An investment firm founded by President Obama's former car czar, Steven Rattner, has agreed to pay $12 million to resolve allegations that it paid kickbacks to drum up business from New York's giant government pension fund.
The Quadrangle Group said it would refund $7 million to the pension fund and pay another $5 million to the Securities and Exchange Commission as part of the deal, which was announced Thursday.
The settlement covers only Quadrangle, not Rattner, who left the firm last year to become co-leader of the presidential task force that restructured the auto industry.
It leaves open the possibility that Rattner -- a major political fundraiser, friend to media giants and influential policy figure -- could still face a lawsuit from either the SEC or New York Attorney General Andrew Cuomo.
Quadrangle has acknowledged paying more than $1 million in finders fees to a political consultant, Hank Morris, in exchange for his help landing a lucrative state investment contract. Morris was a longtime aide to state Comptroller Alan Hevesi, who controlled the pension fund until his resignation in 2006.
Rattner organized those payments, which the SEC called kickbacks. He also had a company controlled by Quadrangle invest in a low budget film produced by the brother of the pension fund's chief investment officer.
Quadrangle had previously argued that those payments and the film deal were not improper, but a news release issued by Cuomo's office Thursday included a statement from the company in which it excoriated its founder.
"We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller's political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong, and unethical," the statement said.
Rattner, who left the auto task force in July, disputed that assessment of his conduct.
"Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement," his attorney, Jamie Gorelick, said in a statement. "Mr. Rattner shares with the New York Attorney General the goal of eliminating public pension fund practices that are not in the public interest. He looks forward to the full resolution of this matter."
The deal is the latest in a series related to a pay-to-play scandal at the $130 billion pension fund, which provides retirement benefits for more than 1 million government workers.
Cuomo's office also announced settlements Thursday with GKM Newport Generation Capital Services, which agreed to pay $1.6 million, political consulting firm Global Strategy Group, which will pay $2 million, the California lobbying firm Platinum Advisors, which will pay $500,000, and a New York political operative, Kevin McCabe, who will pay $715,000.
Prosecutors have charged Morris with shaking down investment firms for millions of dollars as a condition of doing business with Hevesi's office.
The SEC said in a civil complaint, filed in New York, that Rattner first met with Morris about getting the pension fund to invest with Quadrangle in 2003.
It was at that meeting that Morris first encouraged Rattner to invest in "Chooch," a screwball comedy filmed in New York and New Mexico produced by the brother of pension fund Chief Investment Officer David Loglisci.
A company owned by Quadrangle, GT Brands, eventually gave "Chooch" a DVD distribution deal, but only reluctantly.
Initially, the company said it was inclined to "take a pass" on the movie, but it reversed course after Loglisci's brother phoned Rattner to complain about how he was being treated.
"Dance along," Rattner instructed the GT Brands chief, according to the SEC.
Within months, the film was available on disc, and the pension fund had invested $100 million in a Quadrangle fund.
Morris ultimately collected more than $1.1 million in fees related to the state's investment. He pleaded not guilty to a fraud charge and is awaiting trial.
Loglisci pleaded guilty in March to a securities fraud charge.
Hevesi has not been charged and has denied any wrongdoing.
Cuomo said Thursday that the investigation continues and he couldn't comment on whether Hevesi or Loglisci could ultimately face civil or criminal charges.
In a court filing, the attorney general's investigators indicated that they had also examined some events during the early days of Hevesi's successor, Thomas DiNapoli.
Papers filed in connection with the Global Strategy Group settlement mentioned that the political consulting firm, which had been accused only of failing to register as a financial broker -- not paying kickbacks -- arranged a meeting in 2007 between DiNapoli and one of its investment firm clients.
Asked in a news conference whether that meant the attorney general was now probing DiNapoli's office, the lead prosecutor on the case, Linda Lacewell, offered an oblique response, saying only that investigators were interested in all the facts, including "the events of that meeting."
DiNapoli spokesman Robert Whalen described the session with the Global Strategy Group as a "meet and greet" and said no business was discussed and nothing improper took place. DiNapoli said in a statement that he had performed his duties with integrity and "any suggestion or innuendo to the contrary is baseless."
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