Here's how it worked: the adviser, Hank Morris, also allegedly played a dual role as a "placement agent" matching private money managers with the manager of the $122 billion state pension fund, David Loglisci. When Rattner approached Loglisci on behalf of his private equity fund Quadrangle in 2004, Loglisci allegedly sent him to Morris -- who asked Rattner to pay a 1.1% "finder's fee" to a firm he represented for whatever investments Quadrangle received. Then, in a decidedly straight-to-video heist, Loglisci also allegedly convinced Rattner to have a division of Quadrangle pay $86,000 for the DVD distribution rights to a movie Loglisci's brother produced (The movie is called Chooch.)

According to the SEC complaint, Rattner eventually received $100 million from the pension fund Loglisci ran. But that's not all the business Quadrangle got via Morris, according to today's Wall Street Journal: Morris also secured $85 million from the New York City Employee Retirement System, $10 million from the Los Angeles Fire and Police Pension System and $20 million from the State Investment Council of New Mexico in 2005.

New Mexico, of course, has its own pension fund scandal brewing; inflows from state retirement funds are a major focus of the expansive pay-to-play probe that caused Gov. Bill Richardson to withdraw his nomination for Obama's commerce secretary. Rattner, for his part, has donated $20,000 to Richardson's gubernatorial campaigns, $15,000 of that after he nabbed the state retirement fund investment.

But Rattner's Quadrangle is just one place the state scandals intersect: there's also Aldus Equity, a Dallas firm that advises pension funds on investments in private equity firms. According to the indictment of Morris, Loglisci, and two alleged co-conspirators, a "political ally" named Raymond Harding who claims the charges are bogus and a Dallas hedge fund manager named Barrett Wissman who pleaded guilty last week to securities fraud and is cooperating in the investigation, Aldus was in 2004 asked by Loglisci to submit a proposal for providing investment advice on minority-owned and "emerging" private equity funds.

Aldus didn't have any experience in this business, but the pair of officials had already been spurned by a competing minority owned private equity firm that balked at Morris's demand to siphon off half the firm's management fees. So they turned to Aldus, which, according to the indictment, agreed to pay Morris $319,374 in fees. According to the indictment, when Aldus tried to extricate itself from the arrangement sometime around the end of 2005 in advance of a possible acquisition by a "large investment bank," Morris told Wissman to tell Aldus the retirement fund could take its business away "just as quickly as it had given it to" them. Aldus backed down and continued going along with the scheme, according to the complaint; Deutsche Bank took a minority stake in the firm in early 2007.

Aldus denies it was involved in any wrongdoing. But in response to the developments in New York, New Mexico, which has paid Aldus millions in investment advisory fees, last week announced it was suspending its contract with the firm and released a list of more than 200 private fund managers the state pays millions to help advise its investment decisions.