SEC delays vote on deal for Rattner
Agency may impose 2-year ban on former auto czar, $6M fine
DAVID SHEPARDSON
Detroit News Washington Bureau
The Securities and Exchange Commission on Thursday delayed a vote on a deal to end a pension fraud probe involving ex-auto czar Steve Rattner.
The deal under consideration would reportedly include a $6 million fine and ban Rattner from serving in the financial industry for two years.
The deal also would reportedly allow him to continue to advise New York Mayor Michael Bloomberg, according to published reports.
The settlement is on hold as Rattner continues to work out a deal with New York State Attorney General Andrew Cuomo on a separate investigation.
Rattner declined to comment Thursday.
At issue is a "pay-to-play" scandal where Rattner paid a hefty "finders fee" to land an investment from the $129 billion New York State Pension Fund.
Rattner's investment firm, Quadrangle Group LLP, paid $1.1 million to Hank Morris, a former top political consultant to ex-New York Comptroller Alan Hevesi, according to Cuomo's investigation. Rattner reportedly met with Morris.
Quadrangle then received an investment of $100 million from the state pension fund. Quadrangle settled a probe of the firm in April for $7 million and reproached Rattner as part of a settlement with Cuomo.
Rattner left the firm in February 2009 to oversee the Obama administration's restructuring of the auto industry and left the auto task force in July 2009.
"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 firm said.
Quadrangle called reforms proposed by Cuomo "vitally necessary to eliminate pay-to-play practices from the public pension fund investment process.We urge others in the industry to follow."
Quadrangle retained Morris as a placement agent to increase to $100 million from $25 million an investment Quadrangle was seeking from the pension fund.
In the middle of the investment decision-making process, Quadrangle also arranged a DVD distribution deal for a low-budget movie, "Chooch," that was produced by the brother of then New York pension fund Chief Investment Officer David Loglisci.
Hevesi, 69, pleaded guilty to a second-degree charge of receiving reward for official misconduct.
He resigned as state comptroller in 2006.
Peter Henning, a Wayne State University law professor and former SEC attorney, said Rattner is trying to put the matter behind him.
"Two years is not crippling, but this is a stain on his reputation," he said.
Rattner is worth an estimated $188 million to $608 million and is on a book tour to tout his memoir "Overhaul."
In his book, Rattner described the episode as wrenching.
"During my 35 years in the working world, I had never been accused of so much as jaywalking," Rattner said. "It was painful for me and my family to have my honesty and integrity impugned, often by innuendo."
Rattner, a former New York Times reporter, is set to appear at the Detroit Economic Club to discuss his book on Oct. 26.
If you read the NY Times coverage of this case you'll see how they soft pedal the case. Just like they did with Jack Abramoff, right?
How about this from the distinguished Mayor of NYC. Notice Rattner's attorney is the very well connected and Freddie Fannie crook as well as the person who helped make 9/11 possible, tah dah, Democrat operative Jamie Gorelick
Rattner finds pal in Mike
Mayor Bloomberg is standing by his financial adviser, Steve Rattner, the former banker and car czar who is close to settling investigations into kickback accusations involving New York's pension fund.
"Steve Rattner's my friend. Of course I would keep him on," Bloomberg said yesterday at a news conference about the financial guru of his charitable foundation.
President Obama's ex-car czar is reportedly close to settling state and federal probes of his role in New York's "pay-to-play" pension scandal.
"I value his advice and he's a close friend of mine and you stick by your friends. I don't know what he's going to do, but we'll see that," Bloomberg said.
Bloomberg's endorsement comes as Rattner is deep in negotiations with New York state Attorney General Andrew Cuomo's office to settle a long-running investigation as part of a wider probe into pension kickbacks.
Those negotiations have postponed a separate settlement with the Securities and Exchange Commission that would require Rattner to pay a $6 million fine and accept a two-year ban from the securities industry, according to published reports.
Rattner's lawyer, Jamie Gorelick, didn't return a request for comment, and Cuomo officials declined to comment.
The ban would prohibit Rattner from selling stocks and bonds as a registered investment adviser or a broker, although he could still provide investment advice.
We are not in the trouble we're in because of Wall Street. We in this kind of trouble because the Wall Street, government complex has distorted the system so it no longer resembles anything fair and honest. Need I remind you of the threats made by people like Maxine Waters and Barney Frank about investigating Fannie and Freddie. The racist pandering that forced banks into making loans that were not reasonable. The banks had lemons forced on them and we must now drink the bitter lemonade. Al Hevesi was a crook because he was a crook. The political side only facilitated his crookedness. Honest behavior comes from moral people not laws.
I must add this article from the Village Voice (not a right wing publication by any means of measure). The circle of crime and corruption grows even larger to include Senator Chuck Schumer.
Steve Rattner's Book, Overhaul: the Cuomo and S
Categories: Wayne Barrett
Steve Rattner, the financier and Democratic fundraiser who served in 2009 as President Obama's car czar, takes some guarded shots at New York's political elite in his yet-to-be-released book, Overhaul.
He paints himself as a victim in the ongoing Securities & Exchange Commission investigation of his role in the New York State pension fund case, even suggesting that his public service as head of the Treasury Department's auto-industry task force intensified law enforcement interest in him. "Now that I was in the national spotlight," Rattner writes, "New York Attorney General Andrew Cuomo and other state officials pressed the inquiry further. My daily chores suddenly included late-night conference calls with lawyers and former Quadrangle colleagues as we attempted to make our case to the authorities and the press. During my many years in business, I had certainly been criticized, but I had never before had no integrity questioned. Nothing in my entire professional life had been as painful as that episode."
What drove the press "crazy," leading it to cast "my conduct in the worst possible light," says Rattner, was the release of an April 15, 2009 amendment to an SEC complaint detailing his involvement in the 2005 pension scam. According to the complaint, Rattner's firm, Quadrangle, paid a $1.1 million fee to Hank Morris, who had been indicted by Cuomo a month before the SEC amended complaint, to secure $100 million in fund assets. Morris was the top political advisor to Alan Hevesi, the then state comptroller. Rattner also brokered a distribution deal for a failed movie produced by the brother of Hevesi's fund manager, David Loglisci. Rattner's "not accused of any wrongdoing," Obama press secretary Robert Gibbs claimed in response to the SEC complaint. But Rattner noted in his book: "Even that didn't help. I continued to be deluged with questions."
Though Rattner recounts events as late as August 2010 in the book, he makes no mention of the fact that his partners at Quadrangle issued a statement this April "wholly disavowing" Rattner's conduct, which the firm called "unethical" and "wrong" (one partner, Josh Steiner, actually served on the Obama transition team and recruited Rattner for the auto rescue job). Nor does Rattner mention or attempt to rebut a Times story in June that says Cuomo granted Rattner immunity in the probe but that the SEC is now seeking to bar him from the securities business for three years.
Rattner's second reference to Cuomo comes almost a hundred pages after the first, when Rattner's "Team Auto" closed the deals with both Chrysler and GM in July 2009. Rattner says "the pay-to-play controversy in which I was involved had shown no signs of going away," using the term "controversy" to describe a probe that had by then resulted in multiple indictments and guilty pleas, as well as Quadrangle's agreement to pay a $12 million fine to settle its end of the case with Cuomo and SEC, both of which were still pursuing Rattner himself. "Instead" of going away, Rattner wrote, "it was intensifying, as New York Attorney General Andrew Cuomo decided to dig more deeply and other jurisdictions began their own examinations." He does not specify what these "other jurisdictions" are, though this does not appear to be a reference to the SEC alone, since he'd already cited its involvement. The two Cuomo references leave the reader with the impression that Rattner believes the AG was unfairly targeting him.
"I contemplated other assignments within Treasury or the broader administration," Rattner says, apparently still oblivious to how his reported conduct was widely viewed, "but in conversation with Mark Patterson," who was Tim Geithner's chief of staff, "it became clear that that would not be appropriate given the ongoing inquiries." Shortly after Rattner's return from Detroit, "Mark and I agreed that I would leave Treasury at the end of July." Rattner is implicitly conceding that the Cuomo/SEC probe drove him out of public life.
While Rattner lists Senator Chuck Schumer as one of the friends who is standing tall with him now, despite the charges against him, he does Schumer no favor when he writes that "before Quadrangle offered Hank Morris the job, I'd checked him out with Chuck." He said he'd first met Morris when the political consultant worked with him in Schumer's first senate campaign in 1998 and that Schumer "confirmed my impression that, in a realm filled with shady characters, Hank was a straight shooter."
As underplayed as Rattner's reference to Schumer is, it's a shocking revelation. It means that as far back as 2004-2005, when this deal was consummated, Schumer apparently knew that Morris was functioning as a placement agent, selling his access to the state comptroller's office, even though Morris had performed precisely the same political function with Hevesi as he did with Schumer. Schumer apparently thought there was nothing wrong with this arrangement, and continued his close ties with Morris, Hevesi and Rattner. The only other explanation is that Rattner sounded Schumer out about Morris without telling him why, which would make Schumer's continued friendship with Rattner very strange indeed.
The other references are less explosive but advertise how intertwined Schumer and Rattner are. Rattner says shortly after his initial contacts with Geithner about taking the czar job, he had dinner with his "close friend" Schumer. "Autos is a no-win," Schumer advised him. "The situation is probably unsalvageable. You'll run up against the unions and get eviscerated by your own party. Work on housing--it's a big, important issue, it affects everybody, it has to get resolved, and the politics are easier." Not only was Schumer's advice a dagger to the heart of Detroit, it proved totally inaccurate about both autos and housing, and could potentially hurt him in the majority leader contest should Harry Reid lose his Nevada seat this year.
More dramatically, "62-county Schumer," who prides himself on his frequent visits all around the state, particularly to Western New York, demonstrated a galling indifference to the fate of hundreds of thousands of auto-related jobs in his own state. In December 2008, just as Schumer and Rattner were having these conversations, State Comptroller Tom DiNapoli put out a report saying that the auto industry paid $12 billion a year in wages and benefits to New Yorkers, pointing out that 30 percent of the total manufacturing payroll in the Buffalo-Cheektowaga corridor was related to the auto industry, including a General Motors plant. DiNapoli said that NY's auto-related employment is the seventh largest in the country, with 30,000 workers directly employed by automakers and another 200,000 working in related companies like Delphi. In addition, DiNapoli estimated that the auto industry was carrying $100 billion in debt, exposing New York financial institutions to possible disastrous losses.
The third reference to media hound Schumer involves the leaking of Rattner's appointment. Rattner accepted the czar post on January 7, 2009, but "hoped to keep the news confidential until I could inform my partners and our investors" at Quadrangle. "But within a few hours, Senator Chuck Schumer called to congratulate me," says Rattner. Schumer told him that he heard it from Larry Summers, the president's top economic advisor. "Less than 24 hours later, Jake Tapper of ABC News posted a report on his website." Rattner complains that this "blindsided" his business colleagues, adding that he called Summers "dismayed," only to be "amused" when Summers "wondered aloud whether the problem had arisen 'from your end or our end.'" Actually, Tapper refers vaguely to his source as the first word in his story, reporting simply that "Democrats" say Rattner has the job. No one would describe Summers or Rattner that way, but they might describe a certain Democratic senator with just that simple word.
There's only one reference to Arthur Sulzberger, the New York Times publisher who is Rattner's lifelong friend and gym rat partner. On the Sunday night before Obama was to address the nation about the auto crisis, "my friend Arthur Sulzberger sent the first news flashes to my Blackberry. I texted back, 'I'm sitting in the Oval Office!' feeling the unreality of the moment." Rattner lists Sulzberger in the acknowledgements as a friend who is sticking by him in the pension fund crisis, but complains about the Times' participation in the "sensationalized treatment" of the pension fund investigation. Having met Sulzberger decades ago when both were young Times reporters, Rattner reveals that "as of August 2010, my former employer, the New York Times, had put my travails on the front page five times (and not once for anything related to Team Auto."
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