World and Nation

Investment firm agrees to settle N.Y. pension case

The investment firm founded by Steven L. Rattner, the politically connected financier who went on to lead President Barack Obama’s automobile industry task force, has agreed to pay $12 million to settle allegations that it paid kickbacks to win lucrative business from the New York State pension fund.

But the agreement, announced on Thursday, explicitly excluded Rattner, leaving open the possibility that he could face separate lawsuits from state or federal authorities.

The firm, the Quadrangle Group, agreed to pay $7 million to the pension fund and $5 million to the Securities and Exchange Commission. As is typical in such settlements, Quadrangle neither admitted nor denied wrongdoing.

But Quadrangle issued an unusual public rebuke to its founder, who left the firm to spearhead the Obama administration’s rescue of General Motors and Chrysler.

“We wholly disavow the conduct engaged in by Steve Rattner,” Quadrangle said. News of the settlement came on the same day that the state comptroller, Thomas P. DiNapoli, became entangled in the sprawling investigation of New York’s nearly $130 billion pension fund. The office of Attorney General Andrew M. Cuomo acknowledged that its inquiry included DiNapoli’s tenure, although no evidence has surfaced to suggest that DiNapoli benefited improperly from pension business.

The three-year-old investigation has focused on allegations that friends and aides of the previous comptroller, Alan G. Hevesi, reaped millions of dollars from investment companies seeking state business. Hevesi resigned in 2006 after pleading guilty to a felony related to his use of state workers to chauffeur his wife.

Quadrangle has acknowledged paying more than $1 million in fees to a political consultant, Henry Morris, in exchange for his help in landing a state investment contract. Morris was a longtime aide to Hevesi.

Rattner organized those payments, according to Quadrangle, adding that he also arranged for a company that Quadrangle controlled to distribute a low-budget film, “Chooch,” which was produced by a brother of the state pension fund’s chief investment officer, David J. Loglisci.

“That conduct was inappropriate, wrong and unethical,” Quadrangle said. No current Quadrangle employees were involved in the allegations.

Rattner’s lawyer, Jamie S. Gorelick, vigorously denied the attorney general’s claims.