemblyman Hevesi nor former Comptroller Hevesi, a Democrat, have been charged and their lawyers have denied any wrongdoing by their clients.

Loglisci's lawyers said in a statement: "David Loglisci never even met Ray Harding and was not the chief investment officer of the Common Retirement Fund with respect to what Mr. Harding said in his plea."

Saul Meyer, a founding partner of Dallas-based Aldus Equity, pleaded guilty and "admitted that he understood that because of Hank Morris's political connections, Morris had the ability to secure a Common Retirement Fund investment mandate for Aldus," Cuomo said.

"These guilty pleas vividly depict the depth and breadth of corruption involving the New York State pension fund," he added.

Commenting on Meyer's plea, the lawyers for Loglisci said: "With respect to Mr. Meyer, we believe there is documentary evidence that will establish beyond any doubt that Mr. Meyer's recollection in his statement is factually incorrect."

Several reforms have sprung from the pension probe. The SEC's comment period on a "pay-to-play" ban ends on Tuesday, Cuomo said, hoping the anti-graft measure is adopted. Both the current state comptroller, Thomas DiNapoli, a Democrat, and Cuomo have enacted similar prohibitions on their own.

Both Harding and Meyer are cooperating with the investigation and the amount of help they provide will be taken into account in determining what sentencing recommendation the state attorney general recommends to the judge, Cuomo said.

Meyer is also working with the US attorney who is investigating other states, particularly New Mexico.

Gilbert Gallegos, a spokesman for New Mexico Governor Bill Richardson, in a statement said the governor's office was not aware of the probe Cuomo described.

"The governor never had any personal contact with Saul Meyer," Gallegos added.

After the probe became public this spring, Richardson ordered the state investment officer to cut ties to Aldus and told the State Investment Council to suspend alternative investments until it requires placement agents to disclose fees for winning state business.