Have things really changed at the SEC? Michael Barbaro reports here, in today’s NYTimes, that the SEC and mega-wealthy financier Steven L. Rattner are at loggerheads over whether Rattner should be barred from working in the securities industry for up to three years. This obviously means that civil settlement talks between Rattner and the SEC have been in the works for some time. Rattner is said to have ”fiercely resisted” the proposed bar.
According to Barbaro, the SEC and New York AG Andrew Cuomo ”have suggested that Mr. Rattner improperly paid off a political operative to win lucrative business from the New York state pension fund — in one case, by arranging to help distribute a low-budget film for the brother of a pension fund official.” Rattner’s former company, Quadrangle Group, settled with the SEC in April, characterizing Rattner’s conduct as “inappropriate, wrong, and unethical.”
I posted on that settlement here, noting that:
“Rattner is under investigation by the SEC and the New York Attorney General’s Office as part of the New York State Common Retirement Fund ‘pay to play’ scandal, in which certain money-management firms allegedly paid kickbacks to middlemen in order to gain Retirement Fund business.”
According to the SEC’s press release at the time of the Quadrangle Group settlement:
“The SEC alleges that Quadrangle Group LLC and Quadrangle GP Investors II, L.P. secured a $100 million investment from the New York State Common Retirement Fund. The investment came only after a then-executive at Quadrangle arranged for an affiliate to distribute the DVD of a low-budget film that former New York State Deputy Comptroller David Loglisci and his brothers had produced.
The SEC further alleges that the Quadrangle executive also agreed to pay more than $1 million in purported ‘finder’ fees to Henry Morris, the top political advisor and chief fundraiser for former New York State Comptroller Alan Hevesi. The SEC previously charged Morris and Loglisci for orchestrating the fraudulent scheme that extracted kickbacks from investment management firms seeking to manage the assets of the Retirement Fund.”
If SEC enforcement types really believe all of this stuff, but decide to cave in on a three-year bar for Rattner, then they have no guts and nothing has changed. And if they don’t believe all of this stuff, then they have no business smearing Rattner in press releases.
Rattner has an impressive resume–onetime NYTimes reporter, monster Democratic fund-raiser, former Obama Administration car czar, Michael Bloomberg intimate, Manhattan socialite, and all-around beautiful person. By most accounts he is a nice guy and a super-competent Wall Street money man. Does the SEC have what it takes to go after him?
By the way, the conduct that Rattner is alleged to have engaged in would typically generate a DOJ investigation in virtually any federal district in which it occurred. But that apparently did not happen here. And I had not realized, until reading it in Barbaro’s story, that Cuomo has granted immunity to Rattner, which ”has complicated Mr. Cuomo’s case against Mr. Rattner.” You don’t say!
This brings up some interesting questions. Is there a federal criminal investigation of Rattner? If not, why not? (It may just be that Cuomo got his hands first on the the NY State Pension “pay to play” probe.) If Rattner has an immunity deal with Cuomo, how broad is it and how will it effect any current or future federal investigation, assuming that such an investigation would survive DOJ’s Petite Policy? Why was Rattner given immunity? Did Cuomo really need his testimony that badly?
Look, I don’t wish an SEC or FBI investigation on anybody. But the conduct Rattner allegedly engaged in is garden variety fodder for the feds. If you or I or anybody else engaged in such conduct, a file would be opened at a minimum. Prosecutorial discretion is one thing. Favoritism is another. The rich, famous, and politically connected should not be singled out for special abuse or special favors.
But I digress. Let’s get back to the SEC. We are just talking about a civil settlement here. If the SEC really believes its press releases, this one should be a no-brainer.