New York attorney general and Governor-elect Andrew Cuomo sued former Quadrangle Group principal Steven Rattner Thursday over his alleged role in a widespread kickback scheme to obtain investments from New York’s largest pension fund, the $135 billion Common Retirement Fund.
Cuomo filed two lawsuits against Rattner, who last year headed up the Obama administration’s restructuring of the auto industry, seeking at least $26 million and a lifetime ban from the securities industry in New York. The suits filed in state court allege that Rattner paid kickbacks in order to obtain $150 million in investments for Quadrangle from the fund.
Also on Thursday, Rattner settled securities fraud charges filed by the Securities and Exchange Commission, agreeing to pay $6.2 million and to be barred for two years from associating with any investment adviser or broker-dealer. He neither admitted nor denied the charges.
The SEC alleged that Rattner secured investments for Quadrangle from the retirement fund after he arranged for a firm affiliate to distribute the DVD of a low-budget film produced by the fund’s chief investment officer and his brothers.
Rattner then had Quadrangle retain Henry Morris, the top political adviser and chief fundraiser for former New York State Comptroller Alan Hevesi, as a placement agent, paying him more than $1 million in “sham fees.” even though Rattner already was dealing with then-state deputy comptroller David Loglisci.
But Cuomo’s suits go much further than the SEC’s. Cuomo added Rattner as a defendant to a so-called forfeiture action already pending in state court against Morris and Loglisci that seeks to recover more than $13 million.
In the second suit, Cuomo charged Rattner violated the Martin Act and other state laws and is seeking more than $13 million, as well as additional remedies including injunctive relief.
Rattner reportedly rejected a Cuomo offer to pay a $20 million penalty, arguing it was disproportionate to the money he earned and the penalties paid by other executives ensnared by the investigation, according to the New York Times.
In a statement to the Times, Rattner said: “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. This episode is the first time during 35 years in business that anyone has questioned my ethics or integrity — and I certainly did not violate the Martin Act.”
