By Tomoeh Murakami Tse
Washington Post Staff Writer
Wednesday, July 15, 2009
NEW YORK, July 14 -- New York Attorney General Andrew M. Cuomo has stepped up his investigation of an investment firm founded by the former head of the Obama administration's autos task force, with authorities engaging in discussions that would be "a prelude to any settlement talks," according to a source close to the case.
Although talks between law enforcement and representatives of the Quadrangle Group -- founded by Steven Rattner, who abruptly resigned Monday from the auto task force -- have intensified in recent weeks, no settlement is imminent, the source said.
"There have been no discussions of specific terms of settlement," said the source, who spoke on condition of anonymity because the investigation is ongoing. "The discussions have concerned the nature of the case."
Cuomo's office and the Securities and Exchange Commission have been investigating for two years the use of middlemen by Wall Street firms to win lucrative business from major public pension funds. The probe centers on millions of dollars in payments made by Quadrangle and other firms to middlemen who helped the firms win investments from the pension funds of New York state and other local governments.
In SEC filings, a "senior executive" at Quadrangle, whom sources have identified as Rattner, is described as having arranged a $1 million-plus payment to a middleman. That middleman, Hank Morris, along with several others, has been criminally charged. Morris has denied any wrongdoing.
Any eventual settlement would be to avoid civil charges. Sources familiar with the investigation said criminal charges against Rattner or Quadrangle are unlikely, although civil charges remain a possibility.
In an announcement that took some senior administration officials by surprise, Treasury Secretary Timothy F. Geithner said Monday that Rattner, who joined the administration five months ago, was stepping down with the culmination of the Chrysler and General Motors bankruptcy cases. Geithner praised Rattner's work and said the former task force chief was returning to New York to private life and family. A source familiar with the matter said Rattner would not return to Quadrangle.
Rattner, who led the administration's efforts to restructure the auto industry, could not be reached for comment Tuesday night. A spokesperson for Quadrangle did not immediately return a phone call.