Subject: Quadrangle Group settles charges with SEC, N.Y.
From: "Eric Schwerin" <[email-masked]>
To: <[email-masked]>, <[email-masked]>, "Michael Muldoon" <[email-masked]>, <[email-masked]>
Date: Thu, 15 Apr 2010 19:30:03 -0400

Quadrangle Group settles charges with SEC, N.Y.
By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, April 15, 2010; 6:19 PM 

NEW YORK -- The Quadrangle Group, the New York-based private equity firm co-founded by the Obama administration's former car czar, settled Thursday with the Securities and Exchange Commission and the New York attorney general's office as part of an ongoing investigation into the state's pension fund.

Quadrangle will pay a fine of $7 million as part of its agreement with New York Attorney General Andrew M. Cuomo. The SEC brought a complaint against the firm Thursday in U.S. District Court in Manhattan, alleging that Quadrangle improperly secured a $100 million investment from the New York state pension fund after improper "quid pro quo" arrangements. The firm is to pay $5 million to the SEC as settlement for those civil charges.

Quadrangle's agreement with Cuomo's office does not include Steven Rattner, who left the firm last year to join the Treasury Department as the administration's auto industry adviser. Rattner left the administration after four months and is no longer with Quadrangle.

Quadrangle has "disavowed" Rattner's behavior and has agreed to help the investigation, Cuomo's office said Thursday morning. Cuomo's office also said "the principals involved in the conduct at issue here are no longer with Quadrangle."

In a statement, Quadrangle said it had neither admitted nor denied any allegations and said the firm's "current management" had cooperated fully with investigators. Quadrangle also agreed as part of the settlement to adopt a code of conduct similar to those adopted by other investment firms that have settled with Cuomo, including the District-based Carlyle Group.

Rattner has not been charged with any wrongdoing.

"Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement," said Jamie S. Gorelick, an attorney for Rattner. "He looks forward to the full resolution of this matter."

Thursday's developments were the latest in a years-long investigation by Cuomo's office into whether private-equity firms and hedge funds knowingly participated in a pay-to-play scheme to get investments from New York's state pension fund. Cuomo's office also settled with investment firms GKM Newport Generation Capital Services, California lobbying firm Platinum Advisor, political consulting firm Global Strategy Group and Kevin McCabe, an unlicensed placement agent.

According to authorities, an unnamed "senior executive" of Quadrangle, whom sources close to the investigation identified as Rattner, met with David Loglisci, the pension fund's former chief investment officer, in late 2004 to solicit investments. That meeting was followed by another in which Henry Morris, a former top aide to former New York comptroller Alan G. Hevesi, solicited a "finder's fee arrangement" with Quadrangle. A Quadrangle affiliate then agreed to pay $88,841 for the DVD distribution rights to a low-budget film, "Chooch," produced by Loglisci and his brothers.

After the "Chooch" DVD distribution deal was struck, Loglisci informed the Quadrangle executive that the firm would be getting a $100 million investment, authorities said. Quadrangle paid Morris's placement agency $1.125 million in fees.

Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
[email-masked]
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