Dan Primack

Wellspring Capital Management continues to struggle in its efforts to raise a fifth fund, according to a recent regulatory filing. The New York-based buyout firm has secured around $330 million in new commitments over the past year, bringing it to just over $490 million in total. This is compared to an original plan to raise upwards of $1.5 billion, which later was revised downward to $1.3 billion. [Update: We're told that Wellspring has closer to $600m total when overseas commitments are included, and that the $1.3b figure is a hard cap]

New York Attorney General Andrew Cuomo has called a 12pm ET press conference to announce developments in his office's "major public integrity investigation." No additional details yet, including if today's news relates to the pay-to-play scandal involving private equity firms and the New York state pension system. Cuomo also has a bunch of other balls in the air, so this could be related to something else entirely. For example, last month we dialed in to a Cuomo presser, only to learn it was about "the manipulation of salary and overtime payments that leads to inflated pensions at the expense of taxpayers." Important stuff, but not for peHUB. [Update: False alarm, at least from a private equity perspective. Cuomo "has filed suit against Senate Majority Leader Pedro Espada Jr. for looting the Bronx based not-for-profit where Espada serves as President and CEO. Nineteen current and former officers and directors of the Comprehensive Community Development ("Soundview”) are also named in the lawsuit."]

At approximately 10:05am ET yesterday morning, the political aspirations of Steven L. Rattner were pronounced dead. An autopsy revealed an overdose of hubris, and a deficiency of caution. In a 27-page document, the New York Attorney General Andrew Cuomo lays out a narrative in which Rattner -- then a partner of private equity firm Quadrangle Group -- fought to secure business for the brother of New York’s chief investment officer, at the urging of now-indicted “finder” Hank Morris. Specifically, Rattner persuaded a Quadrangle portfolio company (since defunct) sign a DVD distribution deal for the brother’s film – “Chooch” – over the initial objections of portfolio company management. Once the DVD distribution deal was signed, Rattner retained Morris as a “placement agent,” in order to secure fund commitments for Quadrangle Group. Morris helped Quadrangle raise $100 million from the New York State Common Retirement Fund, even though one of Quadrangle’s legitimate placement agents – Monument Group – only had been able to secure between $25 million and $50 million. This increase occurred without Morris setting up or attending any meetings with NYCRF on Quadrangle’s behalf. Morris also helped Quadrangle secure $75 million from New York City, in part via a deal with another placement agent named Julio Ramirez, who last year pled guilty to securities fraud. Quadrangle did not disclose Morris and Ramirez's involvement in official disclosure forms. As a follow-up, the CIO’s brother helped put Rattner in touch with potential investors on the West Coast. These included Elliott Broidy, who sat on the board of the Los Angeles Fire & Police Pension Fund. That system gave Quadrangle $10 million, and Broidy has since pled guilty to felony charges of rewarding official misconduct.

Venture capitalists invested $4.7 billion into 681 U.S. companies during the first quarter of 2010, according to MoneyTree data released today by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters (publisher of peHUB). This represents a decrease in both deals and dollars from the preceding quarter — by 18% and 9%, respectively — but […]

Steve Rattner today broke his silence on the pay-to-play scandal, just hours after being fingered as the badie by his former partners. What follows is his brief statement, via attorney Jamie Gorelick: "Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement. Mr. Rattner shares with the New York Attorney General the goal of eliminating public pension fund practices that are not in the public interest. He looks forward to the full resolution of this matter." Also defending himself was Thomas DiNapoli, the current New York comptroller whose office also is under investigation (as confirmed during Cuomo's press call earlier today). His comments were a bit more detailed, and follow in full after the jump...

Busy morning over at Quadrangle Scandal Central. To sum up, before looking forward: 1. The SEC sued Quadrangle Group for its role in the New York pay-to-play scandal. Specifically, it accused Quadrangle of agreeing funneling cash to the the brother of a state pension fund official, for the production of a straight-to-DVD film called Chooch. 2. Quadrangle Group settled with the SEC, agreeing to pay $5 million in penalties. This sue/settle process apparently is standard operating procedure for the SEC, although the settlement is still subject to a judge's approval. 3. Quadrangle Group also settled with NY Attorney General Andrew Cuomo, agreeing to repay $7 million and sign a "code of conduct" which would preclude Quadrangle from using placement agents going forward. This deal did not include a settlement with Quadrangle co-founder Steve Rattner (who left last year to become Obama's car czar), whom Quadrangle called "unethical" in an official statement. Ok, them's the facts. Now some thoughts:

This is not a good day for Steve Rattner. The SEC this morning sued his former firm, Quadrangle Group, for a kick-back scheme related to the New York State pay-to-play scandal. In related news, Quadrangle agreed to repay $7 million to the State of New York, via an agreement with AG Andrew Cuomo. As part of the latter deal, Quadrangle said the following: "We wholly disavow the conduct engaged in by Steve Rattner, who hired the New York State Comptroller’s political consultant, Hank Morris, to arrange an investment from the New York State Common Retirement Fund. That conduct was inappropriate, wrong, and unethical. We embrace the reforms in the Attorney General’s Code of Conduct, including the campaign contribution and placement agent ban, which are vitally necessary to eliminate pay-to-play practices from the public pension fund investment process. We urge others in the industry to follow.” You can read the SEC's complaint by clicking here. More info after the break...

Regular readers know that buyout fund fees are one of my most stubborn bugaboos. Not the annual management fee, but all the ancillary fees that often serve to enrich the general partner at the expense of its portfolio companies (and, consequently, the fund's limited partners). My bias would be to eliminate such fees altogether, and perhaps someday we'll get there. In the meantime, the best we can hope for is that buyout firms share more of these noxious fees with their investors. Not only for the sake of fairness, but also because fewer fees in GP pockets could diminish GP interest in charging fees in the first place. To that latter point, The Blackstone Group reportedly has altered the transaction fee split for its new global mega-fund, which is expected to close on June 30. The buyout

When writing about the Elevation Partners portfolio last month, I gave particular attention to its investment in Palm. As one source summed it up: “As goes Palm, as goes Elevation.” The reason, of course, is that Elevation has invested just over 25% of its $1.8 billion fund in Palm, via a series of commitments. Such over-allocation apparently was permitted by the fund’s LPA, but it is leading Elevation down a path well-worn by other private equity firms. Basically: If you invest 15% or more of your portfolio in a single company, you are just begging to be knocked to the ground. Remember these moldy oldies: Forstmann Little pumping $1 billion into McLeod USA (not to mention its big bet into XO Communications)? Or how about Parthenon Capital plugging around 20% of its second fund into

I returned yesterday to the home office, after spending a few days as a judge for the VCIC Finals in Chapel Hill. For the uninitiated, VCIC is a competition in which teams of biz-school students form mock VC firms and are asked to make investment decisions. They conduct due diligence with real entrepreneurs, submit term sheets, negotiate with the entrepreneur and then get pummeled with questions by more than a dozen judges (all of whom are actual VCs or LPs save for yours truly). This year’s winner was the University of Chicago, which clearly stood alone among an extremely-talented field. In fact, I think five or six of this year’s teams easily would have won last year’s event. The UC crew was smart (asked the right questions), smooth (seemed prepared for most hiccups) and