Steve Rattner’s Book, Overhaul: the Cuomo and Schumer Revelations


Steve Rattner, the financier and Democratic fundraiser who served in 2009 as President Obama’s car czar, takes some guarded shots at New York’s political elite in his yet-to-be-released book, Overhaul.

He paints himself as a victim in the ongoing Securities & Exchange Commission investigation of his role in the New York State pension fund case, even suggesting that his public service as head of the Treasury Department’s auto-industry task force intensified law enforcement interest in him. “Now that I was in the national spotlight,” Rattner writes, “New York Attorney General Andrew Cuomo and other state officials pressed the inquiry further. My daily chores suddenly included late-night conference calls with lawyers and former Quadrangle colleagues as we attempted to make our case to the authorities and the press. During my many years in business, I had certainly been criticized, but I had never before had no integrity questioned. Nothing in my entire professional life had been as painful as that episode.”

What drove the press “crazy,” leading it to cast “my conduct in the worst possible light,” says Rattner, was the release of an April 15, 2009 amendment to an SEC complaint detailing his involvement in the 2005 pension scam. According to the complaint, Rattner’s firm, Quadrangle, paid a $1.1 million fee to Hank Morris, who had been indicted by Cuomo a month before the SEC amended complaint, to secure $100 million in fund assets. Morris was the top political advisor to Alan Hevesi, the then state comptroller. Rattner also brokered a distribution deal for a failed movie produced by the brother of Hevesi’s fund manager, David Loglisci. Rattner’s “not accused of any wrongdoing,” Obama press secretary Robert Gibbs claimed in response to the SEC complaint. But Rattner noted in his book: “Even that didn’t help. I continued to be deluged with questions.”

Though Rattner recounts events as late as August 2010 in the book, he makes no mention of the fact that his partners at Quadrangle issued a statement this April “wholly disavowing” Rattner’s conduct, which the firm called “unethical” and “wrong” (one partner, Josh Steiner, actually served on the Obama transition team and recruited Rattner for the auto rescue job). Nor does Rattner mention or attempt to rebut a Times story in June that says Cuomo granted Rattner immunity in the probe but that the SEC is now seeking to bar him from the securities business for three years.

Rattner’s second reference to Cuomo comes almost a hundred pages after the first, when Rattner’s “Team Auto” closed the deals with both Chrysler and GM in July 2009. Rattner says “the pay-to-play controversy in which I was involved had shown no signs of going away,” using the term “controversy” to describe a probe that had by then resulted in multiple indictments and guilty pleas, as well as Quadrangle’s agreement to pay a $12 million fine to settle its end of the case with Cuomo and SEC, both of which were still pursuing Rattner himself. “Instead” of going away, Rattner wrote, “it was intensifying, as New York Attorney General Andrew Cuomo decided to dig more deeply and other jurisdictions began their own examinations.” He does not specify what these “other jurisdictions” are, though this does not appear to be a reference to the SEC alone, since he’d already cited its involvement. The two Cuomo references leave the reader with the impression that Rattner believes the AG was unfairly targeting him.

“I contemplated other assignments within Treasury or the broader administration,” Rattner says, apparently still oblivious to how his reported conduct was widely viewed, “but in conversation with Mark Patterson,” who was Tim Geithner’s chief of staff, “it became clear that that would not be appropriate given the ongoing inquiries.” Shortly after Rattner’s return from Detroit, “Mark and I agreed that I would leave Treasury at the end of July.” Rattner is implicitly conceding that the Cuomo/SEC probe drove him out of public life.

While Rattner lists Senator Chuck Schumer as one of the friends who is standing tall with him now, despite the charges against him, he does Schumer no favor when he writes that “before Quadrangle offered Hank Morris the job, I’d checked him out with Chuck.” He said he’d first met Morris when the political consultant worked with him in Schumer’s first senate campaign in 1998 and that Schumer “confirmed my impression that, in a realm filled with shady characters, Hank was a straight shooter.”

As underplayed as Rattner’s reference to Schumer is, it’s a shocking revelation. It means that as far back as 2004-2005, when this deal was consummated, Schumer apparently knew that Morris was functioning as a placement agent, selling his access to the state comptroller’s office, even though Morris had performed precisely the same political function with Hevesi as he did with Schumer. Schumer apparently thought there was nothing wrong with this arrangement, and continued his close ties with Morris, Hevesi and Rattner. The only other explanation is that Rattner sounded Schumer out about Morris without telling him why, which would make Schumer’s continued friendship with Rattner very strange indeed.

The other references are less explosive but advertise how intertwined Schumer and Rattner are. Rattner says shortly after his initial contacts with Geithner about taking the czar job, he had dinner with his “close friend” Schumer. “Autos is a no-win,” Schumer advised him. “The situation is probably unsalvageable. You’ll run up against the unions and get eviscerated by your own party. Work on housing–it’s a big, important issue, it affects everybody, it has to get resolved, and the politics are easier.” Not only was Schumer’s advice a dagger to the heart of Detroit, it proved totally inaccurate about both autos and housing, and could potentially hurt him in the majority leader contest should Harry Reid lose his Nevada seat this year.

More dramatically, “62-county Schumer,” who prides himself on his frequent visits all around the state, particularly to Western New York, demonstrated a galling indifference to the fate of hundreds of thousands of auto-related jobs in his own state. In December 2008, just as Schumer and Rattner were having these conversations, State Comptroller Tom DiNapoli put out a report saying that the auto industry paid $12 billion a year in wages and benefits to New Yorkers, pointing out that 30 percent of the total manufacturing payroll in the Buffalo-Cheektowaga corridor was related to the auto industry, including a General Motors plant. DiNapoli said that NY’s auto-related employment is the seventh largest in the country, with 30,000 workers directly employed by automakers and another 200,000 working in related companies like Delphi. In addition, DiNapoli estimated that the auto industry was carrying $100 billion in debt, exposing New York financial institutions to possible disastrous losses.

The third reference to media hound Schumer involves the leaking of Rattner’s appointment. Rattner accepted the czar post on January 7, 2009, but “hoped to keep the news confidential until I could inform my partners and our investors” at Quadrangle. “But within a few hours, Senator Chuck Schumer called to congratulate me,” says Rattner. Schumer told him that he heard it from Larry Summers, the president’s top economic advisor. “Less than 24 hours later, Jake Tapper of ABC News posted a report on his website.” Rattner complains that this “blindsided” his business colleagues, adding that he called Summers “dismayed,” only to be “amused” when Summers “wondered aloud whether the problem had arisen ‘from your end or our end.'” Actually, Tapper refers vaguely to his source as the first word in his story, reporting simply that “Democrats” say Rattner has the job. No one would describe Summers or Rattner that way, but they might describe a certain Democratic senator with just that simple word.

There’s only one reference to Arthur Sulzberger, the New York Times publisher who is Rattner’s lifelong friend and gym rat partner. On the Sunday night before Obama was to address the nation about the auto crisis, “my friend Arthur Sulzberger sent the first news flashes to my Blackberry. I texted back, ‘I’m sitting in the Oval Office!’ feeling the unreality of the moment.” Rattner lists Sulzberger in the acknowledgements as a friend who is sticking by him in the pension fund crisis, but complains about the Times‘ participation in the “sensationalized treatment” of the pension fund investigation. Having met Sulzberger decades ago when both were young Times reporters, Rattner reveals that “as of August 2010, my former employer, the New York Times, had put my travails on the front page five times (and not once for anything related to Team Auto.”