Mr. Rattner’s Quadrangle Group wasn’t beholden to any such strictures relating to the Bloomberg Family Foundation’s portfolio, and throughout 2008, the foundation made liberal use of the offshore loophole.
The bulk of the investments ended up in the Caymans. The Rattner team transferred more than $71 million dollars to Highfields Capital Ltd., the Caymans arm of a Boston-based hedge fund. (Last month, Highfields’ co-founder, Richard Grubman, was arrested after he allegedly beaned a Ritz Carlton valet with the keys of his BMW.) Another $67.8 million went to Brookside Cayman Ltd, the island home of Brookside Capital.
Other money decamped for even more exotic locales: $710,000 zipped to the tiny Grand Duchy of Luxembourg. Another $700,000 went to two funds on the island nation of Mauritius, about 500 miles east of Madagascar in the Indian Ocean. A Brazilian hedge fund got $304,000.
Mystique surrounds even some of the smaller foreign investments. In one, the mayor’s foundation transferred $104,000 in cash to a Cyprus-based oil services firm called Geotech Oil Services Holdings Ltd., controlled by a Russian oligarch named Nikolai Levitsky; Mr. Levitsky was once the first deputy governor of the resource-rich Komi Republic in Russia’s Northwest.
Reached by phone, Geotech spokesman Denis Cherednichenko said he had no idea if the Bloomberg Family Foundation had invested in the company, but seemed surprised. He speculated it could have been through another hedge fund. He said three American funds invested in Geotech in 2007.
In another transaction, Mr. Rattner’s team invested $560,000 of the mayor’s charitable fund in BJJ Universul, a Cyprus-based company that develops real estate in central Eastern Europe. According to its Web site, BJJ was established in Romania in 2004 and has more than 40 employees, split between Bucharest and Sofia, Bulgaria, and focused on “greenfield and redevelopment opportunities in Eastern Europe with a current focus on Romania and Bulgaria.”
Compared with those of the great foundations of America, the Bloomberg investment strategies stand out. “I’ve never seen anything like it. It’s about as opaque set of investments as you can find,” said Rick Cohen, who covers foundations and charities for Nonprofit Quarterly, and who agreed to review the foundation’s tax return. “This involves extensive investments in hedge funds offshore, where the motivation and purpose is not discernible, so you can’t tell what kind of activity it is or who is going to benefit from the investments.”
One former state official, however, defended the activity. “I don’t think there is anything unusual here,” said Bill Josephson, who headed the state’s Charities Bureau when Eliot Spitzer was attorney general, and examined the tax returns for The Observer.
“It is impossible to look at this and determine the intent of the hedge funds investments. You can’t figure it out from the 990 [tax form],” Mr. Josephson said. “The Bloomberg foundation is not that significantly different from the foundations of other individuals who come out of the investment world.”
The mayor announced some time ago that he would strip his funds from the Quadrangle Group, while allowing many of the Quadrangle managers who tended to his money to continue to do so at another firm. Quadrangle continues to manage about $100 million in New York City pension funds, according to the comptroller’s office.
As for the increasingly isolated Mr. Rattner, who remains under investigation, the mayor stands by him. “He’s a friend whose advice the mayor has, and continues to, rely on,” said a Bloomberg spokesman. Mr. Rattner declined to comment.
While almost nothing is known about the foundation’s investments since 2008, Mr. Bloomberg is now preparing to burnish his place in the annals of philanthropy. What exactly that means is not yet public.
Research support for this article was provided by the Investigative Fund of the Nation Institute.