New York City Votes To End Quadrangle Investment Period

New York City Comptroller William Thompson just released a statement, saying that the City’s pension funds have voted in favor of terminating Quadrangle Group’s investment period. My gut says this is a handy PR ploy — vote to kill the investment period even though most other LPs won’t. Actually, it’s a bit more than my gut, since I know that LPs have wrested a bunch of concessions out of Quadrangle, in exchange for agreeing not to vote (absence of vote keeps investment period alive). Anyway, more about this Monday, and the full statement is below:

 New York City Comptroller William C. Thompson, Jr., on behalf of the New York City Pension Funds, announced today that his office voted to terminate the authority of Quadrangle Capital Partners II LP to make new investments on behalf of the partnership.

“Given the current investigation by the New York State Attorney General regarding the Hank Morris matter, I believed that it was in the best interest of the Systems to vote to terminate the commitment period, and my Office voted accordingly,” Thompson said.

Three of the New York City Pension Funds – New York City Employees’ Retirement System, Teachers’ Retirement System and the Police Pension Fund – invested a total of $125 million in Quadrangle in 2005 and 2006. At no time did the Pension Funds’ consultant ever identify Hank Morris or Searle & Company as a placement agent for Quadrangle. In fact, in its response to a due diligence questionnaire issued by the Pension Funds’ consultant, Quadrangle identified only Helix Associates Limited and Monument Group as its placement agents.

Today’s vote by Quadrangle investors – including the three city Funds – will determine whether investors must continue to provide capital for new investments by Quadrangle.  The vote was triggered by the departure of Steven Rattner, a “key person” at the fund. Rattner left the firm earlier this year.

“The departure of Steven Rattner from Quadrangle earlier this year triggered a key-person event under the Quadrangle II partnership agreement, and the election of the limited partners to terminate the commitment period was due today,” Thompson explained. “Under the terms of the partnership agreement, the commitment period will continue if a majority of the limited partners do not elect to terminate the commitment period.”

The vote came after the Comptroller’s Office requested that Quadrangle extend today’s deadline, and Quadrangle refused.

In particular, Thompson said, this extension would have allowed additional time to access the impact of information that has recently come to light regarding Quadrangle’s payment of placement agent fees to an affiliate of Hank Morris and its lack of timely disclosure on this point.

The Comptroller’s Office is awaiting final vote results.

Trustees of the three funds (chairs in bold) are:

New York City Employees’ Retirement System: New York City Finance Commissioner Martha E. Stark (Chair); New York City Public Advocate Betsy Gotbaum; Borough Presidents Scott Stringer (Manhattan), Helen Marshall (Queens), Marty Markowitz (Brooklyn), James Molinaro (Staten Island), and Acting Borough President Earl D. Brown (Bronx); Lillian Roberts, Executive Director, District Council 37, AFSCME; Roger Toussaint, President Transport Workers Union Local 100; and, Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Teachers’ Retirement System: New York City Finance Commissioner Martha E. Stark (Chair); Deputy Chancellor Kathleen Grimm, New York City Department of Education; mayoral appointee Tino Hernandez; and, Sandra March, Melvyn Aaronson and Mona Romain, all of the United Federation of Teachers.

New York City Police Pension Fund: Mayor Michael Bloomberg; New York City Finance Commissioner Martha E. Stark; New York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch, Patrolmen’s Benevolent Association; Michael Palladino, Detectives Endowment Association; Edward D. Mullins, Sergeants Benevolent Association; Thomas Sullivan, Lieutenants Benevolent Association; and, Roy T. Richter, Captains Endowment Association.