Former Liberal Party head Raymond B. Harding, who is a partner at Cozen O’Connor, was arraigned yesterday on charges of pocketing more that $800,000 in “sham” fees for political favors to former state Comptroller Alan G. Hevesi.

In addition to marshalling political support for the former comptroller, Mr. Harding is accused by Attorney General Andrew Cuomo of having arranged a vacancy in the 28th Assembly District in Queens – Mr. Hevesi’s old Assembly district – to pave the way for the election of his son, Andrew Hevesi, in 2005.

Andrew Hevesi is still in the Assembly. Mr. Cuomo said during a teleconference call with reporters that Andrew Hevesi had not been aware of Mr. Harding’s machinations.

The charges were announced by Mr. Cuomo, who is investigating allegations of corruption at the $150 million pension fund that was administered by Mr. Hevesi.

Read the inidtment on state charges.

Mr. Cuomo also disclosed that a hedge fund executive, Barnett Wissman, had pleaded guilty to a state felony charge and agreed to pay a $12 million fine. Mr. Wissman had been accused of paying nearly $1.4 million in kickbacks to obtain state pension investments for two of his clients.

Mr. Harding insisted yesterday that he had done nothing wrong. He pleaded not guilty and was released on $100,000 bail.

Messrs. Wissman and Harding also face civil charges filed by the U.S. Securities and Exchange Commission. Mr. Wissman has consented to the entry of a partial judgment in that case; penalties will be assessed later.

Read the SEC’s civil complaint.

Alan Hevesi has not been charged in connection with Mr. Cuomo’s two-year investigation, but his top political consultant, Henry “Hank” Morris, and the officer in charge of pension fund investment, David Loglisci, were accused last month in a 123-count indictment of reaping millions of dollars.

Asked yesterday whether Mr. Hevesi would be charged, Mr. Cuomo said the investigation “is ongoing” and “other cases are being worked up as we speak.”

Mr. Harding, who is the co-head of governmental relations at Cozen O’Connor, said in a brief interview that he is on a paid leave from his firm and referred questions to his lawyers at Kramer Levin Naftalis & Frankel. Those lawyers, Gary P. Naftalis and David S. Frankel issued a statement declaring Mr. Harding “innocent” of “these baseless accusations.”

Cozen O’Connor said in a statement yesterday that Mr. Harding had joined the firm in March 2005 and “continued serving his personal client base” until March 13, 2009, when he went on administrative leave.

The firm said the allegations against Mr. Harding stemmed from his activities before he joined the firm. Therefore, it said it could make no specific comment about the case against him.

Mr. Wissman, an associate of a wealthy Texas oil family, the Hunts, is cooperating and will testify in upcoming prosecutions, Mr. Cuomo said.

Mr. Cuomo said that the charges against Mr. Harding, coupled with the earlier allegations, depict a level of “brazenness that is breathtaking” with the defendants accused of using the state pension fund as “a piggy bank” to raise campaign money, for personal gain and “to pay people for doing political favors.”

With respect to the charges against Mr. Harding, the criminal complaint alleges that “a high ranking member” of the Comptroller’s Office, identified as “Official A,” is aiding the investigation. Similarly, the complaint identifies a “founding partner” of the Paladin Capital Group as providing information.

Paladin is one of two funds whose payments to a broker, according to the complaint, were diverted to Mr. Harding as a reward for political favors.

Mr. Harding is accused in the complaint as functioning as a “sham” intermediary between the state pension fund and Paladin and two funds operated by Pequot Private Equity.

The complaint says that Mr. Harding was paid $300,000 from Paladin and $500,000 from Pequot, ostensibly for securing $130 million in investments from the state pension fund for three funds the companies operate.

In addition to the Assembly vacancy, Mr. Harding is accused of being rewarded by Mr. Morris and Mr. Loglisci for “repeatedly” having delivered Liberal Party endorsements to Alan Hevesi for his 11 campaigns for the Assembly as well as races in 2001 for mayor and in 2002 for comptroller.

Mr. Harding is accused of violating the state Martin Act by concealing his role in obtaining the Assembly seat and his payments from the two companies. He faces a maximum of 11/3 to four years in prison if convicted.

The statement issued by Mr. Harding’s lawyers asserted that his work as a placement agent has been “honorable and entirely lawful.”

The Liberal Party backed Mr. Cuomo’s bid for the Democratic nomination for governor in 2002. It also backed Mario Cuomo, Mr. Cuomo’s father, in his four races for governor.

When questioned about his own Liberal Party support, Andrew Cuomo said, “No man is above the law – that is the way we run this office.”

Plea From Middleman

The charges against Mr. Wissman are the first in the pension fund probe against someone functioning as a placement agent for investment companies.

The attorney general’s complaint accused Mr. Wissman of paying $790,000 to two firms connected to Mr. Morris for obtaining $500 million in state pension business for one of his clients, Access Capital. Mr. Wissman pleaded guilty to a felony-level Martin Act violation related to that charge.

Mr. Wissman also was accused of paying $600,000 to Mr. Morris in connection with $100 million the pension fund invested in a hedge fund connected with the Hunt family, Hunt Financial Ventures.

The SEC accused Mr. Wissman of violating federal securities laws by receiving $12 million in “sham” placement fees, and similarly arranging for millions in sham fees to be paid to Mr. Morris. Like the state complaint, the SEC document accuses Mr. Harding of receiving $800,000 in sham placement fees.

In settling with the SEC, Mr. Wissman agreed to an injunction, barring him from continuing to practice in the securities industry.

Two Hunt family related entities, HFV Management and HFV Asset Management, also settled, without admitting any wrongdoing, and agreed to pay a $150,000 fine.

Daniel.Wise@incisivemedia.com