The U.S. Securities and Exchange Commission and New York State attorney general settled charges against a private equity firm today alleging that it engaged in a kickback scheme with a state pension fund.

The SEC announced that it has settled charges against Quadrangle Group LLC and Quadrangle GP Investors II, L.P. in connection with its ongoing investigation into a multi-billion dollar kickback scheme involving New York’s largest pension fund, the New York State Common Retirement Fund.

It alleges that the firm secured a US$100 million investment from the fund only after a former Quadrangle executive arranged for an affiliate to distribute the DVD of a low-budget film called “Chooch” that a former deputy state comptroller and his brothers produced, and after that executive agreed to pay more than US$1 million in sham “finder” fees to a political advisor and chief fundraiser for the former comptroller.

In settling the SEC’s charges, without admitting or denying the allegations, the firm agreed to pay a US$5 million penalty. It is also paying US$7 million to the state to settle the attorney general’s charges. And the AG also announced that it has reached penalty settlements with another investment firm, GKM Newport Generation Capital Services, that it accuses of paying fees to the advisor; a political consulting firm; and a lobbying firm.

In a statement, Quadrangle said that it is “pleased to announce today that it has reached resolution with the Offices of the New York Attorney General and the Securities and Exchange Commission”, and it stressed that it cooperated with the investigations, which concerned the conduct of now-former employees. It also said that it supports the efforts of the NYAG and the SEC to ensure that the pension manager selection process is based solely on merit, and it has implemented revised compliance policies.

In its review for the film in question, back in 2004, the New York Times said, “The only solid appeal in the film comes from little Kiwi Limone, a nine-pound dachshund with a face for close-ups who plays an important role in the climactic action-film-style standoff.”