Obama Backs Adviser Linked To Kickback Scandal

Apr 20 2009 | 11:06am ET

President Barack Obama is backing his auto czar in the wake of a corruption scandal involving the alternative investments firm he founded.

Steven Rattner, Obama’s top adviser on the automotive industry charged with turning around Chrysler and General Motors, continues to have the president’s confidence, and disclosed the probe into his Quadrangle Group before his appointment, the White House said.

“He’s not accused of any wrongdoing,” White House press secretary Robert Gibbs said on Friday. “And he’s not likely to face any criminal or civil charges as it relates to this.”

According to The Wall Street Journal, Rattner is the unidentified “senior executive” at Quadrangle mentioned in the Securities and Exchange Commission complaint against a pair of former advisers to ex-New York Comptroller Alan Hevesi. According to the SEC, Quadrangle won a $100 million allocation from the New York State Common Retirement Fund three weeks after a Quadrangle-owned DVD distribution company distributed an independent movie, “Chooch,” produced by the brother of one of the alleged architects of a kickback scheme at the pension. Quadrangle also allegedly paid a finder’s fee to a firm involved with another person charged in the scandal.

“Neither [David Loglisci, the former chief investment officer of the pension whose brother produced the movie] nor anyone else ever disclosed the Chooch DVD distribution agreement with the Quadrangle affiliate and the conflict of interest it created,” the SEC complaint says. Quadrangle itself, which Rattner left when he joined the Treasury Dept., has not been charged.

Nor is it the only prominent alternatives firm caught up in the scandal: Both the Carlyle Group and Pequot Capital Management, among other firms, have been identified as paying kickbacks to so-called finders. None of the firms have been charged with any wrongdoing.

“Quadrangle is fully cooperating, has produced all documents requested and our expectation is that no action will be taken,” spokesman Adam Miller said in a statement.

According to the SEC and New York attorney general, firms paid some $30 million in kickbacks to finders who arranged $5 billion in allocations from the $122 billion pension fund.

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