Seal of the US Securities and Exchange Commission
Seal of the US Securities and Exchange Commission - 
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Kai Ryssdal:Steven Rattner's not a name most people will recognize, but he's a guy with some pull. He's a pretty well known, in certain circles, Wall Street financier. He's the guy who supervised the Obama Administration's overhaul of the auto industry. And today he's said to be negotiating a settlement with the SEC -- one that could cost him millions of dollars and banish him from the securities industry for a while. Rattner's been caught up in an investigation into kickbacks and New York state's pension fund. It's about pay-to-play schemes and the business of managing public money.

Marketplace's Alisa Roth reports.

Alisa Roth:Federal regulators say Steven Rattner paid a political adviser to get the New York State pension fund to invest in his private equity firm. Using those kinds of outside advisers to lobby for business from states and cities is a common practice.

David Ruder is a law professor at Northwestern and a former chair of the SEC. He says it's fine if somebody wants to take you out for lunch and pitch their investment services.

David Ruder: But as you move down the line to tickets to sporting events to trips on vacations and other kinds of activities, then you move into problem areas which are seen as wrong.

The SEC has been trying to crack down on pay-to-play schemes for more than a decade. This summer, it passed a rule that makes it harder for campaign contributors to win business from public pension funds. Other states, including California, have been investigating the role of power-brokers and political advisors in steering state pension fund investment decisions.

David Webber's a law professor at Boston University. He says the SEC hopes going after Rattner will make investors and pension funds pay more attention.

David Webber: Rattner is a very high-profile guy, and I think that other investors who are seeking public pension business are going to be checking and double-checking and making sure that they're playing by the rules.

The settlement between Rattner and the SEC is expected soon. New York's attorney general, Andrew Cuomo, is reportedly also investigating Rattner as part of a long-term inquiry into pay-to-play.

In New York, I'm Alisa Roth for Marketplace.