A Washington Post article, citing an unnamed source,
said Steven Rattner's investment firm Quadrangle Group is
one of about a dozen private-equity companies and hedge
funds involved in the
investigation
by the U.S. Securities and Exchange Commission (SEC) and
New York Attorney General Andrew Cuomo.
Quadrangle invests in the media and telecom
sectors.
The story said investigators are examining millions
of dollars made by the hedge funds and private
equity firm - known as "placement fees" - to
middlemen firms. The middlemen companies, in turn, gave
the hedge funds and private equity firm a tie-in to the
pension program.
While the "placement fees" are common and not
illegal, the Post said, the news report indicated
the investigators are focusing on whether Quadrangle and
other investment managers were knowingly involved in a
scheme under which they would pay for being chosen as one
of the $122-billion fund's outside money
managers.
Investigators are also looking at whether
Quadrangle and the other firms properly disclosed using
the middlemen in their attempts to win pension
business.
The SEC Charges
In an amended complaint filed by the Securities and
Exchange Commission (SEC) in federal district court in
Manhattan, the SEC alleges that Raymond Harding, who is a
former leader of the New York Liberal Party, and Barrett
Wissman, a former hedge fund manager, participated in a
scheme that extracted kickbacks from investment management
firms seeking to manage the assets of the New York State
Common Retirement Fund.
The SEC previously charged Henry "Hank" Morris and
David Loglisci
for orchestrating the fraudulent scheme to enrich Morris
and others with close ties to them. Specifically, the SEC
alleges that Wissman arranged some of the payments made to
Morris, and Wissman was rewarded with at least $12 million
in sham "finder" or "placement agent" fees. Harding
received approximately $800,000 in sham fees that were
arranged by Morris and Loglisci, according to the SEC.
"These men put their greed above the interests of New
York's hard-working public employees," said Robert Khuzami,
Director of the SEC's Division of Enforcement in a
statement. "We will continue to unravel this tangled web of
fraud and corruption."
James Clarkson, Acting Director of the SEC's New York
Regional Office, added, "Public pension fund investments
are supposed to benefit only the fund's investors. They are
not a vehicle for repaying political favors or enriching
friends."
The SEC's amended complaint alleges that the payments to
Morris, Wissman, Harding and certain others were kickbacks
that resulted from quid pro quo arrangements or that were
otherwise fraudulently induced by the defendants. Loglisci
ensured that investment managers that made the requisite
payments - to Morris, Wissman, Harding, and certain other
recipients designated by Morris and Loglisci - were
rewarded with lucrative investment management contracts,
while investment managers who declined to make such
payments were denied fund business. Morris, Wissman,
Harding and the others who received the payments at issue
did not perform bona fide placement or finder services for
the investment management firms that made the payments.