Legal News

Quadrangle Settles Pay-For-Play Charges; Partners Rip Rattner

By Ashby Jones

Forget the movie, we couldn’t even make it through the preview of “Chooch” without our thoughts drifting to more interesting things, like what revisions the IRS might make to the tax code for next year. Sitting through the trailer is simply a punishing, brutalizing experience.*

But “Chooch” is, yes, at the heart of the big pay-to-play scandal involving Quadrangle Group, the hedge fund co-founded by Steven Rattner (pictured), the famed Wall Street deal maker and former Obama administration car czar.

On Thursday, word broke that Rattner’s partners at Quadrangle recently ripped him in a letter for what they called “unethical efforts” to win a $100 million investment for the firm. Quadrangle made the accusations against Rattner as part of a settlement with the New York Attorney General and the SEC. The firm agreed to pay a $12 million fine to settle civil charges concerning its 2004 effort to win business from the New York State pension fund, one of the nation’s largest. Click here for Peter Lattman’s story in the WSJ.

In exchange for the opportunity to handle the investment, Quadrangle was accused of improperly paying off a political operative and helping the brother of a pension-fund official distribute the aforementioned “Chooch.”

The SEC complaint, which was filed Thursday alongside the settlement, offered a detailed picture of the role Rattner allegedly played in trying to win the pension fund’s business. The complaint refers to a former senior executive at Quadrangle who people familiar with the matter say is Rattner.

It chronicled his effort to secure a DVD distribution deal for “Chooch,” a movie produced by the brother of a top pension-fund official.

Rattner’s lawyer, WilmerHale’s Jamie Gorelick, said in a statement: “Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle’s statement.”

The matter has cast a cloud over Rattner, who returned to New York last summer after a five-month stint in Washington leading the Obama administration’s restructuring of the U.S. auto industry. It has also been an albatross for New York-based Quadrangle, which now puts this case behind it as it prepares for its annual investor meeting next week. Click here for a detailed look at Rattner and his return to Quadrangle, from New York Magazine.

* Don’t agree with us about “Chooch”? Try on these reviews for size:

• The sort of vanity project that gives amateurs a bad name. — Lou Lumenick, the New York Post
• It’s an earnest affair that looks like a neighborhood project on film (16-mm, in fact, blown up to 35) for someone’s anniversary or birthday party. — Jack Matthews, the New York Daily News
• Chooch is really just an outline for a movie. — Anita Gates, the New York Times.

Photo: Bloomberg

Full post as published by Law Blog - WSJ.com on April 16, 2010 (boomark / email).