New York City's pension funds are probing whether private equity fund Quadrangle intentionally misled it about placement agents used to win pension fund business, a spokesman for the city's comptroller said Tuesday.

New York City's pensions invested $85 million with Quadrangle in 2005 and $40 million in 2006, Jeff Simmons, the spokesman for Comptroller William Thompson, said by email.

Quadrangle was formerly led by Steven Rattner, who is now the U.S. auto bailout chief.

New York City's investigation marks a widening of an ongoing probe by New York state and the U.S. Securities and Exchange Commission, which have charged that the former state comptroller's top fund-raiser, Henry Morris, reaped kickbacks for helping firms get hired to invest in New York state's $122 billion pension fund.

We are investigating whether the New York City pension funds and the Comptroller's Office were intentionally misled or deceived as to the identities of the placement agents used by Quadrangle, said Simmons.

The comptroller is one of the officials who oversee the city's pension funds. Placement agents act as middlemen, helping pension funds hire investment managers.

This came as a complete surprise, said Adam Miller, a spokesman for Quadrangle. We plan to gather all the facts and intend to clear up the issue as soon as possible.

Rattner, who has been a major Democratic fund-raiser, was not available to comment. Last week, President Barack Obama stood by Rattner, saying he had not been accused of any wrongdoing related to an alleged pension kickback scheme.

Peter Anderson, a lawyer for Connecticut-based Searle & Co, was quoted by the New York Post on Tuesday as saying Morris was paid for arranging for Quadrangle to win business from the city's biggest pension fund. Anderson was not available.

New York City uses a La Jolla, California-based consultant, Pacific Corporate Group, to help vet its private equity investments. At no time did the pension funds' consultant ever identify Morris or Searle as a placement agent, Simmons said.

A spokesman for Pacific, David Fann, said Quadrangle did not disclose if it had hired Morris or Searle.

Quadrangle did say it had hired Boston-based Monument Group and London-based Helix Associates Limited to market its funds, Simmons said.

Monument Group and Helix Associates also marketed Quadrangle to the Los Angeles Fire and Police Pension System, said Tom Lopez, chief investment officer of the $10.7 billion fund.

As for Searle, the staff has never run across them, Lopez said.

A spokesman for Helix, part of the Jefferies Group, declined comment. A Monument official was not immediately available.

Quadrangle also hired Searle to help it win business from the New Mexico State Investment Council but paid no fee, a source close to Quadrangle said on Sunday.

On Tuesday, the New Mexico fund's spokesman, Charles Wollmann, told Reuters that it was asking Quadrangle to confirm in writing that the firm didn't pay Morris.

We have talked to Quadrangle and they've indicated to us that Morris was not paid by them in regards to the New Mexico investment, Wollmann said. We are asking for some clarification in writing from Quadrangle on this subject.

Late Tuesday evening the Quadrangle spokesman said: We have confirmed to New Mexico that we did not pay a fee to Searle in connection with their investment.

The New York state probe, according to the March indictment of Morris and the state pension fund's chief investment officer, involved major investment firms, such as The Carlyle Group, Access/NY European Fund, Aldus New York Emerging fund, GKM/NY Venture Capital Fund, Olympia John Street Fund LP, Paladin Homeland Security Fund and Strategic Co-Investment Partners.

(Reporting by Joan Gralla and Megan Davies; Additional reporting by Jim Christie in San Francisco; Editing by Andre Grenon, Gary Hill)