Rattner Settles With SEC, Sued By NY

Steven Rattner has settled U.S. Securities and Exchange Commission civil lawsuit, agreeing to pay $6.2 million and accept a two-year ban from working with an investment adviser or broker-dealer, but the former Obama administration “car czar” was sued by New York’s attorney general for allegedly paying kickbacks to win investments from the state’s $130 billion pension fund, Reuters reported.

The former investment banker led the federal government’s auto task force that oversaw the restructuring and bankruptcy of General Motors Co.

Andrew Cuomo, the New York attorney general and governor-elect, filed two lawsuits seeking to recover at least $26 million from Rattner and permanently bar him from the securities industry in the state on the same day that GM shares began trading again on the New York Stock Exchange. Only hours before the suits were filed, Rattner had been on CNBC television talking about the revamped GM’s stock market debut.

The allegations date back to when Rattner worked at Quadrangle Group LLC, the private equity firm he co-founded. Relations between the firm and Rattner have become strained, however.

Quadrangle reached its own settlements related to the corruption probes in April, agreeing to pay $7 million to New York and $5 million to the SEC. Court papers show that he is pursuing arbitration proceedings to recover money he believes Quadrangle owes him. He also accuses his former firm of trying to “shift responsibility for its penalty” to him.

In a letter to investors obtained by Reuters, Quadrangle said it was vigorously defending itself against Rattner’s claims, and that Rattner’s conduct “continues his pattern of failing to take responsibility for his actions”.

Cuomo and the SEC alleged that Rattner entered quid pro quo arrangements with the New York State Common Retirement Fund to win $150 million in business for Quadrangle in 2005 and 2006.

The attorney general’s allegations include fraud charges under the Martin Act, a powerful state law used to combat securities fraud.

“Steve Rattner was willing to do whatever it took to get his hands on pension fund money,” Cuomo said in a statement. “Through these lawsuits, we will recover his ill-gotten gains and hold Rattner accountable.”

Rattner, 58, said he would fight Cuomo’s lawsuits, which he called “politically motivated,” and clear his name.

“This episode is the first time during 35 years in business that anyone has questioned my ethics or integrity,” Rattner said in a statement. “I will not be bullied simply because the attorney general’s office prefers political considerations instead of a reasoned assessment of the facts.”

Rattner is the most prominent outside executive to face charges in the “pay to play” corruption probe involving the now $132.4 billion Common Retirement Fund.

His $6.2 million SEC civil penalty includes a $3 million fine. Rattner did not admit wrongdoing in agreeing to that settlement, which requires court approval.

James Fanto, a corporate and securities law professor at Brooklyn Law School, said it the “two-year ban that the SEC imposed is not significant for someone of Rattner’s stature.”

Megan Davies is a Reuters correspondent in New York. Jonathan Stempel and S. John Tilak also contributed to this report.