Steven Rattner, former head of the U.S. government's Automotive Task Force, has agreed to pay $10 million in restitution to settle kickback allegations involving the roughly $132.8 billion New York State Common Retirement Fund and resolves the two lawsuits filed by the New York Attorney General Andrew M. Cuomo.
Cuomo, who became New York's new governor on January 1, and the Securities and Exchange Commission (SEC) had accused Rattner of entering quid pro quo arrangements with the Common Retirement Fund to win $150 million of business for the Quadrangle Group, a private equity firm Rattner had co-founded.
Rattner was accused of securing investments for Quadrangle from the Common Retirement Fund by arranging for a firm affiliate to distribute the DVD of Chooch, a low-budget film produced by the brother of the pension fund's then-chief investment officer, David Loglisci.
Rattner, who is a major fundraiser for Democrats and headed the federal government's automotive task force that oversaw General Motors Co's bankruptcy and restructuring, has also been accused of causing Quadrangle to retain Henry Hank Morris, the top political adviser, and chief fundraiser for former New York State Comptroller Alan Hevesi as a 'placement agent' and pay him more than $1 million in sham finder fees even though Rattner was already dealing directly with then-New York State Deputy Comptroller David Loglisci and did not need an introduction to the Retirement Fund.
The regulators have also alleged that after receiving pressure from Morris, Rattner also arranged a $50,000 contribution to Hevesi's 2006 re-election campaign.
In the probe, Havesi, Morris and Loglisci had pleaded guilty and Cuomo had recovered more than $170 million of settlement payments. This includes Quadrangle's $12 million settlement with regulators last April. The firm had agreed to pay $7 million to the New York state and $5 million to the SEC.
I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multi-year investigation. The state pension fund is a valuable asset held in trust for retirees and supported by taxpayers, Cuomo said in a statement.
Through the many cases, pleas and settlements in this investigation, I believe we have been able to help restore and protect the integrity of the state pension fund, he said.
Cuomo, who has persuaded 19 firms to agree to abide by a code of conduct governing their dealings with public pension funds, had originally sought to recover at least $26 million from Rattner and permanently bar him from the securities industry in New York.
However, as part of the settlement, Rattner only accepted a five-year ban from working with any New York public pension fund.
I am pleased to have reached a settlement with the New York Attorney General's Office, which 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 said in a statement.
I respect the work of the Attorney General and his staff to ensure that the New York State Common Retirement Fund operates properly and in the best interests of New Yorkers, he said.
Last month, Rattner had settled related allegations by the SEC agreeing to a $6.2 million civil penalty and two-year ban from working with investment advisers and broker-dealers.
According to Rattner's spokesman Davidson Goldin, he is still pursuing arbitration proceedings against Quadrangle to recover money he believes he is owed.