Rattner faces industry bans from SEC, NY

New York and the US Securities and Exchange Commission took big swings at former Quadrangle Group chief Steven Rattner Thursday, bringing civil lawsuits for alleged pay-to-play activity that threaten millions in fines and bans from the securities industry.

Rattner settled with the SEC, agreeing to pay $6.2 million and a two-year ban from “associating with any investment adviser or broker-dealer”, the SEC said in a statement. At press time there was no word on whether Rattner is trying to settle with New York.

New York Attorney General Andrew Cuomo brought two lawsuits against Rattner, alleging he paid kickbacks to obtain $150 million in commitments to Quadrangle from the New York State Common Retirement Fund. Cuomo’s lawsuits seek at least $26 million from Rattner and his immediate lifetime ban from the securities industry in New York.

“Steve Rattner was willing to do whatever it took to get his hands on pension fund money including paying kickbacks, orchestrating a movie deal, and funneling campaign contributions,” Cuomo said in a statement.

Both lawsuits center on Rattner’s alleged attempts to secure commitments from the New York State Common Retirement Fund for Quadrangle funds. Cuomo alleges Rattner paid more than $1 million in sham placement fees to Hank Morris. Morris is a former political operative in New York who has been accused of being the alleged mastermind behind a pay-to-play scheme in New York in which private investment firms would pay phony finder’s fees in exchange for commitments from the pension.

Cuomo said Rattner paid the fees to Morris to influence former New York State Comptroller Alan Hevesi, who oversaw the pension, and former New York Common chief investment officer David Loglisci to commit $150 million to Quadrangle’s second fund.

As part of the alleged scheme, Rattner arranged a DVD distribution deal for a movie called “Chooch” produced by Loglisci’s brother through a Quadrangle portfolio company. Rattner also contributed $50,000 to Hevesi’s re-election campaign.

Cuomo has obtained seven guilty pleas as part of the pay-to-play investigation, including from former New York Comptroller Hevesi. The case against Morris is ongoing.

Cuomo also has collected $139 million from private equity firms and individuals who have settled their cases.