Rattner, who helped craft the federal rescues of General Motors and Chrysler, left the Obama administration abruptly last year. This morning, the private equity firm he co-founded, Quadrangle Partners, agreed to pay $7 million to settle allegations it made illegal payments to a New York state official and a political consultant in exchange for millions of dollars in pension investments.

But the settlement specifically excludes Rattner, who Cuomo says is no longer with the firm and remains under investigation. What's more, Quadrangle issued a scathing statement against its co-founder.

"We wholly disavow the conduct engaged in by Steve Rattner," the statmement says. "That conduct was inappropriate, wrong and unethical."

The statement says Rattner hired former new York political operative Hank Morris to arrange the investment deal. Rattner also allegedly arranged an $88 thousand payment to the brother of former New York State Chief Investment Officer David Loglisci, for the DVD distribution rights to a low-budget film called "Chooch."

Loglisci pleaded guilty last month to a single felony count. Morris has denied wrongdoing.

Rattner's counsel, Jamie S. Gorelick, said his client "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," Gorelick said.