Dominos fall in pension probe
Authorities probing pension-fund influence peddling on Thursday announced $17 million in settlements with targets of their investigations, including a high-profile California lobbyist and an investment firm founded by President Obama’s former “auto czar.”
The settlements reached by the Securities and Exchange Commission and New York state Atty. Gen. Andrew Cuomo mark the latest development in a yearlong scandal centering on intermediaries who collected commissions from investment firms for brokering deals that brought the firms chunks of pension-fund money to manage.
In New York, six people have pleaded guilty to corruption and bribery charges in the scandal. California Atty. Gen. Jerry Brown is investigating possible similar abuse at the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.
In one of the settlements announced Thursday, Darius Anderson, founder and chief executive of Platinum Advisors, an influential lobbying firm based in Sacramento, agreed to pay New York state $500,000.
Cuomo’s office alleged that Anderson and Platinum acted as unlicensed brokers in 2004 by helping to put together a deal for New York state and city pension funds to invest with Ares Management in Los Angeles. Ares, which hasn’t been accused of wrongdoing, paid Platinum $337,000 in fees. Neither Anderson nor Platinum admitted guilt.
Meanwhile, New York-based Quadrangle Group agreed to pay $7 million to New York state and $5 million to the SEC to settle allegations that it paid a political consultant for help in obtaining investment-management business from a New York pension fund.
Quadrangle was founded by investment banker Steven Rattner, who left the firm early last year to advise the Obama administration on helping the auto industry recover. He spent just five months in that position, leaving after shepherding General Motors and Chrysler through bankruptcy.
In a statement issued by Cuomo, Quadrangle -- whose clients until recently included billionaire New York Mayor Michael Bloomberg -- distanced itself from Rattner and blamed him for any misconduct. Rattner wasn’t part of the settlements unveiled Thursday.
“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,” Quadrangle said in the statement. “That conduct was inappropriate, wrong and unethical.”
In a statement, Rattner’s lawyer said he didn’t agree with “the characterization of events released today, including those contained in Quadrangle’s statement.”
“Mr. Rattner shares with the New York attorney general the goal of eliminating public pension fund practices that are not in the public interest,” lawyer Jamie Gorelick said in the statement. “He looks forward to the full resolution of this matter.”
In the document outlining the settlement, Cuomo alleged that Rattner set up a DVD distribution deal for a low-budget film produced by the brother of David Loglisci, who was chief investment officer of the New York pension fund. Loglisci has pleaded guilty in the broad scandal.
“Today’s action is yet more evidence that kickbacks and corruption contaminated the retirement fund,” said Robert Khuzami, the SEC’s enforcement chief. “The victims were New York state’s hardworking retirees, who were entitled to have honest advisors manage their hard-earned dollars.”
All the parties that settled with Cuomo, a Democrat who is expected to announce soon that he is running for governor, agreed to submit to a code of conduct.
Among other things, the code bans the use of hired go-betweens, also known as placement agents, in seeking investment management agreements with public pension funds.