(When) Will Rattner Be Indicted?

On the same day that Roger Clemens was indicted for perjury, some PE execs were wondering about a big name in the buyout world that has remained unscathed.

“When will Steve Rattner be indicted?” one source wondered. “We are all amazed at how long he has managed to avoid it. It pays to be a fundraiser for the party in power.”

The person is, of course, referring to the pension fund kickback scandal that has engulfed Rattner for over a year.

Rattner, who co-founded the Quadrangle Group in 2000, was once a powerful buyout executive and former investment banker. In early 2009, he was appointed to head President Obama’s auto task force and aspired

Quadrangle Group Considers Its Options

NEW YORK (Reuters) – Private equity firm Quadrangle Group LLC, which is gearing up to raise a new fund, is exploring options which could include selling a minority stake in itself and gaining an anchor tenant for its fund, two sources familiar with the matter said on Wednesday. Quadrangle, a media-focused firm, is in discussions […]


Quadrangle Secures Big Return from Protection One

Ten days ago, private equity firm Quadrangle Group was in the news for all the wrong reasons. It was sued by the SEC for its alleged role in a pay-to-play pension scheme in New York, and then settled for $5 million. It also settled with New York for another $7 million, and threw in a public statement about how firm co-founder Steve Rattner’s actions were “wrong, inappriate and unethical.”

Quadrangle had been hoping to settle for quite some time, in order to put the ugliness behind it and refocus on making new investments and selling old ones. And it would appear to be mission accomplished, as the firm today announced an agreement to sell portfolio company Protection One (Nasdaq: PONE) to GTCR for approximately $828 million, via a tender offer.

All About Steve

At approximately 10:05am ET yesterday morning, the political aspirations of Steven L. Rattner were pronounced dead. An autopsy revealed an overdose of hubris, and a deficiency of caution.

In a 27-page document, the New York Attorney General Andrew Cuomo lays out a narrative in which Rattner — then a partner of private equity firm Quadrangle Group — fought to secure business for the brother of New York’s chief investment officer, at the urging of now-indicted “finder” Hank Morris. Specifically, Rattner persuaded a Quadrangle portfolio company (since defunct) sign a DVD distribution deal for the brother’s film – “Chooch” – over the initial objections of portfolio company management.

Once the DVD distribution deal was signed, Rattner retained Morris as a “placement agent,” in order to secure fund commitments for Quadrangle Group. Morris helped Quadrangle raise $100 million from the New York State Common Retirement Fund, even though one of Quadrangle’s legitimate placement agents – Monument Group – only had been able to secure between $25 million and $50 million. This increase occurred without Morris setting up or attending any meetings with NYCRF on Quadrangle’s behalf.

Morris also helped Quadrangle secure $75 million from New York City, in part via a deal with another placement agent named Julio Ramirez, who last year pled guilty to securities fraud. Quadrangle did not disclose Morris and Ramirez’s involvement in official disclosure forms.

As a follow-up, the CIO’s brother helped put Rattner in touch with potential investors on the West Coast. These included Elliott Broidy, who sat on the board of the Los Angeles Fire & Police Pension Fund. That system gave Quadrangle $10 million, and Broidy has since pled guilty to felony charges of rewarding official misconduct.

Rattner and DiNapoli Issue Statements

Steve Rattner today broke his silence on the pay-to-play scandal, just hours after being fingered as the badie by his former partners. What follows is his brief statement, via attorney Jamie Gorelick:

“Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle’s statement. Mr. Rattner shares with the New York Attorney General the goal of eliminating public pension fund practices that are not in the public interest. He looks forward to the full resolution of this matter.”

Also defending himself was Thomas DiNapoli, the current New York comptroller whose office also is under investigation (as confirmed during Cuomo’s press call earlier today). His comments were a bit more detailed, and follow in full after the jump…


Lots More Thoughts on Quadrangle Situation

Busy morning over at Quadrangle Scandal Central. To sum up, before looking forward:

1. The SEC sued Quadrangle Group for its role in the New York pay-to-play scandal. Specifically, it accused Quadrangle of agreeing funneling cash to the the brother of a state pension fund official, for the production of a straight-to-DVD film called Chooch.

2. Quadrangle Group settled with the SEC, agreeing to pay $5 million in penalties. This sue/settle process apparently is standard operating procedure for the SEC, although the settlement is still subject to a judge’s approval.

3. Quadrangle Group also settled with NY Attorney General Andrew Cuomo, agreeing to repay $7 million and sign a “code of conduct” which would preclude Quadrangle from using placement agents going forward. This deal did not include a settlement with Quadrangle co-founder Steve Rattner (who left last year to become Obama’s car czar), whom Quadrangle called “unethical” in an official statement.

Ok, them’s the facts. Now some thoughts:


Quadrangle Slams Steve Rattner, Settles with Cuomo and SEC

This is not a good day for Steve Rattner.

The SEC this morning sued his former firm, Quadrangle Group, for a kick-back scheme related to the New York State pay-to-play scandal. In related news, Quadrangle agreed to repay $7 million to the State of New York, via an agreement with AG Andrew Cuomo. As part of the latter deal, Quadrangle said the following:

“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. 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.”

You can read the SEC’s complaint by clicking here. More info after the break…

Where PE Went Wrong With MGM

If you can get past the annoying hedge fund mischaracterization, there are a few tidbits of useful info in this Defamer post about MGM. Author Edward Jay Epstein got his hands on the company’s sale memorandum and explains where its buyout barons (TPG, Providence Equity Partners, DLJ Merchant Banking Partners and Quadrangle Group) went wrong.

The main flaw in the LBO firms’ investment thesis, apparently, was its big bet on Blu-Ray. The firms took the gamble that DVD revenue would spike as people replaced their DVD players, and DVD collections, with high definition Blu-Ray players and collections.

That simply hasn’t happened, and MGM’s DVD revenues actually fell thanks to fewer new releases from the studio, a worldwide decrease in DVD sales, and “price erosion” caused by video piracy and services like Netflix and Redbox. In other words, TPG, Providence, and the others missed the macro-trend boat, big time.

Bloomberg Moves Personal Fortune from Quadrangle

NEW YORK (Reuters) – Private equity firm Quadrangle Group will no longer be managing the assets of New York City Mayor Michael Bloomberg, who is extracting his funds from the firm, two sources said on Friday. The news was earlier reported by the Wall Street Journal and New York Times, which said that Bloomberg is […]

Quadrangle Leads Deal for Tower Vision

MUMBAI (Reuters) – Privately-held telecom tower manager Tower Vision India Pvt Ltd said on Wednesday it had secured equity financing from eight international investors led by private equity firm Quadrangle Capital Partners. Gurgaon-based Tower Vision did not disclose the size of the transaction, but said the equity financing and concurrent debt financing would provide it […]

Quadrangle Group Exits Cinemark

The Quadrangle Group has sold its remaining 2.33 million shares in Cinemark Holdings Inc. (NYSE: CNK), a Plano, Texas-based movie theater chain, via a secondary public offering. The shares were sold at $12.85 each, or approximately $30 million. Barclays Capital served as underwriter. Cinemark went public in 2007 at $19 per share.

Will Pay-to-Play Enter New Jersey Gov Race?

New Jersey does not have a long history of investing in private equity, making its first fund commitments just four years ago. But that doesn’t mean that private equity won’t become an issue in next week’s gubernatorial election, where incumbant John Corzine is struggling to fend off Republican challenger Chris Christie.

Christie needs to land just a few more body blows, and sources say that he may try a last-minute attempt to link Corzine with the growing rash of pay-to-play scandals involving state pension systems and private equity.

West Corp. Files for $500 Million IPO

NEW YORK (Reuters) – Private-equity backed West Corp, an operator of call centers and conference calls backed by private equity firms, filed plans on Friday to raise as much as $500 million in an initial public offering. The Omaha, Nebraska-based company was acquired in 2006 by a group led by private equity firms THL and […]

Quadrangle To Focus Less on Europe, More on Asia

NEW YORK (Reuters) – New York-based private equity firm Quadrangle Capital Partners will “substantially close” its London office and pursue its European investments out of the United States, an investor letter dated Friday said. Quadrangle — co-founded by Steven Rattner, who left the firm earlier this year — also plans to increase resources in Asia […]

MGM Replaces CEO, Hires Turnaround Expert

NEW YORK/LOS ANGELES (Reuters) – Metro-Goldwyn-Mayer Inc has replaced its chief executive with a team that includes turnaround expert Stephen Cooper and its production boss, Mary Parent, as the storied Hollywood studio grapples with reducing a high debt load. Harry Sloan, a veteran Hollywood businessman who took the helm a few months after the 2005 […]

Alpha Media Restructures Debt

NEW YORK (Reuters) – Alpha Media, parent of mens magazine Maxim, said on Friday it will cut its debt by way of a debt-to-equity conversion. The publisher was bought by private equity firm Quadrangle Group in 2007 for about $250 million. Quadrangle later said the deal had been a mistake, and wrote the value of […]


Steve Rattner Steps Down, What Next?

Wow, that was fast. Steve Rattner today stepped down as President Obama’s auto czar, less than five months after taking the job, and less than five days after General Motors emerged from Chapter 11 bankruptcy protection. In a statement, Treasury Secretary Geithner said that Rattner would “transition back to private life,” and that he’d be succeeded […]

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