Gold9472
04-17-2009, 09:37 AM
Rattner Involved in Inquiry on Fees
http://online.wsj.com/article/SB123992516941227309.html
By PETER LATTMAN and CRAIG KARMIN
4/17/2009
Steven Rattner, the leader of the Obama administration's auto task force, was one of the executives involved with payments under scrutiny in a probe of an alleged kickback scheme at New York state's pension fund, according to a person familiar with the matter.
A Securities and Exchange Commission complaint says a "senior executive" of Mr. Rattner's investment firm met in 2004 with a politically connected consultant about a finder's fee. Later, the complaint says, the firm received an investment from the state pension fund and paid $1.1 million in fees.
The "senior executive," not named in the complaint, is Mr. Rattner, according to the person familiar with the matter. He is co-founder of the investment firm, Quadrangle Group, which he left to join the Treasury Department to oversee the auto task force earlier this year. Neither Mr. Rattner nor Quadrangle has been accused of any wrongdoing. Mr. Rattner did not return calls for comment.
A spokeswoman for the Treasury, which is in charge of the auto task force, said that "during the transition, Mr. Rattner made us aware of the pending investigation."
In the long-running pay-to-play case, authorities allege that about 20 investment firms made payments in exchange for investments from the $122 billion New York State Common Retirement Fund. The case, being investigated by New York Attorney General Andrew Cuomo and the SEC, has led to three criminal indictments and a guilty plea. The attorney general's office and the SEC declined to comment.
The next phase of the investigation is expected to focus more on the investment firms, which include Quadrangle, Carlyle Group and Odyssey Investment Partners. The three firms say they have cooperated and are not targets of the investigation. Authorities are trying to determine whether any of the firms violated securities laws in paying fees to a placement agent for access to the state pension fund.
The main legal issue for the investment firms turns on whether they knew, or should have known, that fees they paid to certain entities for access to the New York fund were legitimate or were improper kickbacks, and whether they were properly disclosed, according to people familiar with the matter.
The SEC alleges in its complaint that a meeting was arranged between the senior Quadrangle executive and a brother of New York's then-deputy comptroller to discuss acquiring the DVD distribution rights to the low-budget film, "Chooch." The deputy comptroller, now under indictment, and his brothers produced the movie.
Quadrangle, through an affiliate called GT Brands, agreed to acquire the rights for $88,841, and three weeks later the deputy comptroller told the senior Quadrangle executive that Quadrangle would get a $100 million investment from the pension fund, according to the complaint. Quadrangle then paid the $1.1 million finders fees to a company affiliated with the political consultant, according to the complaint.
GT Brands was a DVD publishing company that did business as GoodTimes Entertainment. One person familiar with the deal says it was a standard movie deal, where GoodTimes made an investment and the producers of the movie received payments after GoodTimes recouped its investment.
Mr. Rattner, 56 years old, is a veteran deal maker who co-founded New York-based Quadrangle in 2000 after spending years as an investment banker at Lehman Brothers, Morgan Stanley and Lazard Freres & Co., where he rose to the No. 2 spot. Earlier this year, President Barack Obama tapped him to lead a task force of two dozen people to figure out how to restructure ailing U.S. auto makers General Motors Corp. and Chrysler LLC.
Placement agents play a key role in the hedge fund and private-equity fund-raising business. Typically, they serve as middlemen between investment firms and prospective clients, and get a percentage of the investments as fees.
Hank Morris, who was the top political adviser and chief fund-raiser for former New York Comptroller Alan Hevesi, was a placement agent named in the SEC complaint. The deputy comptroller, who helped produce "Chooch," was David J. Loglisci.
Both men were arrested last month and charged in a 123-count state criminal indictment that included money-laundering, enterprise-corruption and bribery charges. The SEC filed civil-fraud charges against the two men. Attorneys for the two men have denied the accusations.
The SEC suit charges that Mr. Loglisci told firms interested in managing New York's pension money that they should hire Mr. Morris. After the money managers agreed to pay Mr. Morris a fee, then "Loglisci approved the proposed deal with the investment management firm," the SEC alleged.
The SEC complaint says that in 2004, the senior Quadrangle executive met with Mr. Loglisci to solicit an investment for the firm. In December, "Morris met with the Quadrangle executive and solicited a finder fee arrangement between Quadrangle and Morris," the complaint alleges. Although Quadrangle had already retained a placement agent, the complaint says, "Quadrangle entered into a written agreement...to pay Searle [a placement agency affiliated with Mr. Morris] 1.1% of any amount invested by the Retirement Fund with that private equity fund."
Quadrangle paid a $1.125 million fee to Searle, with Mr. Morris receiving 95% of that amount, the complaint alleges.
The SEC alleges that Quadrangle wasn't the only firm to invest in "Chooch." An executive at the private-equity firm Riverstone Holdings, which paid fees to Searle through a joint venture with Carlyle, invested $100,000 in the movie, according to the SEC complaint. Riverstone has said it has cooperated with the investigation, and that neither the company nor its executives have been advised that they are targets.
http://online.wsj.com/article/SB123992516941227309.html
By PETER LATTMAN and CRAIG KARMIN
4/17/2009
Steven Rattner, the leader of the Obama administration's auto task force, was one of the executives involved with payments under scrutiny in a probe of an alleged kickback scheme at New York state's pension fund, according to a person familiar with the matter.
A Securities and Exchange Commission complaint says a "senior executive" of Mr. Rattner's investment firm met in 2004 with a politically connected consultant about a finder's fee. Later, the complaint says, the firm received an investment from the state pension fund and paid $1.1 million in fees.
The "senior executive," not named in the complaint, is Mr. Rattner, according to the person familiar with the matter. He is co-founder of the investment firm, Quadrangle Group, which he left to join the Treasury Department to oversee the auto task force earlier this year. Neither Mr. Rattner nor Quadrangle has been accused of any wrongdoing. Mr. Rattner did not return calls for comment.
A spokeswoman for the Treasury, which is in charge of the auto task force, said that "during the transition, Mr. Rattner made us aware of the pending investigation."
In the long-running pay-to-play case, authorities allege that about 20 investment firms made payments in exchange for investments from the $122 billion New York State Common Retirement Fund. The case, being investigated by New York Attorney General Andrew Cuomo and the SEC, has led to three criminal indictments and a guilty plea. The attorney general's office and the SEC declined to comment.
The next phase of the investigation is expected to focus more on the investment firms, which include Quadrangle, Carlyle Group and Odyssey Investment Partners. The three firms say they have cooperated and are not targets of the investigation. Authorities are trying to determine whether any of the firms violated securities laws in paying fees to a placement agent for access to the state pension fund.
The main legal issue for the investment firms turns on whether they knew, or should have known, that fees they paid to certain entities for access to the New York fund were legitimate or were improper kickbacks, and whether they were properly disclosed, according to people familiar with the matter.
The SEC alleges in its complaint that a meeting was arranged between the senior Quadrangle executive and a brother of New York's then-deputy comptroller to discuss acquiring the DVD distribution rights to the low-budget film, "Chooch." The deputy comptroller, now under indictment, and his brothers produced the movie.
Quadrangle, through an affiliate called GT Brands, agreed to acquire the rights for $88,841, and three weeks later the deputy comptroller told the senior Quadrangle executive that Quadrangle would get a $100 million investment from the pension fund, according to the complaint. Quadrangle then paid the $1.1 million finders fees to a company affiliated with the political consultant, according to the complaint.
GT Brands was a DVD publishing company that did business as GoodTimes Entertainment. One person familiar with the deal says it was a standard movie deal, where GoodTimes made an investment and the producers of the movie received payments after GoodTimes recouped its investment.
Mr. Rattner, 56 years old, is a veteran deal maker who co-founded New York-based Quadrangle in 2000 after spending years as an investment banker at Lehman Brothers, Morgan Stanley and Lazard Freres & Co., where he rose to the No. 2 spot. Earlier this year, President Barack Obama tapped him to lead a task force of two dozen people to figure out how to restructure ailing U.S. auto makers General Motors Corp. and Chrysler LLC.
Placement agents play a key role in the hedge fund and private-equity fund-raising business. Typically, they serve as middlemen between investment firms and prospective clients, and get a percentage of the investments as fees.
Hank Morris, who was the top political adviser and chief fund-raiser for former New York Comptroller Alan Hevesi, was a placement agent named in the SEC complaint. The deputy comptroller, who helped produce "Chooch," was David J. Loglisci.
Both men were arrested last month and charged in a 123-count state criminal indictment that included money-laundering, enterprise-corruption and bribery charges. The SEC filed civil-fraud charges against the two men. Attorneys for the two men have denied the accusations.
The SEC suit charges that Mr. Loglisci told firms interested in managing New York's pension money that they should hire Mr. Morris. After the money managers agreed to pay Mr. Morris a fee, then "Loglisci approved the proposed deal with the investment management firm," the SEC alleged.
The SEC complaint says that in 2004, the senior Quadrangle executive met with Mr. Loglisci to solicit an investment for the firm. In December, "Morris met with the Quadrangle executive and solicited a finder fee arrangement between Quadrangle and Morris," the complaint alleges. Although Quadrangle had already retained a placement agent, the complaint says, "Quadrangle entered into a written agreement...to pay Searle [a placement agency affiliated with Mr. Morris] 1.1% of any amount invested by the Retirement Fund with that private equity fund."
Quadrangle paid a $1.125 million fee to Searle, with Mr. Morris receiving 95% of that amount, the complaint alleges.
The SEC alleges that Quadrangle wasn't the only firm to invest in "Chooch." An executive at the private-equity firm Riverstone Holdings, which paid fees to Searle through a joint venture with Carlyle, invested $100,000 in the movie, according to the SEC complaint. Riverstone has said it has cooperated with the investigation, and that neither the company nor its executives have been advised that they are targets.