Steven Rattner will leave as head of the U.S. autos task force, which oversaw bankruptcies at General Motors Corp and Chrysler Group, at a time when a probe into how the private equity firm he co-founded gained New York pension business has intensified.
In announcing Rattner’s resignation on Monday, Treasury Secretary Timothy Geithner said that the investor would be returning to private life and his family in New York. A source close to Rattner said he does not plan to rejoin his former firm, Quadrangle.
Rattner, a former journalist, made his name as a media banker and co-founder of media-focused private equity fund Quadrangle, and surprised Wall Street when he took the autos role in the government in February.
Quadrangle and Rattner have in recent months been linked to a corruption probe by New York’s attorney general, Andrew Cuomo, into the pensions industry.
A source familiar with the matter said that Cuomo’s investigation of Rattner has "intensified" in recent weeks.
"The attorney general’s office has been seeking additional documents from Quadrangle concerning the New York pension fund investments," the source said.
Rattner and Quadrangle have not been accused of wrongdoing.
The pensions scandal involved allegations that high powered political lobbyists were paid by private equity firms to pull in pension fund business from New York and other state pension funds.
The investigation has already led to the indictment of several of those involved, including Henry Morris, who was the former state comptroller’s top fund-raiser.
When the controversy broke in April, U.S. President Barack Obama stood by Rattner, saying he had not been accused of wrongdoing.
There was no indication from administration officials that the state pension probe was connected with Rattner’s departure from the task force.
Cuomo, a Democrat and possible gubernatorial candidate, has spent over two years investigating whether investment firms were buying access to the state’s pension fund by using paid agents. The U.S. Securities and Exchange Commission later joined his probe; so far, Cuomo has extracted two guilty pleas.
Rattner is the person identified only as a "senior executive" of Quadrangle Group in an SEC complaint against two former New York political officials and others, a source previously told Reuters.
Rattner was not available to comment and a Treasury spokeswoman declined to comment on whether the New York pension investigation was a factor in his decision to leave.
Treasury spokeswoman Meg Reilly said: "Steve’s decision to leave is the first step in a planned scaledown of the task force and there will of course be more departures in the future. It was always part of the plan to downsize once Chrysler and GM emerged from bankruptcy."
Ron Bloom, a senior member of the White House/Treasury Department task force and a former Wall Street executive and labor restructuring expert, will take over day-to-day responsibilities for Rattner, officials said.
An administration official, who was not authorized to speak for attribution, added that Rattner’s departure represents the start of a long-planned wind-down of the autos panel, which was formed in February to restructure GM and Chrysler.
Geithner said the government’s role would shift from restructuring the automakers to monitoring their businesses. He said taxpayers have a "much better chance" of recouping their investment in both companies now that restructuring has been completed.
"With the emergence of both General Motors and Chrysler from bankruptcy, we enter a new phase of the government’s unprecedented and temporary involvement in the automotive industry," Geithner said.
Last week, Rattner likened the post-bankruptcy operating strategy of the task force to that of an institutional investor that holds a large stake in a public company. It aims to look after the taxpayers’ investment without meddling in operations, exercising voting power to approve board members, but not other company decisions.
The government owns 60 percent of GM with a $50 billion stake and 8 percent of Chrysler/Fiat with more than $12 billion in taxpayer bailout funds.
Rattner also said that he hopes GM will be in a position to launch an initial public stock offering in the first half of next year for at least a portion of the government’s stake, returning the automaker to public stockholder ownership.
GM Chief Executive Officer Fritz Henderson credited Rattner’s financial expertise in helping turn around the company quickly, and said the automaker has "an excellent working relationship" with Bloom.
A Chrysler official had no immediate comment.