Former Obama administration auto industry czar Steven Rattner agreed to pay $10 million to resolve lawsuits by New York's attorney general over kickbacks allegedly paid to do business with the state's pension fund.
Rattner is the most prominent outside executive and last major figure to resolve charges in a multiyear pay to play corruption probe that involved the roughly $132.8 billion New York State Common Retirement Fund.
New York Attorney General Andrew Cuomo said on Thursday the settlement ends two lawsuits by his office over alleged kickbacks dating to 2005 and 2006 when Rattner worked for Quadrangle Group, the private equity firm he co-founded.
In agreeing to settle, Rattner also accepted a five-year ban from working with any New York public pension fund.
Cuomo had originally sought to recover at least $26 million from Rattner, 58, and permanently bar him from the securities industry in New York.
Rattner can claim victory for avoiding a lifetime ban, and while Cuomo didn't get Rattner's scalp, he can claim victory for substantially improving practices at the pension fund, said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University.
LAST MAJOR SETTLEMENT
Cuomo said he has won eight guilty pleas in the probe, including one from former state comptroller Alan Hevesi, and more than $170 million of settlement payments.
He also said 19 firms agreed to abide by a code of conduct governing their dealings with public pension funds.
The Rattner settlement resolves the last major action of our multiyear investigation, Cuomo said in a statement. We have been able to help restore and protect the integrity of the state pension fund.
In a statement released by Cuomo, Rattner said he was pleased to settle, and that the accord allows me to put this matter behind me.
I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult, Rattner added.
Cuomo will become New York's governor on January 1. Eric Schneiderman, who has been a state senator, will succeed him as attorney general. Both are Democrats.
Last month, Rattner settled related allegations by the U.S. Securities and Exchange Commission, agreeing to a $6.2 million civil penalty and two-year ban from working with investment advisers and broker-dealers.
Rattner is still pursuing arbitration proceedings against Quadrangle to recover money he believes he is owed, spokesman Davidson Goldin said.
Quadrangle and current state Comptroller Thomas DiNapoli were not immediately available for comment.
QUID PRO QUO ALLEGED
Cuomo and the SEC accused Rattner of entering quid pro quo arrangements with the Common Retirement Fund to win $150 million of business for Quadrangle.
The alleged kickbacks included an agreement for a Quadrangle affiliate to distribute a DVD of Chooch, a low-budget film produced by the brother of the pension fund's then-chief investment officer, David Loglisci.
Regulators also accused Rattner of funneling more than $1 million of sham finder fees to Henry Hank Morris, once a top political adviser to Hevesi, and arranging for an outside $50,000 contribution to Hevesi's 2006 re-election campaign.
Morris and Loglisci also entered guilty pleas in the case.
Quadrangle settled with regulators in April, agreeing to pay $7 million to New York and $5 million to the SEC.
ENORMOUS IMPACT BENEFITS PUBLIC
Hurley said Cuomo's probe has significantly changed how pension funds award investment contracts.
The investigation has had an enormous impact in the public pension world, he said.
Pension fund managers and state treasurers are now considerably more cautious about the payments of finder's fees and hidden charges to win asset management contracts. It means more transparency and higher returns for the funds, because fund managers will be hired on merit rather than for their political connections or payments. This benefits the public.
Long a major fundraiser for Democrats, Rattner led the federal government task force that oversaw General Motors Co's bankruptcy and restructuring.
Cuomo sued him hours after Rattner appeared on television to discuss GM's stock market debut following its initial public offering, and while he was on a promotional tour for his book Overhaul, an account of the auto industry rescue.
(Additional reporting by Nadia Damouni and Daniel Trotta; Editing by Dave Zimmerman and Steve Orlofsky)