Steven Rattner and the art of the comeback
By Geraldine Fabrikant
The opinions expressed are her own.
Last spring, several months after Steven Rattner, a cofounder of the private equity firm Quadrangle Partners, settled separate charges totaling $16.2 million that related to a kickback scheme involving New York state pension funds, he hosted a dinner at his sprawling upper east side co-op overlooking New York’s Central Park.
Always an avid courtier of the media, among the guests that night were Charlie Rose, Financial Times U.S. managing editor Gillian Tett, journalists Alexis Gelber and Mark Whitaker and literary agent Amanda Urban as well as Rattner’s friend and champion Mayor Michael Bloomberg.
The dinner came in the wake of his very public battles with former attorney general Andrew Cuomo; a settlement with the government; a series of negative stories in the press; and an ongoing battle with Quadrangle Group, the firm he helped to found. Among other issues, Rattner charged that Quadrangle had held seized money that was owed to him when he left the firm to work as the car czar. Neither Mr. Rattner nor Quadrangle would comment for the story. The case is currently in arbitration (see editor’s note below)
litigation. In April 2010 when Quadrangle settled with the Attorney General’s office over the case of attracting pension fund money, it said that Rattner conduct was “inappropriate, wrong and unethical.” But that battle seemed well in the past to one attendee the evening who said the dinner felt like a coming out party reflecting Rattner’s determination to put the past behind him. It was business as usual, or as one guest recalled it: “the typical Upper East Side dinner party,” filled as it was with brand-name power brokers.
How exactly does one come back from being publicly dragged through the mud? Why do some from the land of the formerly disgraced manage to launder their reputations, while others disappear? Part of the answer is that you’ve got to work at it, and–with the possible exception of Michael Milken, the disgraced junk bond guru, or Eliot Spitzer, the former governor who resigned in the wake of a prostitution scandal—few have worked as assiduously as Rattner has to put themselves back in the limelight. He asked to write for both the New York Times and the Financial Times and actively promoted his book “Overhaul” chronicling his role in bailing out the auto companies.
By many measures, he is succeeding. Rattner, 59, now contributes regularly to both publications . He is frequently on MSNBC’s Morning Joe and has appeared on The Charlie Rose show and other TV programs. But most important, he is involved in managing the fortune of Mayor Michael Bloomberg. Last year it was reported that the Mayor had shifted about $5 billion of assets that were being managed by Quadrangle to a group of former Quadrangle employees led by Alice Ruth who formed Willett Advisors. Mr. Rattner works actively with that team. Forbes this year estimated the Mayor’s total net worth at $19.5 billion.
It is in part the Mayor’s endorsement that assures Rattner access to the top echelons in the city. “When one of the richest men in the country is your friend and you are working for him, it helps a great deal,’’ said one top Manhattan power broker, who did not want to be quoted publicly speaking about the Mayor or Rattner.
Rattner also remains close to Brian Roberts, whose Comcast Corporation owns CNBC and MSNBC. He has been sighted dining with Mayor Bloomberg and attending the wedding of Benjamin Tisch, grandson of the late billionaire Laurence Tisch. He is also a longtime friend of New York Times publisher Arthur Sulzberger Jr. And some of those high level players who might have missed him in restaurants or opining in the media, can read his opinions on his website or in the emails he regularly sends out to a panoply of power brokers.
Meanwhile the media does not allude to his settlements in his bio when he writes or appears on TV. The New York Times identifies him by saying he was a counselor to the Treasury secretary and lead auto advisor and a longtime Wall Street executive. Asked why the government settlement is not mentioned, a spokeswoman said that the paper was comfortable with the level of attribution. She said that Rattner has approached the paper about “getting op-ed pieces on an ongoing basis. “He has a journalistic background, great connections and very good ideas, so we agreed. Thus far we are very pleased,” she said.
The Financial Times says only that Rattner writes a monthly column. An FT spokeswoman said that the paper had covered the story and does not feel it is “unfamiliar territory to its readers,” she said. She added that Rattner’s experience in both the public and private sector gives him a unique perspective.
Yet when Rattner was at Quadrangle, the firm paid an advisor to help win pension fund business. Both the advisor, Hank Morris and the ex-controller Alan Hevesi, went to jail. Court filings also allege that Rattner had arranged for the distribution of a film made by the brother of the fund’s chief investment officer. Rattner settled with both the SEC and the attorney general without admitting wrongdoing.
As a result of the settlement Rattner cannot appear before a New York state pension fund for another four years. At the time of the settlement he was not allowed to be paid for his work at Willett Advisors, although that ban has since been lifted.
For now, Rattner has landed on his feet, working for Mayor Bloomberg. But his history on Wall Street has not been without some particularly ugly battles. Not only is he still fighting with Quadrangle but during his years at Lazard, Rattner and high profile banker Felix Rohaytan clashed. Ultimately Rattner and several associates left to form Quadrangle.
As to his writing, Rattner is not without critics. Some journalists at both the New York Times and the Financial Times believe that Rattner should not be permitted to write for them after his controversies with the government. And the columns themselves get some negative reviews. Bruce Greenwald, a professor of finance at Columbia University Business School finds that they offer nothing new. “They are mostly tired conventional wisdom,” he said.
Steven Mintz, a professor who writes the blog “Ethics Sage” argues that at the least, the media should have waited for a cooling off period during which Mr. Rattner could resurrect his name with positive contributions to society. “The inescapable conclusion is that he did pay off a political advisor,’’Professor Mintz said.” The question must be asked: why should the public trust anything he says?”
But Henry Blodget, the former internet analyst who runs the Business Insider website said that not to publish Rattner’s writing would be like saying that he is guilty.
Still, there might yet be some parts of Rattner’s past beyond his reach. As counselor to the U.S. Treasury secretary and lead auto advisor, Rattner and the auto task force worked to salvage General Motors and Chrysler. While that effort was widely hailed as a success, another government appointment, several veteran political players say, would be difficult if it required Congressional approval.
Blodget believes that even though Rattner settled and paid $16.2 million, he is using the right long term strategy to forge a comeback. (In 2003 Blodget himself was banned from the securities business and paid a $2 million fine after being charges with civil securities fraud by the SEC.) “He was right not to fight for years in the court system,’’ Blodget said. “From the point of view of someone who was accused of that, it is painful to settle because people take it as a sign that you are guilty. But the truth is that as any lawyer will tell you, of the many bad alternatives, biting the bullet is the best thing to do,’’ said Blodget.
Not all of the fallen choose such a public rehabilitation. Consider Jack Grubman, the former telecommunications analyst at Salomon Smith Barney, who now runs The MacGee Group, a consulting firm. Grubman was banned from the securities industry eight years ago, after the Securities and Exchange Commission found that he has issued research reports that misled investors. His reputation was severely damaged as well when it was found that he upgraded AT&T, a company on which he had been publicly negative, and that soon afterward Salomon benefited in fees from an offering of shares in its subsidiary. In addition, he bragged in an e-mail that, in return for the upgrade, Sanford Weil, then Chairman of Citigroup, helped get Mr. Grubman’s daughters into school at the 92nd Street Y. Grubman has received next to no publicity since and did not return a call seeking comment.
Sometimes it helps to get into another line of business. In the 1980s Michael Milken, then at Drexel Burnham Lambert, plead guilty to securities law violations. Since serving nearly two years in prison and paying $600 million in fines, Mr. Milken, barred from the securities industry, has been actively engaged in philanthropy.
When he assumed the auto czar role, Rattner had to resign from boards on which he served. Presumably he will resume that role, and he has a fortune, estimated to be at least several-hundred million dollars, at his disposal and will possibly use some of that money for philanthropy. As to whether he hankers for another post in government, he can always argue that once was enough and he does not want it anyway. The way things have been going for him lately, he may not need it.
PHOTO: Steven Rattner, Former Head of U.S. Treasury Department’s Auto Task Force, speaks at the Council on Foreign Relations in New York, November 19, 2009. REUTERS/Brendan McDermid
Editor’s note: This column originally said that the case between Rattner and the Quadrangle Group is in litigation; it is in arbitration.