SEC Reaches Settlement Deal with Rattner while AG Cuomo Aggressively Pursues

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After years of working in lockstep on the blockbuster New York State pension scandal, the Securities and Exchange Commission and Attorney General Andrew Cuomo split over how to hold former auto czar Steven Rattner accountable for his alleged role in the scheme.

In his SEC settlement, Rattner will pay $6.2 million and accept a two-year ban from associating with investment advisors or broker dealers. But he admits no wrong doing. He must reapply to the SEC after his suspension.

Minutes after the SEC rolled out the details of their deal, Cuomo announced he was suing Rattner for $26 million and seeking to ban him for life from the securities business in New York.

The Attorney General, unlike the SEC, has both criminal and civil prosecutorial powers and has in his arsenal the state's powerful Martin Act, which gives the AG sweeping powers to fight financial fraud. In a press statement, Cuomo described Rattner as a central player in the criminal conspiracy to use bribes and kickbacks to get $150 million in state pensions that he could invest through his company Quadrangle.

"The investigation showed and the lawsuits allege that Rattner arranged for a series of kickbacks aimed at influencing the Office of the State Comptroller," asserts the Attorney General. "These kickbacks included more than one million dollars in sham placement fees paid to Henry “Hank” Morris, the political adviser to then-State Comptroller Alan Hevesi."

Cuomo's charges that it was Rattner, at Morris’ request, that arranged for a DVD distribution deal for “Chooch,” a movie produced by the brother of David Loglisci, who was the Comptroller’s chief investment officer at the time. Rattner also made $50,000 in contributions to Hevesi’s re-election campaign.   

In dueling broadcast appearances on Thursday, both Rattner and Cuomo stood their ground.

Rattner is still promoting his book "Overhaul," which chronicles his work as President Obama's point man tasked with saving the auto industry. He remained calm when CNBC panelists asked him about the SEC settlement and Cuomo's fresh legal action against him.

"I am open to a reasonable settlement in order to move on with my life and so forth," said the confident Rattner. "And whether we achieve that or not is frankly up to the Governor-elect."

Meanwhile, on his regular appearance on the radio show of New York Post editor Fred Dicker, Cuomo blasted the SEC for being too lenient. And the Governor-Elect was sharpening his sights on Rattner, whom Cuomo says asserted his fifth amendment privilege 68 times during questioning about his role in the wide-ranging scandal. 

"But it's not justice to me, Fred, to say, well put back the money that you took and you go about your way. Put the cookie back in the jar and we will make believe it never happened," Cuomo said.

Former federal prosecutor and white-collar defense attorney Robert Mintz says that Rattner still has a lot to be worried about. Mintz says Cuomo may have a reach the SEC does not have. "And settling with the SEC does not mean he might not be exposed to civil and even potentially criminal  charges for the same conduct if it violates parallel state criminal and civil law,” Mintz says. 

Rattner is a major Democratic fundraiser and long-time financial advisor to Mayor Bloomberg. During his CNBC appearance, he continued to drop Mayor Bloomberg's name and said he was still spending much of his time helping the mayor manage his vast private wealth and charity, the Bloomberg Family Foundation. "I think he is wonderful," said Rattner, "and I would like to help with whatever he plans to do next in life."

Under the terms of his two-year exile from the securities industry, government regulators say he cannot get paid for giving investment advice.
He can, however, give free advice. And Mayor Bloomberg said through a spokesman he will be glad to get it from Rattner. "Mr. Rattner is a friend whose advice the mayor has and will continue to rely on" says Stu Loeser.