US auto czar Rattner quits as company probe hots up

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(China Daily)
Updated: 2009-07-15 10:27

WASHINGTON/NEW YORK: Steven Rattner will leave as head of the US autos task force, which oversaw bankruptcies at General Motors Corp and Chrysler Group, at a time when a probe into how the private equity firm he co-founded gained New York pension business has intensified.

In announcing Rattner's resignation, Treasury Secretary Timothy Geithner said that the investor would be returning to private life and his family in New York. A source close to Rattner said he does not plan to rejoin his former firm, Quadrangle.

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Rattner, a former journalist, made his name as a media banker and co-founder of media-focused private equity fund Quadrangle, and surprised Wall Street when he took the autos role in the government in February.

Quadrangle and Rattner have in recent months been linked to a corruption probe by New York's attorney general, Andrew Cuomo, into the pensions industry.

A source familiar with the matter said that Cuomo's investigation of Rattner has "intensified" in recent weeks.

"The attorney general's office has been seeking additional documents from Quadrangle concerning the New York pension fund investments," the source said.

Rattner and Quadrangle have not been accused of wrongdoing.

The pensions scandal involved allegations that high-powered political lobbyists were paid by private equity firms to pull in pension fund business from New York and other state pension funds.

The investigation has already led to the indictment of several of those involved, including Henry Morris, who was the former state comptroller's top fund-raiser.

When the controversy broke in April, US President Barack Obama stood by Rattner, saying he had not been accused of wrongdoing.

There was no indication from administration officials that the state pension probe was connected with Rattner's departure from the task force.

Cuomo, a Democrat and possible gubernatorial candidate, has spent over two years investigating whether investment firms were buying access to the state's pension fund by using paid agents. The US Securities and Exchange Commission later joined his probe; so far, Cuomo has extracted two guilty pleas.

Rattner is the person identified only as a "senior executive" of Quadrangle Group in an SEC complaint against two former New York political officials and others, a source previously told Reuters.

Rattner was not available to comment and a Treasury spokeswoman declined to comment on whether the New York pension investigation was a factor in his decision to leave.

Reuters