Obama's auto adviser linked to NY pension probe

April 17, 2009

By DAVID B. CARUSO Associated Press Writer

An investment company run by the head of the Obama administration's auto task force has been accused of paying more than $1 million to an aide to New York's former comptroller in a bid to win a lucrative deal with the state pension fund.

Steven Rattner was an executive at the Quadrangle Group, a private equity firm, until he left this year to lead President Barack Obama's efforts to fix the U.S. auto industry. The Wall Street Journal and The New York Times reported that Rattner met with two now-indicted men to try to win state pension fund business.

Quadrangle, while under Rattner's watch, paid huge fees to Hank Morris, a political aide to former comptroller Alan Hevesi, the Securities and Exchange Commission said in court papers filed Wednesday.

Morris and the retirement fund's former chief investment officer, David Loglisci, were indicted in March on corruption and bribery charges. New York's attorney general and the SEC have said the payments Morris collected from Quadrangle and other firms interested in landing pension fund business amounted to kickbacks.

Rattner has not been charged with any wrongdoing. A spokesman for Quadrangle declined to comment Thursday when asked about the company's role.

Quadrangle's link to the investigation has been public for some time, but an SEC complaint filed this week in connection with a new round of indictments provided new details.

The complaint said that a Quadrangle "senior executive" met with Loglisci and then with Morris in 2004 to try to persuade the state fund to invest in Quadrangle. The two newspapers, each citing a person with knowledge of the case, reported that the "senior executive" was Rattner.

Quadrangle ultimately agreed to pay Morris's firm, Searle & Co., a "finder fee" of 1.1 percent of any money it received from the fund. A Quadrangle affiliate that specializes in distributing low-budget films, GT Brands, also acquired the DVD distribution rights to a film called "Chooch" that had been produced by Loglisci's brother.

Weeks after that film deal was signed, Loglisci told Quadrangle it would get $100 million in pension fund business.

Rattner's link to the investigation was first reported in February. A Treasury Department spokeswoman said Rattner had "made us aware of the pending investigation" during the transition.

An SEC spokesman declined to comment.

New York Attorney General Andrew Cuomo has been investigating alleged corruption at the comptroller's office during Hevesi's administration.

Prosecutors charged Morris and Loglisci in March with shaking down millions of dollars in payments from private equity firms and hedge funds interested in obtaining pension fund business.

This week, charges were also filed against the former chairman of New York's Liberal Party, Raymond Harding, who is accused of taking $800,000 in payments as part of the alleged scheme. A Dallas businessman and classical music promoter, Barrett Wissman, has pleaded guilty to taking payments and agreed to return $12 million.

Hevesi has not been charged and has denied any wrongdoing.

Rattner, a one-time New York Times reporter who made a fortune on Wall Street, has been a major fundraiser for political candidates. His wife, Maureen White, was the former fundraising chairwoman for the Democratic National Committee.

New York Mayor Michael Bloomberg considers Rattner a friend and praised him earlier this month as a "phenomenally competent guy." The billionaire mayor's investments are handled by Quadrangle Asset Management, which is part of the Quadrangle Group.

Bloomberg said he and Rattner had discussed whether Rattner should take on the Obama administration job.

"We did have conversations about whether he should do it," Bloomberg said. The mayor, who was a businessman before he entered politics, said he warned Rattner there was a lot to think about before going into public service, including "the disclosure issues."

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Associated Press Writer Sara Kugler contributed to this report.


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