UPDATE 4-Quadrangle, Cuomo in kickback accord; Rattner eyed

* Quadrangle to pay $12 mln in Cuomo, SEC settlements

* Pension fund accord does not include Rattner

* Four other defendants also settle with Cuomo

* Cuomo says probe reaches into current comptroller's term

* Rattner disagrees with characterization of events (Recasts first paragraph; Adds Rattner, DiNapoli statements)

By Jonathan Stempel and Megan Davies

NEW YORK, April 15 (Reuters) - Private equity firm Quadrangle Group LLC agreed to settle its part of a long-running pay-to-play corruption probe involving New York state's $129.4 billion pension fund.

The accord excludes co-founder Steven Rattner, who left Quadrangle last year to briefly run U.S. President Barack Obama's auto bailout task force.

Rattner, 57, remains under regulatory scrutiny, and his lawyer said Rattner hopes to resolve the matter.

New York Attorney General Andrew Cuomo said on Thursday that Quadrangle and four other defendants agreed to pay nearly $12 million to settle their involvement in the New York State Common Retirement Fund.

Quadrangle is paying $7 million to New York, and another $5 million to resolve a related U.S. Securities and Exchange Commission probe.

Cuomo's probe has focused on alleged kickbacks while former state Comptroller Alan Hevesi was in office.

The attorney general on Thursday confirmed the probe has expanded to activity that took place early in the term of current Comptroller Thomas DiNapoli, who succeeded Hevesi in 2007.

On a conference call, Cuomo said there has been a "constant refrain" of alleged kickbacks afflicting the Common Retirement Fund, the third-largest U.S. public pension fund, for decades.

"Everyone does it, everyone knows about it and no one's done anything about it," he said. "Well, that is changing."

DiNapoli, in a statement, said he has not been interviewed as part of the investigation, and has ended the potential for "shameful corruption" that plagued the pension fund. "I inherited a mess," he said. "It is a mess that I have fixed."

Cuomo said his probe has resulted in six guilty pleas, settlements with 15 firms, including Carlyle Group [CYL.UL], and more than $130 million of recoveries.

The attorney general is widely expected to run this year for New York's governorship and has a large lead in polls over prospective rivals. Cuomo and DiNapoli are Democrats.

QUADRANGLE, RATTNER

Investigators alleged that Quadrangle won a $100 million investment from the pension fund by engaging in improper "quid pro quo" arrangements.

They said this involved agreements to pay more than $1 million of "finder" fees to Henry "Hank" Morris, a former top adviser to Hevesi, and distribute a DVD of the film "Chooch," produced by former Common Retirement Fund chief investment officer David Loglisci.

"Kickbacks and corruption contaminated the Retirement Fund," said Robert Khuzami, director of the SEC enforcement division, in a statement. "The victims were New York State's hard-working retirees, who were entitled to have honest advisers manage their hard-earned dollars."

Quadrangle, in a statement released by Cuomo, said: "We wholly disavow the conduct engaged in by Steve Rattner ... That conduct was inappropriate, wrong, and unethical."

The firm agreed to cooperate with Cuomo's investigation of Rattner and others. It did not admit wrongdoing. In a joint statement with Cuomo, it also said the principals involved in the alleged improper conduct have left the firm.

Jamie Gorelick, a lawyer for Rattner, said in a statement her client disagrees with "the characterization of events released today, including those contained in Quadrangle's statement." She said Rattner agrees that public pension fund practices that are not in the public interest should end.

Rattner's departure from Quadrangle was part of the reason it put plans to raise a new private equity fund on hold.

Having settled with Cuomo, Quadrangle plans to meet with investors in the coming months to lay the groundwork for perhaps raising a third fund, a person familiar with the matter said [ID:nN15252213]. The person requested anonymity because the plans are not public.

Loglisci pleaded guilty in March to helping favored firms gain access to the Common Retirement Fund. He and Morris were charged in March 2009 in a 123-count indictment.

TRANSACTION AFTER DINAPOLI TOOK OVER

The other settlements announced on Thursday include $2 million from political consultant Global Strategy Group, $1.6 million from GKM Newport Generation Capital Services LLC, $715,000 from placement agent Kevin McCabe, and $500,000 from California lobbying firm Platinum Advisors.

Cuomo said Global Strategy Group arranged pension fund investments in private equity funds managed by Intermedia Advisors LLC, a private equity firm led by former AT&T Broadband and YES Network Chief Executive Leo Hindery, and private equity firm Clayton, Dubilier & Rice.

He also said calendar records show a Global Strategy Group official and an Intermedia managing partner met with DiNapoli on April 5, 2007, thirteen days before the Common Retirement Fund committed $15 million to Intermedia.

Hindery is one of two Intermedia managing partners, according to the firm's website. Intermedia spokeswoman Anya Hoerburger and Clayton, Dubilier spokesman Dan Jacobs did not return calls seeking comment. Global Strategy, in a statement, said it was pleased to settle with Cuomo.

The New York comptroller is the sole trustee of the state pension fund. Many other U.S. states have multi-member boards to oversee pension funds.

The SEC case is SEC v. Quadrangle Group LLC et al, U.S. District Court, Southern District of New York, No. 10-03192. (Reporting by Megan Davies, Steve Eder, Joan Gralla, Jonathan Stempel and Rachelle Younglai; Editing by Dave Zimmerman, Tim Dobbyn, Andre Grenon and Steve Orlofsky)