Last 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.”
Still, even after the news broke about Mr. Bloomberg’s reshuffled $5 billion, Mr. Rattner has not been seen skulking around with furrowed brows. His demeanor is unimpeachable. “Steve is irrepressible, Steve is disciplined, Steve doesn’t run around and say he’s depressed, quite the opposite,” the friend who spoke anonymously said. “But it’s pretty clear that what he hoped would be a trajectory into even greater prominence in public affairs has hit a wall.”
“All I can say is, Steve told me everything’s going to work out O.K.,” said another friend, Steven R. Weisman, The Times’ former chief international economics correspondent. “He seems as untroubled as can be about it.”
In August, New York magazine profiled his comedown from Washington, although by October, he was publishing a first-person piece in Fortune, one that ends with a tourist who is snapping photos of Alexander Hamilton’s statue stopping to thank him and his team.
Late last year, he got a contract to write a book called Overhaul, essentially an expansion of that piece. Working on the book is taking longer than he’d assumed it would. Actually, he’s found it unbelievably hard. “He’s just holed up on a book deadline,” said Mark Green, the former New York City public advocate, who has exchanged emails about business and writing with the financier recently. “Unless you’re Stephen King, writing books is a bear. It’s just really hard work. And he hasn’t done it before.”
Only a quarter of the book, or maybe a bit more, has been written. It is due to be released this fall.
Mr. Rattner has shuttled between a midtown office, the horse farm and an apartment he and his wife have in the Fifth Avenue co-op building that McKim, Mead & White designed for Jacqueline Onassis’ grandfather. It was delivered back then with 6-foot-wide refrigerators and nine fresh coats of paint.
Early last decade, back when Mr. Rattner’s wife was the finance chair of the Democratic National Committee, Michael Wolff based a piece around the stratospheric oomph of a book party there. It was illustrated with Mr. Rattner as Superman, bursting fist first through a page of The New York Times, which is where he worked as a journalist in the 1970s. He left for Lehman and Morgan Stanley in the early ’80s, before anyone did that sort of thing; became a deputy CEO at Lazard Frères in the ’90s; and started Quadrangle at the turn of the century.
WHEN THE NEWS BROKE on Feb. 20 that the mayor would be moving billions away from Quadrangle, the Daily News put Mr. Rattner’s pension-fund investigation in its lead. The Post called it “a humiliating blow” to the firm he co-founded. “People were speculating,” said someone who knows the investor from New York City political circles, describing guests at a recent Upper East Side dinner. “Was the mayor distancing himself from Rattner? Was it a put-down?”
“It’s actually the opposite,” a source close to the investor said. “He’s moving towards Steve.”
Here’s how the thinking goes: The mayor had brought his billions to Quadrangle in the first place only because of his relationship with Mr. Rattner, an old friend and fund-raiser. (The private-equity firm does no other asset management work.) And not only has Mr. Rattner been gone from the firm for a full year now, but there doesn’t seem to be any love lost between the man and the firm he left during a very fraught era.
“Steve was not going to have a formal role with the company,” said a source familiar with Quadrangle. “It was not going to happen. One of the outcomes of this arrangement is, it does make it possible for the mayor to get Steve involved in a more direct way.”
Indeed, a person familiar with the mayor’s thinking confirmed that Mr. Rattner is working on the upcoming transition, moving the team that he helped put together for Mr. Bloomberg into an independent firm that works only on managing his money and his foundation’s. Anything beyond that hasn’t been settled yet, the source said, but that “it’s certainly true he’s not moving away from Steve.”
What if, at long last, there are real stirrings from investigators? “I don’t see that anything that’s happening is going to come between them, in my personal opinion,” said Thomas H. Lee, the private-equity pioneer. Spokespeople for the New York State attorney general’s office and the S.E.C. wouldn’t comment, and a call to the U.S. attorney general’s office wasn’t returned. Neither Mr. Rattner nor his old firm has been charged with wrongdoing.
Friends of his like to point out that the giant private-equity firm Carlyle Group, which was essentially accused of paying a much bigger fee to Mr. Morris, about $10 million, was allowed to settle with Mr. Cuomo last May for $20 million. And that firm’s decorated chief, David M. Rubenstein, still gets to speak at Davos and sit on the boards of the Kennedy Center and the Council on Foreign Relations.
Then again, Mr. Rattner was said to be personally involved with Mr. Morris and the pension-fund money.
For now, he wafts in limbo. “His greatest strength always has been a rock-hard realism. He knows that a lot of stuff happens and you deal with it,” Mr. Goldberger said. “He’s not one to say, ‘I’m taking my ball and going home! Fuck you all.’”
“Do I know how bad it is inside his head? No, I don’t,” the anonymous friend said, “Am I convinced personally that it’s bad? Yes.”