Ex-autos czar Steven Rattner to apologize, pay $10 million to settle civil charges
Thursday, December 30, 2010; 8:45 PM
Former Obama administration auto czar Steven Rattner agreed Thursday to apologize and pay $10 million to settle civil charges brought by New York Attorney General Andrew Cuomo for his participation in a "pay to play" scheme to win business from New York state's pension fund.
The settlement caps a protracted and acrimonious confrontation between Rattner, a star in the worlds of journalism, finance and politics, and Cuomo, a high-profile critic of Wall Street, who will become governor of New York on Saturday.
At the center of the clash are allegations that Rattner, a founder of the Quadrangle Group private-equity firm, paid kickbacks and orchestrated a distribution deal for a C-list movie to wins tens of millions of dollars in business from the pension fund.
But the legal questions escalated into a personal conflict. Cuomo announced the charges against Rattner on the same day as last month's successful initial public offering of General Motors, whose turnaround was the crowning achievement of Rattner's tenure in government. Rattner's spokesman accused Cuomo of putting "politics and his own media coverage ahead of the public interest." Cuomo's spokesman shot back that Rattner was attempting to spin "his friends in the press" and called the financier's claims "ridiculous."
The showdown ended Thursday with a settlement that offers a measure of victory to each side.
Cuomo can take satisfaction that Rattner agreed to pay a substantial amount and not to do business with any public pension fund in New York for five years. And for Cuomo, the most fulfilling part of the settlement might be Rattner's apology. Cuomo alleged that Rattner had misled investigators at times during his probe.
"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 released by Cuomo. "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."
From Rattner's perspective, the payment is less than the $26 million penalty Cuomo sought when he filed civil fraud charges. But perhaps more important for Rattner, he escapes a lifetime ban on working on Wall Street, also sought by Cuomo. Under the settlement, Rattner did not admit or deny wrongdoing.
Rattner reached a similar agreement last month with the Securities and Exchange Commission. Under that agreement, Rattner agreed to pay $6.2 million and not work on Wall Street for two years.
Davidson Goldin, a spokesman for Rattner, said Thursday: "What's clear is that Mr. Rattner wanted to put this behind him and the attorney general wanted to resolve this while he's still attorney general."
The settlement wraps up a broad investigation into corruption at the state's $135 billion public pension fund. The probe has led to a number of criminal charges and eight guilty pleas to date.
"The state pension fund is a valuable asset held in trust for retirees and supported by taxpayers," Cuomo said. "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."
In a pair of lawsuits, Cuomo alleged that Rattner, while at Quadrangle, arranged to pay kickbacks to gain investment business from the pension fund. Rattner left Quadrangle to join the Obama administration. Quadrangle settled charges this year and disavowed Rattner's conduct.
According to the lawsuits, the kickbacks included more than $1 million in fees paid to Henry "Hank" Morris, a political adviser to then-state Comptroller Alan Hevesi. At Morris's request, Rattner orchestrated a DVD distribution deal for "Chooch," a movie produced by the brother of the pension fund's chief investment officer, David Loglisci, the lawsuits said.
Rattner also arranged for $50,000 in contributions to Hevesi's reelection campaign, the lawsuits said.
As a result of those actions, the pension fund in 2005 and 2006 increased its investments with Quadrangle from $100 million to $150 million, paying the firm bigger fees for managing more money,Cuomo alleged in the lawsuits. Rattner personally netted $3 million in profit, the lawsuits said.
Rattner, a prominent Democratic fundraiser, formerly was a top investment banker at Lazard and a reporter for the New York Times. His net worth is in the hundreds of millions of dollars, according to regulatory disclosures.