Former Obama car czar Steven Rattner charged in pay-for-play scheme
Thursday, November 18, 2010; 10:47 PM
State and federal authorities on Thursday charged former Obama administration car czar Steven Rattner with participating in a "pay-for-play" scheme to win business from New York state's pension fund, and sought more than $30 million in penalties.
New York Attorney General Andrew Cuomo sued Rattner for $26 million and sought to ban him from working on Wall Street permanently. Rattner, meanwhile, agreed to settle a suit brought by the Securities and Exchange Commission by paying $6.2 million and accepting a two-year ban from Wall Street.
The civil charges came on the same day of Rattner's crowning achievement - the sale of shares in a newly revamped General Motors, earning taxpayers a strong return on their investment in the once-beleaguered car company.
Rattner was accused of paying kickbacks and orchestrating a DVD distribution deal for a C-list movie, "Chooch," to win tens of millions of dollars in business from the $135 billion state pension fund.
The allegations, part of a broad investigation into corruption at the fund, are a painful comeuppance for Rattner, 58, who had a meteoric rise through the worlds of journalism, finance and politics before being implicated in the New York state pension fund scandal.
"While settling with the SEC begins the process of putting this matter behind me, I will not be bullied simply because the attorney general's office prefers political considerations instead of a reasoned assessment of the facts," Rattner said in a statement. "This episode is the first time during 35 years in business that anyone has questioned my ethics or integrity. . . . That's why I intend to clear my name by defending myself vigorously against this politically motivated lawsuit."
Rattner helped engineer a swift restructuring for an ailing GM, which received an enthusiastic response from investors on Thursday as shares in the new GM were sold. He has published a book on the experience, called "Overhaul," and spent the past few days discussing the administration's work to turn around GM. He even appeared on CNBC Thursday morning to boast of the GM success.
The timing of the suits led to exceptionally harsh words between Rattner and Cuomo. The SEC and Rattner had a settlement in place for weeks. But the announcement was delayed as Cuomo and Rattner fought over the terms of a deal.
"The attorney general and SEC have the same information, so picking the day of the GM IPO out of 500 possible days further demonstrates the attorney general puts politics and his own media coverage ahead of the public interest," said Davidson Goldin, a Rattner spokesman.
A spokesman for Cuomo said Rattner refused to cooperate with his investigation.
"Mr. Rattner now has a lot to say as he spins his friends in the press, but when he was questioned under oath about his pension fund dealings, he was much less talkative, taking the Fifth and refusing to answer questions 68 different times," said Richard Bamberger, a spokesman for the attorney general. "Anyone who reads the extensive facts laid out in our complaint will understand that Rattner's claims that he did nothing wrong are ridiculous and belied by the fact that he is paying the SEC $6 million today."
The SEC and Cuomo filed the suits as part of a long-running investigation into corruption at the New York state pension fund.