TheBrutalTruth
Well-Known Member
April 17, 2009
Obama Adviser Said to Be Tied to Pension Deal
By DANNY HAKIM and LOUISE STORY
http://www.nytimes.com/2009/04/17/nyregion/17pension.html?ref=business&pagewanted=print
The man leading the Obama administrations efforts to restructure the auto industry has been described in Securities and Exchange Commission documents as having arranged for his investment firm to pay more than $1 million to obtain New York State pension business.
Although he is not named in the documents, a person with knowledge of the inquiry said the investment executive is Steven Rattner, co-founder of the Quadrangle Group, the prominent private equity firm.
The S.E.C. complaint, filed as part of an expansive state and federal investigation into corruption at the state pension fund, details the efforts of Quadrangle to gain business from the pension fund beginning in 2004.
The person who received most of the $1 million-plus payment has been indicted, accused of selling access to the fund.
There is no indication in the complaint that Mr. Rattner faces criminal or civil charges in connection with the inquiry.
Mr. Rattner did not respond to messages seeking comment. A Treasury Department spokeswoman did not address the allegations, but said in a statement, During the transition, Mr. Rattner made us aware of the pending investigation.
In a statement, Quadrangle said the firm is fully cooperating and has produced all documents sought by investigators.
Our expectation is that no action will be taken, the statement said.
The S.E.C. and the office of Attorney General Andrew M. Cuomo, jointly conducting the investigation, also declined to comment.
The inquiry has focused on the four-year tenure of the former comptroller Alan G. Hevesi, who resigned after pleading guilty to an unrelated felony in 2006.
Investigators are scrutinizing the fees paid by investment firms to intermediaries who arranged deals with the $122 billion pension fund. While such payments are legal, they often raise questions about conflicts of interest and would be illegal if used to bribe public officials.
In a 123-count indictment issued last month, two aides to Mr. Hevesi were accused of selling access to the fund. The aides, Hank Morris, who was Mr. Hevesis top political consultant, and David Loglisci, the funds chief investment officer, have denied any wrongdoing.
The S.E.C. complaint, which was released Wednesday, describes steps undertaken by the Quadrangle executive to win $100 million worth of business from the pension fund in 2005. That amount accounted for nearly 5 percent of a Quadrangle private equity fund and helped the company raise money from other investment funds.
In October 2004, the executive met with Mr. Loglisci to seek the pension fund investment and Mr. Loglisci reacted favorably and began taking the necessary steps to secure approval for the investment, the complaint said.
Two months later, in December, the same executive met with Mr. Morris, who, according to prosecutors, was working in tandem with Mr. Loglisci to generate millions of dollars in fees from the investment firms, and within weeks had agreed to a deal to pay an obscure securities firm that employed Mr. Morris 1.1 percent of any money that the retirement fund invested with Quadrangle, as a placement agent fee. That worked out to $1.1 million, of which Mr. Morris received 95 percent.
The timing of the meeting with Mr. Morris was significant, the complaint indicated, because the Quadrangle executive had already met with Mr. Loglisci and would presumably not need a placement agent. In addition, Quadrangle had previously retained a separate placement agent.
The executive also met with Mr. Loglisci about a low-budget movie Mr. Loglisci was producing, Chooch. Soon afterward, GT Brands Holdings, a company owned by one of Quadrangles private equity funds, made a deal to acquire the DVD distribution rights to Chooch, an agreementthat made the films producers nearly $90,000.
The Quadrangle executive called Mr. Morris after the distribution deal was closed, and told him of the deals connection to Loglisci. Three weeks later, Mr. Loglisci personally informed the Quadrangle executive that the retirement fund would be making a $100 million investment in Quadrangle, the complaint said.
Mr. Rattner, a former New York Times reporter, had been an investment banker at Lazard and co-founded Quadrangle in 2000. The investment firm dove into private equity investing in media companies, including investments in a large German cable operator and Comcast. It counted some of the biggest media and finance executives as investors, drawing on Mr. Rattners social and political connections.
The funds investors are heavily skewed toward wealthy individuals, according to a person familiar with the investor roster.
But Quadrangle sought out institutional money, like the state pension fund, as it grew. The firm counts among its investors the Los Angeles Fire and Police Pensions, Calpers and the New Mexico State Investment Council, according to Capital IQ, a division of Standard & Poors.
The New Mexico fund signed on after Mr. Rattner told its officials about other pension investors, including New York, according to minutes of a 2005 state pension meeting in New Mexico.
In 2003, Quadrangle paid $250 million to buy GT Brands Holdings, the owner of the GoodTimes movie brand as well as Richard Simmons weight-loss videos.
The investment was a bust: Soon after Quadrangle bought GT, the companys earnings were falling, and in 2005 GT filed for bankruptcy.
Mr. Rattners selection for the auto job was a topic of much speculation beginning in January, but it took several weeks to be settled. Two people close to the Obama administration said there were a handful of concerns about Mr. Rattner before he was named to his new position, but they declined to elaborate on what those concerns were.
Obama Adviser Said to Be Tied to Pension Deal
By DANNY HAKIM and LOUISE STORY
http://www.nytimes.com/2009/04/17/nyregion/17pension.html?ref=business&pagewanted=print
The man leading the Obama administrations efforts to restructure the auto industry has been described in Securities and Exchange Commission documents as having arranged for his investment firm to pay more than $1 million to obtain New York State pension business.
Although he is not named in the documents, a person with knowledge of the inquiry said the investment executive is Steven Rattner, co-founder of the Quadrangle Group, the prominent private equity firm.
The S.E.C. complaint, filed as part of an expansive state and federal investigation into corruption at the state pension fund, details the efforts of Quadrangle to gain business from the pension fund beginning in 2004.
The person who received most of the $1 million-plus payment has been indicted, accused of selling access to the fund.
There is no indication in the complaint that Mr. Rattner faces criminal or civil charges in connection with the inquiry.
Mr. Rattner did not respond to messages seeking comment. A Treasury Department spokeswoman did not address the allegations, but said in a statement, During the transition, Mr. Rattner made us aware of the pending investigation.
In a statement, Quadrangle said the firm is fully cooperating and has produced all documents sought by investigators.
Our expectation is that no action will be taken, the statement said.
The S.E.C. and the office of Attorney General Andrew M. Cuomo, jointly conducting the investigation, also declined to comment.
The inquiry has focused on the four-year tenure of the former comptroller Alan G. Hevesi, who resigned after pleading guilty to an unrelated felony in 2006.
Investigators are scrutinizing the fees paid by investment firms to intermediaries who arranged deals with the $122 billion pension fund. While such payments are legal, they often raise questions about conflicts of interest and would be illegal if used to bribe public officials.
In a 123-count indictment issued last month, two aides to Mr. Hevesi were accused of selling access to the fund. The aides, Hank Morris, who was Mr. Hevesis top political consultant, and David Loglisci, the funds chief investment officer, have denied any wrongdoing.
The S.E.C. complaint, which was released Wednesday, describes steps undertaken by the Quadrangle executive to win $100 million worth of business from the pension fund in 2005. That amount accounted for nearly 5 percent of a Quadrangle private equity fund and helped the company raise money from other investment funds.
In October 2004, the executive met with Mr. Loglisci to seek the pension fund investment and Mr. Loglisci reacted favorably and began taking the necessary steps to secure approval for the investment, the complaint said.
Two months later, in December, the same executive met with Mr. Morris, who, according to prosecutors, was working in tandem with Mr. Loglisci to generate millions of dollars in fees from the investment firms, and within weeks had agreed to a deal to pay an obscure securities firm that employed Mr. Morris 1.1 percent of any money that the retirement fund invested with Quadrangle, as a placement agent fee. That worked out to $1.1 million, of which Mr. Morris received 95 percent.
The timing of the meeting with Mr. Morris was significant, the complaint indicated, because the Quadrangle executive had already met with Mr. Loglisci and would presumably not need a placement agent. In addition, Quadrangle had previously retained a separate placement agent.
The executive also met with Mr. Loglisci about a low-budget movie Mr. Loglisci was producing, Chooch. Soon afterward, GT Brands Holdings, a company owned by one of Quadrangles private equity funds, made a deal to acquire the DVD distribution rights to Chooch, an agreementthat made the films producers nearly $90,000.
The Quadrangle executive called Mr. Morris after the distribution deal was closed, and told him of the deals connection to Loglisci. Three weeks later, Mr. Loglisci personally informed the Quadrangle executive that the retirement fund would be making a $100 million investment in Quadrangle, the complaint said.
Mr. Rattner, a former New York Times reporter, had been an investment banker at Lazard and co-founded Quadrangle in 2000. The investment firm dove into private equity investing in media companies, including investments in a large German cable operator and Comcast. It counted some of the biggest media and finance executives as investors, drawing on Mr. Rattners social and political connections.
The funds investors are heavily skewed toward wealthy individuals, according to a person familiar with the investor roster.
But Quadrangle sought out institutional money, like the state pension fund, as it grew. The firm counts among its investors the Los Angeles Fire and Police Pensions, Calpers and the New Mexico State Investment Council, according to Capital IQ, a division of Standard & Poors.
The New Mexico fund signed on after Mr. Rattner told its officials about other pension investors, including New York, according to minutes of a 2005 state pension meeting in New Mexico.
In 2003, Quadrangle paid $250 million to buy GT Brands Holdings, the owner of the GoodTimes movie brand as well as Richard Simmons weight-loss videos.
The investment was a bust: Soon after Quadrangle bought GT, the companys earnings were falling, and in 2005 GT filed for bankruptcy.
Mr. Rattners selection for the auto job was a topic of much speculation beginning in January, but it took several weeks to be settled. Two people close to the Obama administration said there were a handful of concerns about Mr. Rattner before he was named to his new position, but they declined to elaborate on what those concerns were.
