Schneiderman’s Legacy in Financial Cases May Survive His Downfall
Posted May 9, 2018 2:11 p.m. EDT
NEW YORK — The job of New York attorney general over the past two decades has proved to be a launching pad for aspiring politicians who used their legal authority to go after Wall Street hucksters, corrupt politicians and real estate scofflaws.
It was a strategy laid out by former Gov. Eliot Spitzer and by Gov. Andrew Cuomo, who had both held the role. And Eric T. Schneiderman showed no reservation in following a similar playbook when he went after the big banks for mortgage abuses and the ride-hailing company Uber for its use of customer data.
Schneiderman’s confrontations with President Donald Trump, mainly through a series of lawsuits to counter the administration’s attempts to roll back environmental and financial regulation, bolstered his national profile and played especially well in progressive political circles.
Now Schneiderman’s legacy is in tatters, after he said on Monday that he would resign in the wake of a report in The New Yorker about allegations that he physically assaulted four women he had dated.
Before his sudden downfall, there was no denying that Schneiderman, 63, had a knack for getting results and getting attention during his more than seven years as attorney general. A former state senator, he brought a politician’s approach to the job, announcing investigations both large and small and issuing news releases galore.
Just last month, his office issued 42 news releases. Their topics ranged from guilty pleas in an investigation of a dogfighting ring on Long Island to a lawsuit against the federal Environmental Protection Agency.
The eclectic nature of Schneiderman’s cases is indicative of the broad mandate of the New York attorney general. But critics say it also suggests a scattershot approach that tried to do too much and spread him thin.
Consider the 2013 case against a group of payday lenders, firms that make high-interest small-dollar loans. In announcing the lawsuit, Schneiderman said the firms had charged interest rates as high as 355 percent to thousands of state residents, and he vowed to “stop companies that seek to prey upon consumers.” He noted the finance charges on loans to nearly 18,000 New Yorkers had exceeded more than $185 million.
But in settling the lawsuit less than six months later, Schneiderman agreed to a deal that required the lending firms to pay $1.5 million in penalties, stop charging interest on any outstanding loans and provide refunds to some borrowers.
“The office issued news releases relating to investigations at a dizzying rate, with less emphasis on follow-through or actual results,” said Caroline Polisi, a white-collar defense lawyer who has appeared as a legal commentator on cable news shows. But Polisi added that there had been considerable substance to a number of Schneiderman’s investigations as well as some major successes.
Schneiderman’s big accomplishment in going after Wall Street were the billions of dollars in penalties that he helped secure from big banks that had sold flawed mortgage-backed bonds during the run-up to the financial crisis. He ensured that some of that money went to help communities across the state that were overrun by abandoned houses and foreclosures — often referred to as “zombie homes.”
His legal team was one of the first in the nation to target banks for sponsoring nontransparent trading platforms called “dark pools,” which allowed high-speed trading firms to take advantage of investors. In 2016, Schneiderman and the Securities and Exchange Commission announced a $154 million settlement with Barclays and Credit Suisse to resolve allegations that the banks had permitted traders to misuse their dark pool platforms.
Three years ago, he opened an investigation with the Massachusetts attorney general into whether Exxon Mobil deliberately misled the public and investors about the impact of climate change.
In 2015, Schneiderman’s office opened an investigation into the mortgage practices of Caliber Home Loans, a fast-growing lender, but has said nothing about the inquiry since then.
A spokeswoman said that the office generally avoided providing details about the number of open investigations. But Barbara Underwood, who was named New York’s acting attorney general on Tuesday, said in a statement that the office’s “work continues without interruption.”
Schneiderman, over the past year, has positioned himself at the vanguard of legal challenges by state attorneys general to the Trump administration’s efforts to roll back regulation — especially environmental rules. Last month, he and more than a dozen states sued the EPA for failing to properly control methane pollution, a greenhouse gas.
He became an early thorn in the side of Trump by filing a lawsuit against Trump University in 2013, accusing the school of taking advantage of thousands of customers and running a “bait and switch” educational program. But some critics said the $25 million settlement that Schneiderman secured in 2016 was too low.
Gerald Lefcourt, a criminal defense lawyer in New York, said Schneiderman’s “dark-side demons shouldn’t obliterate his many admirable positions and accomplishments.”
There was a time when the position of New York attorney general was a rather sleepy one and did not garner the kind of national media attention it now often does. For decades, the office was best known for bringing consumer protection cases and had remarkable little turnover. Louis J. Lefkowitz, a Republican, held the post for 22 years, through 1978. His successor, Robert Abrams, a Democrat, was attorney general for 15 years.
But the job took on a different cast with the 1998 election of Spitzer, a Democrat who dusted off a little-known state law called the Martin Act to aggressively pursue allegations of criminal and civil wrongdoing on Wall Street. The job of state attorney general was soon seen as a steppingstone for aggressive lawyers with big political aspirations.
Spitzer used the post to launch his successful campaign for governor, an office he was forced to quit over the fallout from a federal investigation into secretive payments he allegedly made to several prostitutes.
Cuomo also used the attorney general’s office to catapult him into the governor’s mansion. Like Schneiderman, he drew criticism from some quarters for over-publicizing his office’s actions to get attention.
But with Schneiderman now out of the picture, the job’s high profile is expected to entice a wide array of state politicians to seek to replace him.