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SEC Delays Vote on Deal for Rattner

October 15, 2010
3 min to read


The Securities and Exchange Commission on Thursday delayed a vote on a deal to end a pension fraud probe involving ex-auto czar Steve Rattner, The Detroit News reported.


The deal under consideration would reportedly include a $6 million fine and ban Rattner from serving in the financial industry for two years.

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The deal also would reportedly allow him to continue to advise New York Mayor Michael Bloomberg, according to published reports.


The settlement is on hold as Rattner continues to work out a deal with New York State Attorney General Andrew Cuomo on a separate investigation.


Rattner declined to comment Thursday.


At issue is a "pay-to-play" scandal where Rattner paid a hefty "finders fee" to land an investment from the $129 billion New York State Pension Fund.


Rattner's investment firm, Quadrangle Group LLP, paid $1.1 million to Hank Morris, a former top political consultant to ex-New York Comptroller Alan Hevesi, according to Cuomo's investigation. Rattner reportedly met with Morris.

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Quadrangle then received an investment of $100 million from the state pension fund. Quadrangle settled a probe of the firm in April for $7 million and reproached Rattner as part of a settlement with Cuomo.


Rattner left the firm in February 2009 to oversee the Obama administration's restructuring of the auto industry and left the auto task force in July 2009.


"We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller's political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong and unethical," the firm said.


Quadrangle called reforms proposed by Cuomo "vitally necessary to eliminate pay-to-play practices from the public pension fund investment process.We urge others in the industry to follow."


Quadrangle retained Morris as a placement agent to increase to $100 million from $25 million an investment Quadrangle was seeking from the pension fund.

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In the middle of the investment decision-making process, Quadrangle also arranged a DVD distribution deal for a low-budget movie, "Chooch," that was produced by the brother of then New York pension fund Chief Investment Officer David Loglisci.


Hevesi, 69, pleaded guilty to a second-degree charge of receiving reward for official misconduct.


He resigned as state comptroller in 2006.


Peter Henning, a Wayne State University law professor and former SEC attorney, said Rattner is trying to put the matter behind him.


"Two years is not crippling, but this is a stain on his reputation," he said.

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Rattner is worth an estimated $188 million to $608 million and is on a book tour to tout his memoir "Overhaul."


In his book, Rattner described the episode as wrenching.


"During my 35 years in the working world, I had never been accused of so much as jaywalking," Rattner said. "It was painful for me and my family to have my honesty and integrity impugned, often by innuendo."


Rattner, a former New York Times reporter, is set to appear at the Detroit Economic Club to discuss his book on Oct. 26.

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