NEW YORK — Steven Rattner, head of the Obama administration’s auto task force negotiating a restructuring of General Motors and Chrysler, was involved in activities being investigated by authorities as part of a probe into an alleged pay-to-play scheme involving the New York state pension fund, a source close to the matter said Friday.
At the center of the two-year investigation, by New York Attorney General Andrew Cuomo and the Securities and Exchange Commission, are millions of dollars in payments made by investment firm Quadrangle Group, co-founded by Rattner in 2000, and about a dozen other private-equity firms and hedge funds. These payments went to middlemen who connected the firms to New York’s $122 billion pension fund.
The controversial payments, known as “placement fees,” are a common industry practice and not illegal. The authorities are investigating whether Quadrangle and other investment managers knowingly participated in a pay-to-play scheme to get investments from the state pension fund, according to people familiar with the case.
Cuomo and the SEC have alleged that the middlemen won business for the firms through kickbacks and illicit payments.
Authorities also are investigating whether these firms adequately disclosed their use of middlemen.
So far, three people have been charged and one, a hedge-fund executive, pleaded guilty this week. Those facing charges include Hank Morris, a former top adviser to then-state Comptroller Alan Hevesi, and David Loglisci, former chief investment officer for the pension fund, who were indicted last month on 123 criminal counts, including corruption, bribery and money laundering.
