The former Obama administration official charged with overseeing the restructuring of the auto industry has agreed to settle with the SEC on kickback charges involving New York state pension funds. Under the terms of the settlement, Steven L. Rattner has agreed to pay a fine of $6.2 million for violating the Martin Act, a state securities law.
Rattner was accused of paying Hank Morris, an aide to former state comptroller Alan G. Hevesi, for his help in securing business from the $135 billion fund. Morris pleaded guilty earlier this month to providing illegal access to the fund.
Rattner’s former firm, Quadrangle Group, settled with authorities in April over hiring Morris to get access to the pension fund. The firm paid the SEC a penalty of $12 million and, as part of its settlement, acknowledged Rattner’s actions were “inappropriate, wrong and unethical.” A lawyer for Rattner disputed the wording of the firm’s acknowledgement.
The SEC also charged Rattner with providing special favors to the brother of a senior pension fund official. The brother, a Hollywood producer, was helped by Rattner in securing distribution of a low-budget film called Chooch, through a DVD company owned by Quadrangle. Rattner also helped the brother secure a deal with IFC, a cable outlet partly owned by Quadrangle. Rattner was also a member of IFC’s board of directors.
Officials also accused Rattner of funneling $50,000 in campaign contributions to Hevesi’s reelection campaign for state comptroller through third parties to conceal the true identity of the donor. After making the illegal donations, Quadrangle’s state pension monies under management increased from $100 million to $150 million.
In a separate action Thursday, New York attorney general and governor-elect Andrew Cuomo sued Rattner over the same activities, seeking at least $26 million in fines and a lifetime ban from the New York securities industry. Rattner had been in settlement discussions with the attorney general’s office, and last month rejected a settlement offer of $20 million from Cuomo.
“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,” Mr. Rattner said in a statement. “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. That’s why I intend to clear my name by defending myself vigorously against this politically-motivated lawsuit.”
Before founding Quadrangle, Rattner was a reporter for The New York Times and went on to become an investment banker for Lazard in New York. When he was appointed to the auto czar post in February 2009, he listed his net worth on federal disclosure firms as between $188 million and $608 million.