The former car czar and private equity boss today agreed to pay $10 million in restitution to the State of New York, for his role in the state’s public pension kickback scandal. He also has agreed to refrain from “appearing in any capacity” before any New York pension fund for the next five years.

This follows Rattner’s earlier deal with the SEC, under which he agreed to repay $6.2 million and agree to a two-year ban from the securities industry.

In an official statement, Rattner said:

“I am pleased to have reached a settlement with the New York Attorney General’s Office, which allows me to put this matter behind me. I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult. I respect the work of the Attorney General and his staff to ensure that the New York State Common Retirement Fund operates properly and in the best interests of New Yorkers.”

That’s a far cry from what Rattner said just last month:

While settling with the S.E.C. begins the process of putting this matter behind me, I will not be bullied simply because the attorney general’s office prefers political considerations instead of a reasoned assessment of the facts.

This episode is the first time during 35 years in business that anyone has questioned my ethics or integrity — and I certainly did not violate the Martin Act. That’s why I intend to clear my name by defending myself vigorously against this politically motivated lawsuit.

For the uninitiated, Rattner’s restitution is based on his time as a co-founding partner of Quadrangle Group, a New York-based private equity firm that invested in media, communications and information services companies. Here’s the rundown, based on legal filings (note, I’m cribbing what follows from earlier posts, because nothing in the settlement appears to alter the underlying allegations):

• Rattner secured a video distribution deal for the brother of New York pension fund CIO David Loglisci, via a (now defunct) Quadrangle portfolio company. The deal was done over the initial objections of portfolio company management. Not only does this indicate pay-to-play, it also would seem to mean that Rattner violated his fiduciary obligations to Quadrangle limited partners (not letter of obligations, but spirit).
• Rattner also helped connect Logiscli’s brother with people at film channel IFC, in which Quadrangle was an investor.
• Presumably at Loglisci’s suggestion, Rattner secretly hired Hank Morris as a “placement agent,” in order to secure a $100 million fund commitment for Quadrangle from the New York State Common Retirement Fund (it was later increased to $150m). This came after Quadrangle’s legitimate placement agents had only been able to secure between $25 million and $50 million. Morris got Quadrangle the money without ever setting up or attending any meetings with CRF on Quadrangle’s behalf.
• Morris also helped get Quadrangle $75 million from New York City pension systems, via a third-party who since has pled guilty to securities fraud.
• One of Loglisci’s brothers put Rattner in touch with potential investors on the West Coast. These included Elliott Broidy, who sat on the board of the Los Angeles Fire & Police Pension Fund. LAFPPF committed $10 million to Quadrangle, and Broidy has since pled guilty to felony charges of rewarding official misconduct.
• In 2006, Morris allegedly asked Rattner for a contribution to the reelection campaign of State Comptroller Alan Hevesi (Loglisci’s boss, who last week pled guity to fraud). Rattner demurred, saying that he had a policy against making contributions to public officials with oversight over investments, Morris suggested that Rattner contribute the money via a third party. Soon after, Rattner tapped a Democratic donor who subsequently contributed approximately $25k to Hevesi (plus another $25k from the donor’s wife). That donor was not identified in court documents, but appears to have been Haim Saban. A source tells me that Saban was unaware of Rattner’s backroom shenanigans.

A few final thoughts on this story:

1. This could have been FAR worse for Rattner, and perhaps would have been were Cuomo not leaving the AG’s office in just two days. Cuomo originally sought restitution of between $18 million and $20 million in private, and then bumped it up to $26 million in a pair of lawsuits (both dropped today, as part of the settlement). He also had precedent on his side, based on the $20 million shelled out by Riverstone Group founder David Leuschen, for other activities related to Hank Morris, New York pensions and the aforementioned film (a horrendous piece of dreck called “Chooch”). Finally, Cuomo also was seeking a lifetime securities industry ban.

Not only did Rattner get off relatively cheaply — and never face possible criminal charges — but he even got a bit of a PR boon by settling on a day when half of the world is on vacation (or still stuck at an airport, as the case may be).

2. On the other hand, the timing makes a bad week even worse for Mike Bloomberg. Hizzoner used to employ Rattner as his personal money manager, via a Quadrangle wealth management group, and still sort of does (the Quadrangle unit broke off into a new group with which Rattner is affiliated).

When asked about Rattner over the summer, Bloomberg said:  “I don’t think [Rattner] did anything wrong… I happen to think the charge against him is ridiculous… I’ve always stood up for anybody that works with me who gets attacked by the press.” He has since stuck by his friend, refusing to cut ties with someone who has tacitly admitted to public corruption in Bloomberg’s own state.

3. We’ve seen private equity kickback scandals in a variety of state pension systems, including California and New Mexico, but the New York affair was enabled by a sole fiduciary structure. It’s not coincidence that the only other state with such a structure, Connecticut, was rocked by a similar scandal that ended up with its treasurer in prison. A bill was proposed last year to drop the single fiduciary in favor of a board structure, but went nowhere. It’s almost as if New York legislators are begging for its public pensioners to again be defrauded.

4. Now that this is settled, here’s hoping that Rattner will sit down to speak about the situation with an informed interviewer who sdoesn’t mind asking hard questions. No, not you Charlie Rose. I’ll officially throw my hat in the ring, but won’t hold my breath…