Rattner, Judged by His Peers

For most of the country, news of the involvement of Barack Obama's recently named car czar in an alleged pay-to-play scandal has merely been surprising.

For New York's Democratic fund-raisers and bundlers, it was the day their rarified world fell off its axis.

"We are stunned," said one prominent Democratic donor.

Steven Rattner, the appointee in question, is not just any government bureaucrat. He is about as lofty a star as there is in the New York—and, therefore, national—Democratic fund-raising firmament.

For years, he has been among the top half-dozen names on every Democratic candidate's wish list. His apparent connection to the corruption and graft alleged by the New York attorney general's office—despite the fact that he is not alleged to have committed any crime, and is not a target of Andrew Cuomo's investigation—has astonished the inhabitants of the nation's most powerful fund-raising corridors.

As part of a successful attempt to win a lucrative contract to invest money for the state pension fund, Rattner reportedly paid a finder's fee to Democratic operative Hank Morris, a close ally of the former comptroller who is now facing a 123-count criminal indictment for "enterprise corruption" for selling access to the state's pension fund. (He has denied the charges.) Rattner also had an affiliate company invest in a low-budget comedy film made by the brother of the deputy comptroller who controlled the fund.

It may well be the way this sort of business is frequently done-it's not unheard of, or illegal, to pay multiple finder's fees on spec, and facilitating a private investment in a relative's movie project isn't a particularly extravagant means, in the grand scheme of things, of currying favor with a potential investor.

But it's not pretty.

"I was shocked when I read about it in The Wall Street Journal," said John Catsimatidis, who, like Rattner, bundled donations for Clinton. "He always seemed like a very nice guy, a smart guy and I don't know how he can get himself tied up in crap like this."

A former New York Times business reporter who left journalism to make millions as a financier, Rattner married Maureen White, a Democratic activist whose deep pockets, engaging personality and elegant looks made her the city's donor princess. Together, Rattner, a successful investor, and White, the eventual finance chair of the Democratic National Committee, were uber-brokers during the Clinton administration, holding court, and high dollar fund-raising events, at their palatial Fifth Avenue apartment. It was the preferred stomping ground and dinner destination (hors d'oeuvres specialty: caramelized bacon) for Bill and Hillary Clinton, John Kerry, Howard Dean, Chuck Schumer and just about any national politician seeking entree to the bundlers who could provide the means to run a first-tier national campaign.

In the epic 2008 Democratic primary, Rattner's penthouse became a key forum, where supporters of Obama and Hillary got into shouting matches over superdelegates. When the primary was over, and Rattner's candidate, Clinton, was defeated, he seamlessly transitioned over to the Obama camp, even as other Clinton bundlers recoiled from the prospect of outer-ring access.

Among donors, there was a consensus that Rattner, a highly talented investor and financial expert, wanted to go to Washington, which, after some hiccups, he did, when Obama appointed him as the administration's point man to fix the ailing automobile industry.

For the time being, the Obama administration has forcefully articulated its support for Rattner, arguing that he has done nothing illegal and noting that he alerted them to the investigation during his vetting process.

But the opinions among New York's top-flight donors since Rattner's name started popping up in stories alongside the likes of backroom fixers like former New York State Liberal Party boss Ray Harding—he was actually perp-walked last week after being indicted for his role in the pension-fund scheme—have been varied.

Rattner's backers defend him as a politically idealistic star of the finance world who has sacrificed the comforts of the private sector for a chance to affect the greater good.

"Steve Rattner and Maureen White are role models as public servants and personal inspirations," said Robert Zimmerman, a public-relations executive and leading Democratic fund-raiser. "Our nation is very fortunate that Steve is prepared to make the sacrifices he's making to be in government service."

But Rattner's ambition to rise to the ranks of the Treasury Department, and his unseemly courtship of the state comptrollers' office, has also led to some mild schadenfreude.

One major fund-raiser who is not unsympathetic to Rattner said that there is some "snickering" by donors over his current predicament, which, even if it doesn't affect him in his current capacity, will not be helpful to his chances of eventually moving up into a more prominent role in the administration, perhaps at Treasury.

According to reports in The Wall Street Journal and elsewhere, Rattner met with the brother of David Loglisci, the deputy comptroller in charge of New York State's $122 billion pension fund, to discuss the acquisition of the DVD rights to a low-budget movie called Chooch, which starred John Sialiano (a.k.a. Goumba Johnny, the WKTU radio host and star of Bocce Balls) Carmine Famiglietti (producer of From Woodside, Queens and actor in Bagelized) and Anthony Barrile (childhood friend of Ben Stiller and actor in Kiss Me, Guido).

Under ordinary circumstances, it would not have been the sort of investment—both because of its small scale and obviously modest prospects—that Rattner would have been inclined to pursue personally. But the important thing about Chooch, as far as Rattner's involvement is concerned, is that it was produced by Loglisci and his brothers. 

Through an affiliate called GT Brands, Quadrangle agreed to pay $89,000 for the rights to Chooch. (GT Brands, which was a vehicle for investments in entertainment projects, subsequently went south.) A few weeks after the deal, Loglisci informed Rattner that Quadrangle would be receiving a $100 million from the investment fund. Rattner then paid $1.1 million to Morris, the former political consultant to Alan Hevesi, who as a so-called "placement agent," facilitated the agreement.

"Steven is an extraordinarily bright and careful and diligent guy," said one private equity investor, who expressed disbelief that Rattner made a deal "that smacked of a quid pro quo" to distribute the movie.

"It is very clear to me that that was a foolish move on Steve's part," the investor said. "One, he should never have had the discussion himself, two, he should never have made that connection because it obviously raises a question and there is an odor there."

Rattner, Judged by His Peers