A Reputation, Once Sullied, Acquires a New Shine
By ANDREW ROSS SORKIN
Carlos Osorio/Associated
PressSteven L. Rattner has appeared as a pundit about
the economy on television.Up until three years ago, he was typically referred to in these pages as a former journalist turned successful financier — the vice chairman of the investment bank Lazard and then a co-founder of the Quadrangle Group, the private equity firm.
With much fanfare, he then became the White House auto czar assigned to fix General Motors and Chrysler, after years of trying to become part of the Washington firmament like so many on Wall Street who have wanted to make the leap.
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He was accused of using “pay to play” practices while raising money from a New York state pension fund when he was still at Quadrangle. In 2010 he paid more than $16 million to Andrew M. Cuomo, who was then New York’s attorney general, and the Securities and Exchange Commission to settle the civil cases without admitting or denying wrongdoing.
He was “banned from appearing in any capacity before any public pension fund within the State of New York for five years” and for “associating with any investment adviser or broker dealer” for two years, according to the suits. As the case proceeded, he stepped down from his position in the Obama administration.
Among the cocktail party circuit in Manhattan, Mr. Rattner was Topic A. And the schadenfreude was thick. Mr. Rattner, the narrative developed, had become Wall Street’s Icarus, flying too close to the sun. The New Republic headlined one article: “Rattner Hoisted on His Own Petard.” The question was asked: Would he ever eat lunch in this town again? And what about Washington?
Now, two years later, Mr. Rattner is lunching all over town. And, in truth, he may have never stopped.
As Mr. Rattner sat across from me in Midtown Manhattan two weeks ago, his re-emergence as power magnate was well under way. He is the overseer of Mayor Michael R. Bloomberg’s fortune of billions of dollars — you could call Mr. Rattner a money manager but that doesn’t capture the scope of it. He has appeared as a pundit about the economy on television (MSNBC’s “Morning Joe,” ABC’s “This Week” and “Fox News Sunday,” among others) and in newspapers (The Financial Times, Politico and The New York Times). And to take the story full circle, the Obama administration, which had eased Mr. Rattner out of his role, appears to have re-embraced him, even using him to campaign for the president last fall.
“It was the worst thing that ever happened in my professional life,” Mr. Rattner, who had taken off his trademark tortoise-rim glasses, said of the accusations and the settlement. “If you asked me, do I wish I had done some things differently about this whole situation, of course I wish I had done some things differently.” More on that in a moment, but he also has clearly worked unremittingly to move on. “Looking back, it was a bit like the half life of a radioactive isotope. Every few months the intensity of what happened seemed to go down by half,” Mr. Rattner added, as he sipped English Breakfast tea.
If there was a question about his current status — and whether the chattering classes had moved on — the guest list of his 60th birthday party this last summer, overlooking Rockefeller Center, may provide the answer: Mr. Bloomberg, Barry Diller, Jamie Dimon, Harvey Weinstein, Senator Charles E. Schumer, Ralph Lauren, Brian Roberts and Fred Wilpon, among others, were all in attendance.
When Vice President Biden held his holiday party in December, Mr. Rattner was there. And at the home of Hillary Clinton last month for her farewell party from the State Department, where Mr. Rattner’s wife, Maureen White, works, he was there, too. (His wife was the finance co-chairwoman of the Hillary Clinton for President campaign.)
In a city where powerful figures are dropped at the whiff of trouble — and rarely return to positions of significant influence despite efforts at comebacks — Mr. Rattner’s narrative of a meteoric rise to embarrassing scandal and back again is notable.
His re-emergence may also be a telling commentary about the way the nation’s elite flock to people with power — and those with powerful friends.
Some of his friends, many of whom declined to comment on the record, said they were willing to overlook his past transgressions because they felt he had paid for them, through the fines and the negative publicity. Others said that he had always been honest with them. Still, there are other friends who say they have distanced themselves from him but haven’t cut him off entirely for fear of alienating themselves from other people in his circle.
Mr. Diller, the chairman of IAC, counts himself among Mr. Rattner’s friends. “Whatever complications there were, I never thought he was culpable.” He added, “When you get anybody who is up there, then the takedown is going to have a pile-on effect. It is the nature of public life.”
That may be a truism. But at the time of the scandal, Mr. Cuomo used particularly pointed language: “Steve Rattner was willing to do whatever it took to get his hands on pension fund money including paying kickbacks, orchestrating a movie deal, and funneling campaign contributions.”
In the S.E.C.’s case, David Rosenfeld of the New York regional office said then that Mr. Rattner “delivered special favors and conducted sham transactions that corrupted the Retirement Fund’s investment process.”
Before we go any further, some disclosures are in order: It is well documented that Mr. Rattner is a longtime friend and confidant of the publisher of this newspaper, Arthur Sulzberger Jr. (Mr. Sulzberger was in attendance at Mr. Rattner’s birthday party, too.) Mr. Rattner was a reporter for The Times in the late 1970s and early 1980s. He also now writes a monthly Op-Ed column in The Times, arguably providing him with a powerful platform that increases his influence. I purposely haven’t discussed anything about Mr. Rattner with Mr. Sulzberger before writing this column. Now that that’s done, let’s continue.
Mr. Rattner’s re-emergence was not assured.
“There were some people inevitably who I thought were my friends who I found out were more fair weather and especially some in the political world,” he said. “I’m sure they said to themselves, let’s just keep a little space here and see what happens to Steve as opposed to let’s embrace Steve and say he’s my friend.”
One friend who never left was Mr. Bloomberg. When news of Mr. Cuomo’s case against him first broke, Mr. Rattner sent him an e-mail to give him a heads-up about the situation. Mr. Bloomberg’s reply? “The only thing wrong with you is your golf game.”
In an interview, Mr. Bloomberg said, “Steve is a good friend. You stick by your friends. And I don’t worry about what people say.” And despite all the chatter about Mr. Rattner, Mr. Bloomberg added, “I never heard anyone say they wouldn’t invite Steven Rattner to a party because of what was happening.”
The White House was less forgiving. While the Obama administration and Mr. Rattner portrayed his exit from Washington in July 2009 as a natural time to leave since his role helping G.M. through a government supported bankruptcy was finished, the president clearly made no effort to keep him, given the investigation hanging over him.
On the merits of the case that Mr. Rattner settled with Mr. Cuomo — which Mr. Rattner once described as “close to extortion” — he still has strong views. He and several other private equity firms, including the Carlyle Group, were accused of using Hank Morris, a political consultant, to help the firms obtain hundreds of millions of dollars to manage for the New York state pension fund.
Mr. Morris pleaded guilty to a felony count of violating the Martin Act for paying kickbacks and went to prison. Mr. Rattner was also accused of influencing a film distribution company that Quadrangle owned to secure a DVD distribution deal for a low-budget movie called “Chooch” that was produced by a pension fund official’s brother.
Mr. Rattner said: “I can’t imagine that any of the many firms that hired Hank Morris wouldn’t do that differently, given what he turned out to be. I appreciate clearly how important it is to avoid even the appearance of impropriety.”
Mr. Rattner and Mr. Cuomo chose to settle the case on what some lawyers described as benign terms given the penalty of a $26 million fine and a lifetime ban from the securities industry that Mr. Cuomo originally sought. Mr. Rattner settled for $10 million and a ban from working with New York State pension funds for five years, none of which has prevented him from continuing his role of managing Mr. Bloomberg’s money.
Unusually, Mr. Cuomo even agreed that Mr. Rattner’s settlement would include none of the usual language about admitting or denying wrongdoing, which allows Mr. Rattner to deny he ever broke the law. Mr. Rattner said he chose to settle the case, rather than fight what he said he expected to be a drawn-out court battle, because he wanted to move on with his life. He also paid $6.2 million to settle the S.E.C. case.
He clearly feels a sense of regret about some his actions, but declined to discuss the accusations in detail, citing the settlements.
A spokesman for Governor Cuomo declined to comment.
Mr. Rattner said he discovered a unique indicator to measure the impact of the scandal, which might just prove his theory that he should be compared with a radioactive isotope.
Right after the settlement, Mr. Rattner, who has long been active in political fund-raising for Democrats, said nobody would take his money. In fact, one politician, whom he declined to name, sent back a $500 donation from 2011. Several months later, he began to receive solicitations from politicians looking for his help in raising funds, he said. But does that say more about the state of Washington politics or Mr. Rattner?
Despite his past, the White House called him last fall and talked about his campaigning for the president in Ohio, where the auto bailout was an important issue. (Mr. Rattner published a book in September 2010 about his experience in trying to fix Detroit called “Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry.”)
David Axelrod, who was President Obama’s senior strategist for his re-election campaign, said in an e-mail of Mr. Rattner, “Whatever happened in New York didn’t obviate the great service he rendered.” He added: “Steve did an extraordinary job for the administration and the country in helping to shape the auto plan, which was a clear success.”
So will Mr. Rattner ever have a chance to work in government again? For years, his name was always part of the parlor game of potential nominees for Treasury secretary.
He had a quick answer about returning to Washington: “Probably not.” He said now that he had worked in the capital and lived in the glare of the spotlight, he better appreciates the upside and downside. He said: “I had a great experience, but I also found out how thankless and frustrating it can be.”
A version of this article appeared in print on 02/19/2013, on page B1 of the NewYork edition with the headline: A Reputation, Once Sullied, Acquires A New Shine.
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