SEC Is Said to Seek to Bar Wall St. Financier

As it investigates a suspected kickback scheme in New York’s pension system, the Securities and Exchange Commission has been pushing to bar Steven L. Rattner, a prominent financier and former adviser to the Obama administration on the auto industry, from working in the securities industry for up to three years, according to three people told of the discussions.

Steven Rattner
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Steven Rattner

But Mr. Rattner has fiercely resisted the proposed penalty, setting up a face-off with the federal government, according to these people, who spoke on the condition of anonymity because the negotiations are intended to be confidential.

It would be the most severe penalty for any of the Wall Street executives ensnared in the wide-ranging pension investigation, and it would carry a significant stigma for Mr. Rattner, whose rise in high finance catapulted him to the top of New York’s social and political hierarchy.

The S.E.C. and the New York attorney general, Andrew M. Cuomo, have suggested that Mr. Rattner improperly paid off a political operative to win lucrative business from the New York state pension fund — in one case, by arranging to help distribute a low-budget film for the brother of a pension fund official.

Mr. Rattner’s former firm, Quadrangle Group, paid $12 million in fines to settle with state and federal officials in April, but Mr. Rattner was left out of that agreement because he would not accept the S.E.C.’s proposal that he be barred from working on Wall Street, people briefed on the case said.

Now, the S.E.C. must decide whether to pursue separate civil charges against Mr. Rattner or drop the case altogether.

The attorney’s general’s office is not involved in the S.E.C. talks: Mr. Rattner was granted immunity from criminal action by Mr. Cuomo’s office in return for his testimony before a grand jury, said a person briefed on the matter. That deal has complicated Mr. Cuomo’s case against Mr. Rattner.

But Mr. Rattner’s immunity hinges on whether his testimony was accurate. And he could still face civil penalties from the attorney general.

Spokesmen for the attorney general’s office and the S.E.C. declined to comment. A spokesman for Mr. Rattner also declined to comment.

The Rattner case stems from a four-year-old investigation into the conduct of aides to the former New York comptroller Alan G. Hevesi, who are accused of reaping millions of dollars from investment companies seeking to do business with the state.

Several private equity firms, including the Carlyle Group, have settled with the government, paying multimillion-dollar fines. But none of their executives were barred from the financial industry.

Even being barred temporarily would be a blow to Mr. Rattner’s career and could endanger several of his pursuits. He will soon publish a book about his experience trying to restructure the American auto industry, which was widely praised. And he is playing a vital role in creating an investment office for Mayor Michael R. Bloomberg of New York, which will oversee billions of dollars for the mayor’s ambitious new philanthropic foundation.

Under the proposed S.E.C. settlement, Mr. Rattner, 57, would most likely be barred from advising Mr. Bloomberg on his finances, people briefed on the matter said. A spokesman for the mayor declined to comment.

Mr. Rattner’s troubles could also prove embarrassing for some well-known Democratic politicians. He and his wife, Maureen White, have become influential donors, turning their sprawling Fifth Avenue apartment into something of a salon frequented by leading figures, including Hillary Rodham Clinton and Harold E. Ford Jr., the former Tennessee representative.

A former reporter for The New York Times, Mr. Rattner went to work on Wall Street in the early 1980s, making it to the boardroom of top firms like the investment bank Lazard . He specialized in advising media companies on strategy, and in 2000, started Quadrangle to invest in media companies. For several years, Quadrangle took on the task of managing the multibillion-dollar fortune of Mr. Bloomberg.

Quadrangle has acknowledged paying more than $1 million to Henry Morris, one of Mr. Hevesi’s associates, in exchange for his help securing a $100 million investment from the state’s pension system. Quadrangle, in turn, earned $5 million in fees for managing that money.

Mr. Cuomo’s office, in its settlement with Quadrangle, said that Mr. Rattner had arranged for those payments. Mr. Rattner’s lawyer has denied the attorney general’s “characterization of events.” Mr. Cuomo’s office said that no current employees of Quadrangle were involved in the scheme and that the company’s current executives were cooperating in the investigation.

Quadrangle has rebuked Mr. Rattner’s conduct in unusually harsh terms, calling it “inappropriate, wrong and unethical.”