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April 23, 2009

Obama's Car Czar's 'pay-to-play' scheme

Ethel C. Fenig
Car czar Steve Rattner's problems are worsening. His former firm, Quadrangle, is involved in a pension scandal involving New York state retirement funds. But now the problem seems to be metastatizing.

The problem involves the game of pay-to-play, a common custom back here in Chicago that our President seems to be unfazed by, as Ben Smith of Politico explains:

The problems of the auto czar, who paid fees to a political consultant arrested for pension fund corruption in New York State, seem to be getting worse, not better. The Wall Street Journal reports that the New York City Comptroller is now looking into Rattner's firm, Quadrangle. And the Times has more.

But the reminder of this story -- like the Daschle story -- concerns the investment professionals who spend their time raising money and doing favors for politicians. There's often an assumption that upstanding local tycoons who support, particularly, Democratic politicians whose tax policies would be against their obvious interest are acting out of a kind of noblesse oblige, and demonstrating public spirit.

That may be true, but it doesn't mean there's not an enormous amount of money -- by any standard -- to be made by being friends with pols, particularly the ones who control state workers' retirement money.

The Wall Street Journal weights in today with an editorial:

The New York City comptroller said Tuesday it is conducting an internal investigation into whether private-equity firm Quadrangle Group "intentionally misled or deceived" the city pension funds by failing to disclose paying finder fees to the firm of the now-indicted political adviser Hank Morris, a comptroller spokesman said.

Quadrangle paid fees to Mr. Morris's former employer, Searle & Co., in 2005 for an $85 million investment in the New York City Pension Funds, according to a lawyer for Searle.

But in disclosures to the pension fund, Quadrangle didn't mention retaining or paying fees to Searle, according to a spokesman for the New York City comptroller, William Thompson, who oversees the fund. Rather, Quadrangle told the pension fund it used two other placement agents -- companies that help investment firms secure business from pensions, endowments and foundations.

A spokesman for Rattner's company said: "This came as a complete surprise." I'll bet it did. 

What came as a complete surprise? That someone caught them dealing with Morris? If they disclosed a relationship with two other placement agents, what stopped them from being competent enough to do the same with Morris? This was a huge investment and they did not bother to get their facts straight and run their business competently? How does that fit with the responsibilities given to a former journalist to be the auto czar?

Let's not forget the unfolding pay to play scandal also involved New Mexico and Bill Richardson, who at least had the courtesy (unlike Rattner) to "bow out" of assuming a position in the Obama administration, Now it apears that New Mexicos's Democratic Senator Jeff Bingaman may be involved as this New York Times article by Louise Story explains:

Mr. Rattner, a major Democratic fund-raiser, has social and political connections. Mr. Rattner headed much of Quadrangle's effort to raise money from pension funds in 2005, when the firm attracted money from the New York fund and others.

Mr. Rattner forged close personal ties in New Mexico, which invested $20 million in Quadrangle. He met with Senator Jeff Bingaman, a Democrat from that state, on at least one occasion, according to a person with knowledge of the meeting. From about 2004 until early this year, Quadrangle also employed the senator's son as an associate.

A spokeswoman for Senator Bingaman said that the senator's son did not raise money for Quadrangle, but instead helped make investments. Senator Bingaman was not involved in the pension process, she said.


Uh...huh. Now we all know how politics works, exchanging favors while social ties lubricate the process - particularly when the politicians share party affiliation. Does anyone think Bingaman's son landed a job at the prestigious Quadrangle fund based on his scholastic accomplishments and work experience? It's possible, though did he have to go through the rigorous process that most new hires have to go through when they land a plum job at one of these Wall Street firms that President Obama has previously demonized? That's before hiring one of the demons - someone well connected at the New York Times - to be his car czar.

Or is it just possible that Bingaman's son was hired as a favor to Senator Bingaman who then weighed in with Governor Richardson - also a Democrat - to steer New Mexico pension business to the very firm that just hired his son? After all, then the Senator would owe Richardson one - perhaps the trade would be completed by a nice slab of pork tossed Richardson's way by Bingaman?

At least one water-carrying columnist at the Washington Post - David Broder - seems to be unfazed by this scandal as well as the various Cabinet appointments that were dropped (and one that was not)  when tax and influence peddling problems arose. Then there were the serial examples of amateurish communication problems I detailed here in AT yesterday.

Broder thinks that Obama's performance so far has been a "A Bravura Opening"

 And people wonder why the media is held in such low esteem in America. 

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