UPDATE 2-Obama sticks by auto chief despite NY probe link

* W.House: auto task force head not accused of wrongdoing
* Source says Rattner is senior executive in SEC complaint

(Recasts with White House comment; adds background on probe,
details about "Chooch" film, bylines)
By Megan Davies and Rachelle Younglai
NEW YORK/WASHINGTON, April 17 (Reuters) - U.S. President
Barack Obama stood by his auto task force head on Friday,
saying Steven Rattner had not been accused of any wrongdoing
related to an alleged pension kickback scheme in New York.
Rattner was one of the executives involved with payments
being probed by New York state and federal regulators in the
alleged scheme, a source familiar with the situation said on
Friday.
He is the person only identified as a "senior executive" of
Quadrangle Group in the U.S. Securities and Exchange Commission
complaint against two former New York political officials and
others, the source said. His identity was earlier reported by
The Wall Street Journal and The New York Times.
The "senior executive" met with a consultant, and then the
firm paid a $1.1 million fee after receiving an investment from
New York's pension fund, the complaint said.
Neither Rattner nor Quadrangle, a private equity fund he
co-founded, has been accused of any wrongdoing.
The White House said Obama had full confidence in Rattner.
"He's not accused of doing any wrongdoing and he's not
likely to face any criminal or civil charges as it relates to
this. And the pending investigation was something that he
brought up to us," White House spokesman Robert Gibbs told
reporters aboard Air Force One on the way to Trinidad.
Rattner could not be reached for comment. Quadrangle and a
spokesperson for the U.S. Treasury, which oversees Rattner's
auto task force, declined comment.

AGGRESSIVE LINE
The task force led by Rattner has taken a sophisticated and
aggressive line with automakers, surprising some Washington and
industry insiders who thought the Obama administration would
opt for a more nuanced and gradual approach.
Rattner left Quadrangle to lead the auto task force, and
just a few weeks into his job was instrumental in ousting
General Motors Chief Executive Rick Wagoner.
Quadrangle helps run New York City Mayor Michael
Bloomberg's personal investments and Rattner has been a major
Democratic fundraiser.
The first criminal charges related to the scheme were
brought last month by New York state attorney general Andrew
Cuomo, who accused Hank Morris, the former state comptroller's
top fundraiser, and David Loglisci, the pension investment
chief from 2003-2006, with taking million-dollar kickbacks from
money manager firms.
The two men, whose lawyers say they are innocent, also face
civil charges from the SEC.
More than 20 investment deals made by the state's pension
fund were "tainted" by the kickbacks, New York Attorney General
Andrew Cuomo said at the time. The list of companies involved
includes The Carlyle Group [CYL.UL] and other private funds.
The main legal issue for the investment firms is whether
they knew, or should have known, that fees they paid to
intermediaries to win business from New York's pension fund
were legitimate or were kickbacks, and whether they were
properly disclosed, people familiar with the matter told the
Journal.
Earlier this week, hedge fund manager Barrett Wissman
pleaded guilty to a felony for "his role in the pay-to-play
scheme" and agreed to forfeit $12 million and serve as a
witness in the continuing investigation. Criminal charges were
also filed against the former head of New York's Liberal Party,
Raymond Harding, who was charged with taking more than $800,000
in illegal fees.
Harding's lawyer has said he is innocent.

"CHOOCH" DEAL
A bizarre aspect of the saga outlined in the charges
regards a low-budget film named "Chooch," produced by Loglisci
and his brothers. It is a comedy about a Queens resident who
goes to Cancun after performing badly in a softball game,
according to the movie review website Rottentomatoes.com.
In January 2005 a Quadrangle affiliate, GT Brands LLC,
agreed to acquire the DVD distribution rights to Chooch for
$88,841, says the SEC complaint. That was shortly after
Quadrangle agreed to pay a firm associated with Morris 1.1
percent of any amount invested by the retirement fund with
Quadrangle.
However, a source close to Quadrangle said that the
distribution deal was a standard commercial agreement under
which no money was paid out until GT Brands recouped its cost.
Quadrangle invested in GT Brands, formerly Good Times
Entertainment in 2003 and it filed for bankruptcy protection in
2006, according to press reports at the time.
((Reporting by Megan Davies in New York, Jeff Mason aboard Air
Force One, Rachelle Younglai and John Crawley in Washington,
Joan Gralla and Anupreeta Das in New York; Editing by Brian
Moss and Tim Dobbyn)
((megan.davies@thomsonreuters.com ; +1 646 223 6112; Reuters
Messaging: megan.davies.thomsonreuters.com@reuters.net))
((For more M&A news and our DealZone blog, go to
http://www.reuters.com/deals))
Keywords: RATTNER/

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