On April 15, the Securities and Exchange Commission officially filed both its complaint against Quadrangle Group LLC and Quadrangle GP Investors II, L.P and the Consent Judgment executed by Quadrangle putting an end to the SEC prosecution. According to its website, Quadrangle Group LLC is a private global investment firm with $3 billion in assets under management.
The complaint concerns allegations of a kickback scheme in which individuals connected to the New York State Comptroller’s office sought a quid pro quo from Quadrangle before it agreed to invest $100 million with Quadrangle. The $100 million belonged to the New York State Retirement Fund (“Fund”). The Fund holds assets in trust for more than one million employees and retirees from New York State governments, most New York local governments and some public authorities. The State Comptroller is the sole trustee and manager of the Fund.
The quid pro quo, according the Securities and Exchange Commission, was that Quadrangle had to secure a DVD distribution deal for the former State Deputy Comptroller’s “very unrealistic and naive” brother and pay more than $1 million (indirectly) to the top political adviser for the then-acting State Comptroller. Quadrangle must have decided that it was good for business to agree to the quid pro quo, but it also appears to have decided that it was bad for business to disclose the existence of these dealings to anyone outside of the scheme.
Fast Forward to The Final Consent Judgement: Simultaneously with the filing of the complaint, the SEC released the Final Consent Judgement executed by Quadrangle. The Judgement expressly states that Quadrangle does not admit or deny the allegations in the complaint, but Quadrangle agreed to stop making false or misleading representations or omissions in the offer or sale of securities. Quadrangle also agreed to pay a civil penalty of $5 million to the SEC.
Quadrangle also has settled with New York Attorney General Andrew Cuomo’s office by agreeing to pay $7 million to the state and fully cooperate with the government’s ongoing investigations.
Given the bad press, harm to reputation, massive legal expense, civil penalties and disruption of ordinary business activities, the decision by Quadrangle to appears to have turned out to be a bad one after all.
If you would like to discuss any aspect of the “pay to play” scheme, contact Jeffrey Wittenberg at (877) 352-2010.