It seems, at first glance, unlikely that a gifted social operator like Rattner would get involved in an imbroglio as grubby and venal—inelegant, if not illegal—as the pension-fund scandal centered around Democratic consultant Hank Morris. But Rattner at the time was building his private-equity business, and to win at that game you have to play the game, and Morris is a person with whom it was played.

Quadrangle’s annual statement from 2008, a copy of which was obtained by New York, shows that after eight years, investors in the first $1 billion fund had just about got back their initial investment. There was still considerable “unrealized value,” as the illiquid assets are called, and if you add that in, the returns beat a poorly performing stock market over that time, though they still wouldn’t have outperformed a municipal bond. “We’ve had lots of investments that have disappointed,” says Damon Mezzacappa, a former vice-chairman at Lazard and an investor. “Quadrangle was okay, not great.” In the long run, Quadrangle may do well—its performance is in line with that of its peers. It owns valuable properties, and the fund has held on to investors and staff. Still, the coast

By 2004, Rattner, the firm’s effective CEO, was Quadrangle’s public face and its key fund-raiser—he hardly brought deals in anymore. The firm’s first $1 billion fund was fully invested, and if the business was going to grow, it needed more money, and the biggest money is in institutions like pension funds. Also, an investment from a major pension fund like New York State’s signals to other funds that Quadrangle is a good bet.

— Rattner  

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