Steven Rattner, who leads the Obama administration's auto task force, was one of the executives involved with payments being probed by New York state and federal regulators in an alleged pension kickback scheme, a source familiar with the situation said on Friday.

A senior executive of Rattner's firm, Quadrangle Group, identified in a U.S. Securities and Exchange Commission complaint against two former New York political officials and others, is Rattner himself, the source said.

Rattner himself is not mentioned in the SEC complaint, and neither Rattner nor Quadrangle has been accused of any wrongdoing.

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 agreed to pay what became a $1.1 million fee after receiving an investment from New York's $122 billion pension fund, the complaint said.

A representative for Quadrangle declined to comment.

A spokesperson for the U.S. Treasury, which oversees the auto task force headed by Rattner, also declined to comment.

But when asked whether the Obama administration knew of Rattner's role in the investigation, the spokesperson said: During the transition, Mr. Rattner made us aware of the pending investigation.

One financial industry executive who asked not to be identified because of the sensitivity of the situation said Rattner can continue to lead Obama's auto task force because there is no one else to do it.

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 car task force, and just a few weeks into his job was instrumental in ousting General Motors Chief Executive Rick Wagoner.

Rattner co-founded Quadrangle, which helps manage New York City Mayor Michael Bloomberg's personal investments, with Joshua Steiner. Both Rattner and Steiner have been major Democratic fundraisers.

Sources familiar with the investigation told Reuters earlier this week that several investment firms, including the Carlyle Group, are being scrutinized by the SEC and New York's Democratic Attorney General Andrew Cuomo.

On Wednesday, criminal charges were filed against the former chairman of the state Liberal Party, Raymond Harding, alleging he got more than $800,000 in illegal fees. Hedge fund manager Barrett Wissman pleaded guilty to securities fraud for his role in the pay-to-play scheme and agreed to forfeit $12 million and be a witness.

Last month, Hank Morris, the former state comptroller's top fundraiser, and David Loglisci, the pension investment chief, were charged with taking millions of dollars in kickbacks from money manager firms.

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 improper kickbacks, and whether they were properly disclosed, people familiar with the matter told the Journal.

(Reporting by Megan Davies and Anupreeta Das with additional reporting by Joan Gralla, Rachelle Younglai and John Crawley; Editing by Lisa Von Ahn and Brian Moss)

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