NY Times
New York City’s billionaire mayor, Michael R. Bloomberg, has decided to remove his fortune from a private equity firm founded by his longtime friend, just 10 months after that firm became embroiled in a scandal involving the state pension fund.
The mayor is shifting about $5 billion from Quadrangle Capital Partners into a new investment firm devoted solely to his interest and that of his charitable foundation. About a dozen workers from Quadrangle will join the new enterprise, according to a letter sent by Quadrangle to its investors on Friday, suggesting the move is not being driven by a desire to change investment strategy.
In assets, Quadrangle will shrink by more than half, leaving the firm only private equity investments in the media and telecommunications industries.
The setback caps a year of struggle for Quadrangle, after Steven Rattner — the founder who is Mr. Bloomberg’s friend — departed last year to run the Obama Administration’s automobile task force. Mr. Rattner was implicated in the New York pension fund scandal within months of that appointment and stepped down from his government role last summer.
No charges have been brought against the firm or Mr. Rattner by the attorney general of New York or the Securities and Exchange Commission, which are both investigating Quadrangle’s past dealings with the New York state pension.
Mayor Bloomberg’s private fortune — built around his media business, Bloomberg L.P. — fueled his improbable victory in the 2001 mayoral campaign and helped secure a close re-election last fall. His decision to relocate his money may fuel speculation about his political ambitions: he is considered a potential candidate in the presidential campaign of 2012. If he were to run, he would undoubtedly finance the campaign himself, at a staggering cost: his aides previously put the price tag at $1 billion.
Quadrangle said in its letter that “Mayor Bloomberg believes creating this independent entity will allow his investment team to operate with the flexibility and privacy that he seeks.”
The mayor’s decision to disentangle himself from Quadrangle ends a storied partnership that elevated Mr. Rattner into spheres of influence in government and business, and that allowed Mr. Bloomberg to take bigger risks with his overall fortune, which is estimated at $15 billion, including his large stake in the media company.
Since the S.E.C. revealed details about Quadrangle’s dealings with the state pension last spring, Mr. Bloomberg has steadfastly defended Mr. Rattner. At the time, the mayor praised his work and called him “a great public servant.” Initially, the mayor said he had no plans to take his investments elsewhere, despite the questions that dogged its founder.
Mr. Bloomberg and Mr. Rattner remain close, frequently dining together and speaking by telephone, according to mutual friends. On Wednesday night, the mayor and his girlfriend left a book party for Henry M. Paulson, the former Treasury secretary, alongside Mr. Rattner and his wife, according to a person who attended the party.
Mr. Rattner’s involvements with the state pension investigation came to light when the S.E.C. filed a case against middlemen who helped investment firms like Quadrangle garner investments from the state pension. Mr. Rattner handled the discussions about hiring the middlemen. One of the middlemen was producing a movie called “Chooch,” and a company owned by Quadrangle made a deal to distribute the low-budget film, according to an S.E.C. complaint filed against the now-indicted middlemen.
The mayor’s office, and representatives of Quadrangle and Mr. Rattner, declined to comment.
The mayor is shifting about $5 billion from Quadrangle Capital Partners into a new investment firm devoted solely to his interest and that of his charitable foundation. About a dozen workers from Quadrangle will join the new enterprise, according to a letter sent by Quadrangle to its investors on Friday, suggesting the move is not being driven by a desire to change investment strategy.
In assets, Quadrangle will shrink by more than half, leaving the firm only private equity investments in the media and telecommunications industries.
The setback caps a year of struggle for Quadrangle, after Steven Rattner — the founder who is Mr. Bloomberg’s friend — departed last year to run the Obama Administration’s automobile task force. Mr. Rattner was implicated in the New York pension fund scandal within months of that appointment and stepped down from his government role last summer.
No charges have been brought against the firm or Mr. Rattner by the attorney general of New York or the Securities and Exchange Commission, which are both investigating Quadrangle’s past dealings with the New York state pension.
Mayor Bloomberg’s private fortune — built around his media business, Bloomberg L.P. — fueled his improbable victory in the 2001 mayoral campaign and helped secure a close re-election last fall. His decision to relocate his money may fuel speculation about his political ambitions: he is considered a potential candidate in the presidential campaign of 2012. If he were to run, he would undoubtedly finance the campaign himself, at a staggering cost: his aides previously put the price tag at $1 billion.
Quadrangle said in its letter that “Mayor Bloomberg believes creating this independent entity will allow his investment team to operate with the flexibility and privacy that he seeks.”
The mayor’s decision to disentangle himself from Quadrangle ends a storied partnership that elevated Mr. Rattner into spheres of influence in government and business, and that allowed Mr. Bloomberg to take bigger risks with his overall fortune, which is estimated at $15 billion, including his large stake in the media company.
Since the S.E.C. revealed details about Quadrangle’s dealings with the state pension last spring, Mr. Bloomberg has steadfastly defended Mr. Rattner. At the time, the mayor praised his work and called him “a great public servant.” Initially, the mayor said he had no plans to take his investments elsewhere, despite the questions that dogged its founder.
Mr. Bloomberg and Mr. Rattner remain close, frequently dining together and speaking by telephone, according to mutual friends. On Wednesday night, the mayor and his girlfriend left a book party for Henry M. Paulson, the former Treasury secretary, alongside Mr. Rattner and his wife, according to a person who attended the party.
Mr. Rattner’s involvements with the state pension investigation came to light when the S.E.C. filed a case against middlemen who helped investment firms like Quadrangle garner investments from the state pension. Mr. Rattner handled the discussions about hiring the middlemen. One of the middlemen was producing a movie called “Chooch,” and a company owned by Quadrangle made a deal to distribute the low-budget film, according to an S.E.C. complaint filed against the now-indicted middlemen.
The mayor’s office, and representatives of Quadrangle and Mr. Rattner, declined to comment.
