Ilya Marritz covers business for WNYC.
Equity Firm Settles Pension Corruption Case
Thursday, April 15, 2010
A New York investment firm once headed by President Obama's former "car czar" has reached a settlement with the Attorney General's office over an alleged corruption scheme involving the state pension fund.
In 2003, the Quadrangle investment firm hired a former aide to the man who controlled the pension fund, then-Comptroller Alan Hevesi.
Acting as a middleman, that former aide, Hank Morris, succeeded in increasing Quadrangle's pension money under management from $25 million to $100 million.
Quadrangle neither admitted nor denied that its actions amounted to illegal corruption. But the firm will pay $7 million to New York State and $5 million to the Securities and Exchange Commission to settle the charges. The settlement does not cover former Quadrangle managing principal Steven Rattner, a prominent Democratic Party donor, who also served as the car czar for the Obama administration in 2009.
"“We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller’s political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund," the firm said in a statement. "That conduct was inappropriate, wrong, and unethical."
The investment firm acknowledged paying $1 million in finder fees to consultants in order to acquire state contracts.
The settlement announced by Cuomo also addresses the activities of Global Strategy Group, an influential Democratic political consultant group, which received roughly $1.3 million from private equity firms for arranging pension fund investments. The firm's CEO, Jon Silvan, will pay $2 million to New York state.