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In the stricken United States, rocked by serial accounting scandals, dark dealings among bankers, analysts and accountants, and criminal investigations into some of the country's biggest names and corporations, Alan Hevesi is a unique phenomenon. While the rest of corporate America is leaning toward greater accountability among managements and enhancing the independence of supervisory bodies while expanding the circle of decision-makers and power brokers, Hevesi retains enormous power in his own two hands.

His status is all the more remarkable because of his feisty, well-publicized battle against corporate corruption. Hevesi was among those pressing Richard Grasso to resign as chairman of the New York Stock Exchange, and also spearheaded some of the largest lawsuits against corrupt corporate practices.

Formally, his title is state comptroller of the State of New York, and he commands a workforce of 2,400 people. But his real power derives from his position as sole trustee of the NYSCRF, the New York State Common Retirement Fund. He is the man who makes decisions regarding the fund, free of pressure from any managerial board. There is an advisory board, but it is powerless. "I have a great, big and wonderful job," Hevesi says. "I don't report to anybody."

The NYSCRF is enormous, even by American standards. One of the biggest pension funds in the U.S., it has $105 billion worth of assets, second only to CalPERS of California. And all that economic clout lies under the sole sway of Hevesi. Few private sector managers have access to resources like that, and their moves are restrained by boards, auditing committees, regulators and a well-oiled system of checks and balances. In the case of NYSCRF, Hevesi is the board, the auditor, the sovereign, the brake and the check. "Only the law restricts me," he says modestly.

Few Israelis knew his name, and those who did were mainly venture capitalists. But his recent decision makes him one of the most influential people in Israel's economy. Hevesi decided that NYSCRF will invest $200 million in Markstone, an investment fund that intends to raise $500 million for investment only in Israel.

An investment that large by a body like NYSCRF is one of the best things that could happen to a fund manager. It is unusual that the second-largest fund in the United States decides to pledge 40 percent of the amount the fund seeks in one country. It is even rarer for a major U.S. fund to invest that kind of money in a country with a tiny economy wracked by internecine bloodshed and political instability. But Hevesi's special status allows him to get away with decisions like that.

Fielding mudballs

Markstone was established by U.S. businessman Elliot Broidy, former Lehman Brothers Israel general manager Ron Lubash, and a former VP at Arison Investments, Amir Kess. The fund is slated to become one of the biggest and most liquid players in Israel. Its success was apparently the main reason the U.S. fund Carlyle withdrew its plan to launch a similar $250 million fund in Israel. Hevesi shrugs off criticism of his choice to invest that much in Israel via a single investment vehicle. He's used to fielding mudballs.

Hevesi is the grandson of the Chief Rabbi of Budapest. After World War II broke out, Hevesi's father, an economist at the Hungarian embassy in the U.S., acceded to his father's request and remained in the the country, never returning to Hungary. Alan Hevesi, born in the United States, spearheaded several battles to regain Jewish assets held by European banks, most notably Swiss banks. Hevesi won, but not before being slammed by critics for taking actions that were a matter of foreign policy.

He chose to invest in Markstone in order to expand beyond the U.S. The country's phenomenal 7.2 percent GDP growth in the third quarter of 2003 left him unmoved. "That growth was nothing more than a sugar rush," he says, that might leave traces over the coming year. He anticipates a downturn after the next presidential election, as was the case when debts accrued during the Reagan and Bush eras triggered recessions. "The American economy stands before a downturn, as that growth was financed mainly by a steep increase in debt, sucking the oxygen out of the economy," he warns.

If the U.S. debt deters him, why doesn't Israel's? Israel suffers from a lack of competition, Hevesi explains. But after meeting with Finance Minister Benjamin Netanyahu and Industry and Trade Minister Ehud Olmert, he gained confidence that Israel will make every effort to pull down the barriers and enable growth. "There was a vacuum in the Israeli market," he describes, and Markstone is stepping into that vacuum.

What sectors interest Markstone? "The traditional ones - Bezeq, construction," he says. "Nobody will compete with us. I'm convinced we'll see higher yields than what we were used to in the past." He professes to be unworried over investing a sum that large in a single vehicle that invests only in Israel. It isn't risk free, but it's also a great opportunity, Hevesi says: Israel's economy is flourishing, and Markstone is in for the long run.

Reinforcement for his stance comes from one of his staffers, David Loglisci, a former investment banker and his current director of alternative investments . "Attitudes toward Israel are completely misguided," Loglisci says. "When you watch CNN's reports on Israel, you get the impression it's a war zone." But he visited and felt more comfortable in Tel Aviv than in some areas of New York, he says. Israel has suffered from a capital flight, so assets that trade in the United States at double their cash flow trade at 10 times their cash flow in Israel. "If I could, I would put my own money in the fund," he says.

What kind of return do they expect? "25 percent gross, which is 20 percent net," Loglisci says. How was contact with Markstone established? "The first contact was with Broidy," Hevesi says. "The one who introduced us was the comptroller of Buffalo." Broidy waited for him to take the job, and then told him, "I was glad to hear you're both a Zionist and a comptroller," Hevesi says.

Helping Holocaust victims

Taking advantage of his connections and clout as New York City's comptroller, Hevesi threatened to stop doing business with Swiss banks that were preventing access to accounts of Jews killed in the Holocaust unless they reached an arrangement. In 1995, they did, but the signed agreements fell through due to pressure within Switzerland that forced the banks to renege. "A few weeks later we declared a new plan" to persuade the banks to reverse yet again, Hevesi explains. "I told them, simply, they had stolen property."

The second round fared better. In August 1998, another arrangement was signed in which the two largest Swiss banks agreed to transfer $1.25 billion to make the claims disappear.

Hevesi says he's fighting corporate malfeasance at three levels. One level is to impose pressure via the SEC to legislate, the second is to promote legislation, and the third is to plug loopholes in the law. Hevesi also acts on behalf of a coalition of pension funds that together manage $500 billion worth of assets. Hevesi's fundamental position is that the corrupt practices are undermining the public's faith and causing massive losses to investors.

The harbinger of the debacle that so incensed Hevesi was Enron, whose creative and fraudulent accounting practices blew up in its face in 2001, and was closely followed by Global Crossing, WorldCom, Xerox, Qwest and Tyco. The burgeoning number of cases, coupled with suspicions falling on investment banks and accounting firms, dented confidence that the supervisory institutions are capable of upholding the law. The upshot was a deep crisis of faith in the soundness of the U.S. economy and markets.

In August Hevesi published a statement entitled, "Corporate corruption cost New York State's economy $2.9 billion, cut tax revenues by $1 billion and decreased pension fund value by $9 billion."

Why are there no Israeli Enrons? Hevesi: "There could be two reasons. A, Israeli supervision is the best and managerial quality is good." And the other? "B is everything that isn't A. There are two kinds of capitalism," Hevesi sums up: "There is capitalism of total laissez-faire, where the government plays no part and the big ones eat up the little ones, then the children of the little ones." And the other? "The other is the American kind, enabling the existence of a financial industry, but with regulation."