The legal mastermind behind New York's record bank fines

[December 08, 2014]  By Karen Freifeld

NEW YORK (Reuters) - Billions of dollars have flowed to New York state coffers thanks to headline-grabbing settlements with global banks announced by Governor Andrew Cuomo and Benjamin Lawsky, New York's first superintendent of financial services.

But little attention has been focused on Daniel Alter, the 49-year-old legal mastermind behind many of the deals.

Sources close to the settlements describe Alter, general counsel at New York's Department of Financial Services (DFS), as instrumental to crafting strategies that leverage the three-year-old agency's unique powers to extract large and sometimes painful penalties from major banks.

For example, Alter wrote the order threatening to revoke Standard Chartered's <STAN.L> license to operate in New York, which paved the way for a $340 million settlement he helped negotiate with the British bank over transactions linked to Iran, sources said. That 2012 deal put the young agency on the map.

Alter also played a key role negotiating a $2.24 billion penalty for the state against BNP Paribas <BNPP.PA> for sanctions-related violations. That settlement included an unprecedented punishment that curbed the French bank's ability to clear U.S. dollars, a core service for clients, people familiar with the settlement said.
 

In the latest salvo against banks, the Yale Law School graduate pushed to install monitors in Barclays and Deutsche Bank, so the regulator could study possible manipulation of foreign exchange rates from the inside, one source said.

Those investigations are ongoing and could result in more hefty penalties.

Sources familiar with the matter say Alter may soon get a higher profile because he is being discussed as a possible replacement for Lawsky, who is said to be eyeing an early 2015 departure for the private sector.

A spokesman for the agency declined comment and said Alter was not available for an interview. A spokesman for Cuomo, who will appoint the next superintendent, did not return a call for comment.

A veteran of the New York legal scene, Alter was previously a high-level official at the Manhattan U.S. Attorney's office and has made allies including Mary Jo White, now head of the U.S. Securities and Exchange Commission, and FBI director James Comey.

In 2010, Senator Charles Schumer recommended him to serve as a Manhattan federal judge, though he was not nominated. "His towering intellect is matched only by his staggering capacity for hard work," Comey, a former U.S. Attorney, and more than 60 others wrote in support.

Some adversaries have bristled at the agency's exercise of raw power, but many express grudging respect for Alter's legal acumen and say he has a warm personal style.

"He's a real straight-shooter," said Ted Mirvis, an attorney for Bank of America <BAC.N> who has sat across the table from Alter both while Alter was at DFS and when he did a stint at the New York attorney general's office. "He takes aggressive positions, but he's also willing to listen and exchange ideas."

Those who have worked with Alter say he is an expert at crafting new ways to use old laws. He came up with a legal hook to crack down on the consulting industry, notably during an investigation into whether Deloitte omitted critical information in its report to regulators on Standard Chartered's money laundering controls.

Alter was able to take advantage of his power to sign waivers that allow banks to share the information with consultants, according to a person familiar with the agency's operations.

In June 2013, Alter met Deloitte and threatened to send an order barring DFS-regulated banks from sharing information with the firm, said a person close to those negotiations.

The meeting marked a turning point, the person said. Two weeks later, Deloitte agreed to pay $10 million, refrain from certain business for a year and adopt reforms the agency would use as a model for other consultants.

James Corcoran, former superintendent of New York's insurance department, which merged with banking to form DFS, said Alter's legal prowess has been key to successfully taking on powerful global banks.

"You're outnumbered, you're outstaffed, you're outspent. The only way you can do your job is to be creative," he said.

(Reporting by Karen Freifeld; Editing by Karey Van Hall and Andrew Hay)

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