If Cuomo’s tenure at HUD produced murky results, it’s even less clear what he’s accomplished in his battles with Wall Street. His record draws ridicule from veterans of Spitzer’s pugilistic years. “He’s been very, very weak on settlements,” a former prosecutor says. “In many cases he’ll find an issue and do a quick resolution that involves new industry standards or best practices and a smallish fine, and he’ll move on. As a lawyer and a regulator, he’s a lightweight.”
Less partisan observers, however, give Cuomo higher marks. “He was the first person to get a real settlement in the auction-rate-securities case,” says John Coffee, a Columbia Law School professor and expert in securities law. Cuomo accused banks of misleading investors about the safety of these bonds. “The SEC may have extended the settlement, but it wouldn’t have happened without Cuomo being there first.”
Even if it’s too early to tell if Cuomo has accomplished anything of long-term substance in his engagement with Wall Street, it’s clear that as political theater, it’s been a brilliant run. “The interesting thing about coming after Spitzer,” a New York defense lawyer says, “is that you can be pretty aggressive, pretty press-hungry, pretty self-congratulatory—and still look like a pretty reasonable guy.”
Ben Lawsky is surrounded by his boss’s growing fame. On a spring Friday afternoon, the 39-year-old attorney—one of Cuomo’s top lieutenants—is sitting at his office desk in the financial district. To Lawsky’s right, his computer screen is playing a 2007 video of Jim Cramer blistering Cuomo for investigating home-mortgage companies. To Lawsky’s left is a television, tuned to CNBC. Suddenly, a live shot from the White House lawn pops up.
“Hey, it’s my friend Ken Lewis,” Lawsky says with a laugh. A month earlier, Lawsky made the Bank of America CEO squirm as he deposed him for not surrendering the names of bankers who’d received millions in bonus payments.
Lawsky’s phone rings. It’s the office of Barney Frank, the Massachusetts congressman who, with Cuomo’s help, has been leading the Washington charge against profligate corporations. For the last six months, Cuomo’s office has been headquarters for the political and legal war on Wall Street.
“In October, Andrew had become very interested in these compensation issues,” Lawsky says. “His feeling was, if a bank or a firm was getting federal bailout money, they have new duties, of at least transparency and maybe even fiduciary-type duties to the taxpayers. When they put out bonuses, they should be justified. We spent a long weekend, with our biggest brains here, thinking a lot about New York law. What we were trying to figure out was, what was our basis to investigate this stuff? And we came up with this fraudulent-conveyance law.”
To oversimplify, Cuomo argued that New York is a creditor of firms that take federal bailout money, and so the state’s lawyer—the attorney general—has the right to sue for fraud. “He has a very creative legal argument,” says Ed Morrison, a Columbia Law professor, “but the hoops he has to jump through to make it a credible case are very large challenges.”
Going to court, however, was almost beside the point; Cuomo pressed his case in the court of public opinion. He blasted “unwarranted and outrageous” company junkets at AIG, which created headlines just weeks after the government rescued the company with an $85 billion loan. Cuomo threatened to sue if his office didn’t get “immediate cooperation,” successfully pressing not just for an end to the junkets, but for freezing a $600 million bonus fund as well as $19 million due to its former chief executive.
During the winter, Cuomo and his lieutenants turned much of their attention to Merrill Lynch and its disastrous merger with Bank of America. AIG was selling off assets and seemed to be behaving itself—until late one Friday night in March. Lawsky was at the bar at Bobby Van’s, a steakhouse just across the street from the stock exchange, unwinding with other attorneys from the A.G.’s office after a long day in State Supreme Court. They were worn out from arguing that Bank of America should surrender the names of the executives who’d reaped millions in bonuses even as Merrill Lynch cratered. But around 9 p.m., Lawsky got a message on his BlackBerry that startled him.
An executive at AIG had news. The company had just sent out $165 million in payments for a “retention plan” in AIG’s financial-products division, the epicenter of the company’s losses. Lawsky traded a few e-mails trying to get more details. Then he called the boss.
Why hadn’t Cuomo stopped the bonuses back in the fall when he made the deal with AIG? Critics argue that Cuomo, having already achieved the headlines he wanted, didn’t dig hard enough. Lawsky insists that’s not the case. “We didn’t miss the existence of the plan,” he says. “We certainly didn’t know about any planned payouts, and we had a very strong expectation that they were going to come to us and talk to us. We were very angry when we learned that the Fed and Treasury had cleared these payments. We were outraged.”