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Why Isn't Steve Rattner Facing Criminal Charges?

Disgraced financier Steve Rattner and his defenders have been energetically arguing that New York State Attorney General Andrew Cuomo is going overboard in his campaign against Rattner -- with a new effort seeking at least $26 million from Rattner and to ban him for life from the securities industry. As reported recently:

Attorney General Andrew Cuomo "has been trashing my reputation for a year and a half," Mr. Rattner said Monday in an interview with The Wall Street Journal. "There was a line," he said, speaking of actions he took while trying to secure business from the fund. "I felt I was well on the right side of that line."

If I were Steve Rattner, I'd pay the $26 million and count my blessings. Indeed, what I don't understand is why Cuomo is going so easy on Rattner? Why isn't the financier facing criminal charges and possible prison time for actions that appear to have been brazenly illegal? The most recent press release from Cuomo's office offers new details of Rattner's kickbacks to influence investment decisions by the New York State Comptroller:

The series of kickbacks paid or arranged by Rattner include the following:

  • Rattner paid over $1 million in sham placement fees to Henry “Hank” Morris, then-Comptroller Alan Hevesi’s paid political adviser and campaign manager.
  • Though Morris provided no legitimate placement services, Rattner paid these fees in order to influence Hevesi’s and then-Chief Investment Officer David Loglisci’s decision to make investments totaling $150 million in Quadrangle Capital Partners II (“QCPII”), a private equity fund.
  • At Morris’s request, Rattner arranged a DVD distribution deal for a movie, “Chooch,” produced by Loglisci’s brother, through a Quadrangle portfolio company. Though it was not originally interested in “Chooch,” the portfolio company eventually entered into a distribution deal with Loglisci’s brother, after Rattner had instructed the company’s CEO to reconsider the film, because David Loglisci was important to Quadrangle.
  • Rattner also connected Loglisci’s brother to various people at a film channel company, IFC, in which Quadrangle was an investor and on whose board Rattner sat at the time.
  • At Morris’s request and in order to influence Hevesi, Rattner arranged for third-party contributions totaling $50,000 to Hevesi’s re-election campaign. Shortly thereafter, the CRF increased its total investment in QCPII from $100 million to $150 million. Rattner ensured that the contributions were made through third-parties in order to conceal his role and to ensure his name did not appear on public donor records.

The press release says: “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,” said Attorney General Cuomo. “Through these lawsuits, we will recover his ill gotten gains and hold Rattner accountable.”

Cumo's investigation into what his office calls a "criminal scheme" has ressulted in seven guilty pleas, including some with prison time attached. And Cuomo has also called what Rattner did "fraud." A Cuomo spokesman recently added that Rattner's behavior was "the most egregious of all the actions in the New York 'pay to play' scam. He effectively stole from the taxpayers, defrauded the state pension fund and then lied to this office about it."

And yet there is no talk of criminal charges for Rattner or prison time.

My guess is that Cuomo's office is doing what Spitzer's office did before him: get the best deals they can without ever having to go trial against wealthy defendants who will fight them for years and may possibly prevail because of superior resources and the complexity of these cases.

In other words, Steve Rattner is getting off lightly here. 

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