Rattner in Limbo

rattner Rattner in LimboLast Friday, while Manhattan suffered through another desperately slushy storm, the 57-year-old financier Steven Rattner was holed up inside his family’s Westchester horse farm. There were no taxis to splash through icy curbside puddles. The snow fell from the pretty white sky.

It was bad. There are only two things that can happen after a hugely baroque Manhattan scandal: survival or ruin. But sometimes a New Yorker gets trapped in between, in the gooey limbo of semi-disgrace, which you wouldn’t wish on your worst enemy. Important chief executives ask aloud if the United States attorney general’s office, never mind New York’s, might be interested in having a chat with you. Over iced teas at midtown hotel bars, important publicists nudge reporters about around-the-corner indictments. Friends speak about you gently, and foes, voices even gentler, purr about your fate.

Almost one year ago to the day, Mr. Rattner triumphantly left Wall Street to become car czar in the Obama administration, then equally triumphant. Six months later, he was gone, and under the cloud of New York Attorney General Andrew Cuomo’s investigation into the putrid world of state-pension-fund money.

And there Mr. Rattner has sat since the summer, simmering in purgatory. When the news broke two weeks ago that Mayor Bloomberg was moving $5 billion away from Quadrangle, the enormous firm Mr. Rattner co-founded, tongues again clucked and mouths watered. Was the mayor, an old friend, quietly shuffling away from an oncoming train wreck? “I’ve heard from a zillion people, ‘Did you hear?’” a longtime friend who asked for anonymity said. “And everyone’s reaction is, ‘Oh, that’s a bad thing.’”

“Like any good businessman,” the billionaire politician John Catsimatidis said recently, “Bloomberg is limiting his exposure.”

But like with all great Manhattan stories, especially the ones involving billions of dollars, first reactions are often exceptionally wrong. Interviews with sources close to Mr. Rattner and the mayor, and with their peers at the top of the city’s political and finance circles, paint a much more interesting picture, one in which the financier might make it out of the long winter alive, maybe even with some dignity.

THE FIRST THING anyone says about Steve Rattner is that he is simply the most coolly focused and ambitious and intelligent man on the Upper East Side, which is why it is incredibly hard to fathom how he got tangled in such a vulgar mess. The S.E.C. has said that at the New York State pension fund, one of the most immense masses of assets anywhere in the world, more than half of the $9.5 billion put in alternative investments from 2003 to 2007 was stained by kickbacks.

‘He’s not one to say, “I’m taking my ball and going home! Fuck you all,” a friend said of Rattner.’

Hank Morris and David Loglisci, middlemen between the fund and the investors who wanted its business, were charged last March on 123 counts of larceny, corruption, fraud, bribery and money laundering. According to reports published a month later, not only did Mr. Rattner have his firm quietly pay Mr. Morris more than $1 million in exchange for a $100 million investment from the fund, but a Quadrangle affiliate paid $88,841 to acquire the DVD distribution rights to a slapstick comedy produced by Mr. Loglisci and his brothers. The film, Chooch, is about goofballs from Queens who get in trouble on a Mexican adventure.

Last year, New York banned middlemen, called placement agents, from helping private-equity firms directly connect with the pension money. “It is unacceptable that a placement agent have any influence in the investments of the state pension fund,” the governor said then. (David Paterson, of course, has his own dealings with Mr. Cuomo at the moment, but that’s another story.) Instead of leaving D.C. as a heroic savant who managed to entirely rebuild Chrysler and GM in mere months, even though he hadn’t been to Detroit in decades, Mr. Rattner slouched back home in July as the subject of an escalating investigation. “I think he had a sense that the whole thing was something foolish that had been blown up way out of proportion. In other words, he certainly didn’t feel that what had been done was right,” said New Yorker architecture critic Paul Goldberger, a longtime friend, “but it was a mistake that was being exploited.”