[June 28, 2014]
By Tim McLaughlin and Karen Freifeld
NEW YORK (Reuters) - New
York Attorney General Eric Schneiderman, long seen as a
secondary force in policing Wall Street banks, is taking
the lead in what may be the most ambitious case of his
career: accusing Barclays Plc <BARC.L> of favoring its
high-frequency trading clients.
By making a case against the bank, Schneiderman has seized a lead
role in a contentious dispute about whether high-frequency traders
have turned the stock market into a rigged game that hurts regular
investors.
The case against Barclays could lead to investigations into other
Wall Street banks and define Schneiderman's career as an attorney
general, lawyers say.
"It is the most important attack on practices in the market that any
AG has engaged in a while," said John Moscow, a former Manhattan
prosecutor who now handles white-collar defense cases.
Barclays spokesman Mark Lane declined to comment on Friday.
A former state senator and corporate lawyer, Schneiderman is
following a well worn path for New York attorney generals - taking
on Wall Street and potentially winning political capital - and could
end up, like Eliot Spitzer and Andrew Cuomo before him, as the
state's governor. He declined to comment for this story.
Schneiderman, 59, graduated from Amherst College and earned a
Harvard Law degree in 1982. He spent 15 years in corporate law,
including as a partner at Kirkpatrick & Lockhart, where he handled
white-collar defense cases. He served six terms as a state senator
before running for attorney general, taking that office in 20ll.
Early in his tenure, Schneiderman was knocked for seeming more like
the state legislator he used to be than a prosecutor. He has been
less adept at grabbing headlines than Spitzer or Cuomo, and while he
may have held banks accountable, he was less likely to push out
ahead with cases.
In 2011, in his first year as attorney general, Schneiderman accused
BNY Mellon Corp <BK.N>, the world's largest custody bank, of
overcharging pension funds on foreign currency trades, alleging the
bank made $2 billion. But the civil action was hardly novel, as
similar cases had already been filed in other parts of the country.
He is co-chair of a state-federal task force that in 2013 settled
with JPMorgan Chase & Co <JPM.N> for $13 billion, with more than
$600 million going to New York. The bank admitted to having
routinely overstated the quality of mortgages it sold to bond
investors before the housing crisis. He also is a key negotiator
with Bank of America Corp <BAC.N> over similar claims. But banks
have been settling with prosecutors and investors over these matters
for years.
In contrast, Spitzer busted Wall Street with a $1.4 billion
settlement with big banks and brokerages for urging customers to buy
stocks that their analysts privately said were junk. Cuomo led a
nationwide investigation into the auction-rate securities market,
uncovering how the investments were marketed as safe when in reality
they faced increasing liquidity risk. His investigation resulted in
more than $60 billion in investor buybacks.
People close to Schneiderman characterize him as patient and
low-key. While Spitzer runs in Central Park in his free time and
Cuomo rides a Harley Davidson motorcycle, Schneiderman practices
yoga.
But lawyers say that banks should not be fooled by Schneiderman's
demeanor. He carries a big stick, namely the Martin Act, a New York
state securities law that is powerful for prosecutors because it
often does not require proof of intent to deceive. Some lawyers have
criticized the law as too broad, with some saying it has been
superseded by federal law.
"Another bank will pay enormous fines under a law that, in my mind,
no longer exists,” said defense lawyer Robert McTamaney, a critic of
the law, referring to the Barclays case.
(Reporting By Tim McLaughlin and Karen Freifeld; Editing by Dan
Wilchins and Frances Kerry)
By making a case against the bank, Schneiderman has seized a lead
role in a contentious dispute about whether high-frequency traders
have turned the stock market into a rigged game that hurts regular
investors.
