Rattner to Pay $10 Million to Resolve Cuomo Pension Fund Probe

Quadrangle Group's Steven Rattner
Steven Rattner, former co-founder of Quadrangle Group LLC. Photographer: Ramin Talaie/Bloomberg

Steven Rattner, a co-founder of the private-equity firm Quadrangle Group LLC, will pay $10 million to settle kickback allegations involving New York’s pension fund, less than half of the $26 million state Attorney General Andrew Cuomo sought in a lawsuit.

Rattner also agreed to be banned from appearing “in any capacity” before any public pension fund in the state for five years, the attorney general’s office said yesterday in an e-mailed statement. Cuomo, New York’s governor-elect, sought a lifetime ban from the securities industry.

“I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multiyear investigation,” Cuomo said in the statement.

Rattner, 58, helped overhaul General Motors Co. and Chrysler Group LLC when he headed the U.S. government’s Automotive Task Force. He said in the same statement he was “pleased to have reached a settlement.”

“I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult,” he said. “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.”

Davidson Goldin, a spokesman for Rattner, said the agreement with Cuomo says Rattner is settling “without any admission as to liability.” Cuomo spokesman Richard Bamberger didn’t respond to an e-mail seeking a copy of the settlement.

‘Close to Extortion’

Rattner and Cuomo’s office have traded jabs over the attorney general’s lawsuit since it was filed on Nov. 18. In an interview on the Charlie Rose television show, Rattner called Cuomo’s lawsuit “close to extortion.”

“He has basically threatened me all along the way that if I don’t do what he wants me to do, he will prosecute me to the ends of the earth,” Rattner said.

Bamberger last month called Rattner’s claims that he did nothing wrong “ridiculous” and said the financier repeatedly cited his constitutional protection against self-incrimination when questioned.

“Mr. Rattner now has a lot to say,” Bamberger said in a statement Nov. 18. “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.”

In an interview with Capital Tonight on Nov. 18, Cuomo said Rattner “is in many ways the worst example of this fraud.”

Kickbacks Paid

Rattner, who is no longer with Quadrangle, caused the New York-based firm to pay kickbacks to obtain $150 million in investments from the pension fund, according to Cuomo’s civil securities-fraud suit. Rattner also was accused of setting up a DVD distribution deal for a movie produced by the brother of a pension fund official.

Rattner last month settled a parallel probe with the U.S. Securities and Exchange Commission for $6.2 million and a two-year ban from associating with broker-dealers or investment advisers.

With the Rattner agreement, Cuomo has secured deals with 19 firms and five individuals, garnering more than $170 million for the state and the pension fund, he said in the statement. The investigation has led to guilty pleas by eight people, including former Comptroller Alan Hevesi and his chief political consultant Henry “Hank” Morris.

“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,” said Cuomo, who has been investigating corruption at the state pension fund for more than three years.

New York’s Governor

The settlement with Rattner largely resolves one of Cuomo’s biggest investigations just as he is set to leave office to become New York’s governor. Those who have pleaded guilty have yet to be sentenced.

Other cases he leaves behind for his successor, Eric Schneiderman, include a fraud case against Bank of America Corp. and former Chief Executive Officer Kenneth Lewis over the bank’s purchase of Merrill Lynch & Co. The office also has lawsuits pending against Charles Schwab Corp. over auction-rate securities and against Ernst & Young LLP. The accounting firm was accused by Cuomo of helping Lehman Brothers Holdings Inc. deceive investors about its financial condition before its 2008 collapse.

“Steve has said all along he wanted to put this behind him and the attorney general clearly wanted to resolve this matter before he leaves office,” Goldin, Rattner’s spokesman, said in an interview.

Rattner has handled the personal and philanthropic finances of New York Mayor Michael R. Bloomberg, whom Rattner supported through his chairmanship of Democrats for Bloomberg during the 2005 re-election campaign. Bloomberg is the majority owner of Bloomberg LP, the parent of Bloomberg News.

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