Quadrangle Group was among several firms and unlicensed brokers that reached settlements Thursday with the SEC and New York Attorney General Andrew Cuomo in their investigations of “pay-to-play” involving investments for the $129.4 billion New York State Common Retirement Fund, Albany.
Quadrangle reached a $5 million settlement with the Securities and Exchange Commission over charges that the firm participated in what the SEC called a “widespread kickback scheme” to obtain investments from the state pension fund, according to an SEC news release.
Quadrangle also paid an additional $5 million to the New York pension fund and $2 million to the New York State Treasury to settle state charges, according to a news release from Mr. Cuomo’s office.
Quadrangle said in a news release that it neither admitted nor denied any wrongdoing. “Quadrangle believes this resolution is in the best interests of its investors,” adding that the federal and state settlements made clear “the matters under investigation related solely to the actions of former Quadrangle employees.”
Quadrangle also said it agreed to adopt Mr. Cuomo’s code of conduct that bans the use of placement agents to seek investments from public pension funds, and prohibits investments within two years of any campaign contribution from the investment firm to the comptroller or other elected trustee.
The SEC said in a news release that Quadrangle Group and an investment affiliate, Quadrangle GP Investors II, secured a $100 million investment from the New York fund “only after a then-executive at Quadrangle arranged for an affiliate to distribute the DVD of a low-budget movie that former New York State Deputy Comptroller David Loglisci and his brothers had produced.”
The agency also said an unnamed Quadrangle executive agreed to pay more than $1 million to Henry “Hank” Morris, chief political adviser to Alan G. Hevesi, former New York state comptroller and sole trustee of the pension fund. The SEC didn’t identify the Quadrangle executive. Mr. Cuomo’s charge against Quadrangle also involved paying fees to Mr. Morris to arrange investment from the retirement fund.
Last month, Mr. Loglisci, who was chief investment officer under Mr. Hevesi, pleaded guilty to charges of helping politically connected firms do business with the retirement fund. In New York, the state comptroller is the sole trustee of the fund.
Mr. Hevesi has not been charged, although Mr. Cuomo said at a Thursday news conference that the investigation into his actions “is ongoing.” Mr. Hevesi resigned in December 2006 and also pleaded guilty to defrauding the government over use of state employees as chauffeurs and aides to his wife.
Last month, Mr. Morris, who was indicted last year with Mr. Loglisci for New York state securities law violations, asked a state court to dismiss the charges. Last year, the SEC also filed charges against Messrs. Loglisci and Morris, alleging they “orchestrated a fraudulent scheme” from 2003 through late 2006 to influence the awarding of pension fund business through “millions of dollars in kickbacks.”
Mr. Cuomo’s news release said Quadrangle “has agreed to fully cooperate with the attorney general’s investigation as to (Steven) Rattner (a founding partner of Quadrangle) and others.” After leaving Quadrangle, Mr. Rattner led President Barack Obama’s auto task force overseeing the restructuring of the U.S. auto industry.
Mr. Cuomo’s news release said the agreement with Quadrangle “expressly does not cover” Mr. Rattner. Although Quadrangle’s official news release didn’t mention Mr. Rattner by name, the attorney general’s news release contained a pointed quote attributed to Quadrangle about Mr. Rattner.
“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,” said the Quadrangle comment in Mr. Cuomo’s news release. “That conduct was inappropriate, wrong, and unethical. We embrace the reforms in the attorney general’s code of conduct, including the campaign contribution and placement agent ban, which are vitally necessary to eliminate pay-to-play practices from the public pension fund investment process. We urge others in the industry to follow.”
A Quadrangle spokesman couldn’t be reached for further comment.
Mr. Rattner’s counsel, Jamie S. Gorelick, said in a statement that her client disagrees “with the characterization of events … including those contained in Quadrangle’s statement.”
Mr. Rattner “looks forward to the full resolution of this matter,” said Ms. Gorelick of the law firm of Wilmer Cutler Pickering Hale & Dorr.
According to his news release, Mr. Cuomo also negotiated settlements with political consulting firm Global Strategy Group, which will pay $2 million; investment firm GKM Newport Generation Capital Services, $1.6 million; lobbying firm Platinum Advisors, $500,000; and unlicensed placement agent Kevin McCabe, $715,000. Like Quadrangle, they promised to comply with Mr. Cuomo’s code of conduct, the news release said.
Bloomberg contributed to this story.