New York’s AG Forms New Bureau to Fight Complex Financial Crimes

By | January 21, 2014

New York Attorney General Eric Schneiderman expanded an existing criminal bureau to include a focus on financial wrongdoing two years after Governor Andrew Cuomo created a regulator with a similar mandate.

Gary Fishman, 44, a former state prosecutor in the Manhattan District Attorney’s Office, will serve as chief of the Criminal Enforcement and Financial Crimes Bureau, an expansion of the Criminal Prosecutions Bureau, the attorney general’s office said on Jan. 17 in a statement.

“Financial industry leaders who play by the rules deserve a level playing field, and those bad actors who seek to take advantage of their competitors and their neighbors must be stopped and punished,” Schneiderman said in the statement.

New York has intensified market enforcement since the financial crisis. In 2010, Manhattan District Attorney Cyrus Vance Jr. formed a major economic crimes unit, where Fishman was principal deputy chief. This was followed by Cuomo’s 2011 merger of state insurance and banking regulators into a Department of Financial Services under Benjamin Lawsky, a top prosecutor when Cuomo was attorney general.

Schneiderman’s office said on Jan. 17 that it won’t pursue damages claims against Bank of America Corp. related to its 2009 Merrill Lynch acquisition. The attorney general is still pursuing the case without that claim, said Matt Mittenthal, a spokesman for the office. The lawsuit also seeks an injunction barring individuals from the securities industry and from serving on public boards.

Merrill Deal

The state accused Charlotte, North Carolina-based Bank of America of misleading shareholders about losses at Merrill Lynch to win approval of the $18.5 billion deal and then manipulating the federal government into contributing bailout funds from the Treasury Department’s Troubled Asset Relief Program to complete it.

Lawrence Grayson, a Bank of America spokesman, declined to comment on the New York attorney general’s decision to no longer pursue damages in the state court case.

Fishman joined Schneiderman’s office in 2012 as senior investigative counsel to the Division of Criminal Justice and led the probe of the Metropolitan Council on Jewish Poverty over the theft of charitable funds.

He served in the Manhattan D.A.’s office for more than 15 years, where he helped lead investigations into foreign financial institutions that bypass sanctions on countries including Iran that led to deferred-prosecution agreements with Lloyds Banking Group Plc, Credit Suisse Group AG and Barclays Plc.

‘Illicit’ Activities

The attorney general’s new bureau will focus on fighting complex financial crimes in banks and financial institutions, as well as securities and investment fraud, money laundering, mortgage fraud, investment schemes and insurance fraud. It will probe “illicit financial activities” and track the flow of suspicious funds to identify trends and help investigators, according to the statement.

Schneiderman’s office has the power to initiate criminal investigations and prosecutions on its own or at the request of the government or state agencies such as the Department of Financial Services, according to its website.

Lawsky’s department monitors about 1,900 banks and other financial institutions with assets of more than $2.9 trillion and almost 1,700 insurance companies with more than $4.2 trillion, according to its website. The department’s financial frauds division pursues civil and criminal probes.

Lawsky spent four years as the top financial crimes prosecutor under then-Attorney General Cuomo, and took part in his effort to force banks that received taxpayer bailouts to disclose information about bonus payments.

Schneiderman also announced the appointment of James G. Sheehan, 61, as head of his office’s charities bureau, which oversees not-for-profit corporations and charitable trusts.

Sheehan, now the chief integrity officer at the New York City Human Resources Administration, served as a federal prosecutor in Pennsylvania for more than 25 years, and as Medicaid inspector general for New York state from 2007 to 2011.

With assistance from Jeremy R. Cooke in Boston, Christie Smythe in federal court in Brooklyn, New York and Edvard Pettersson in Federal court in Los Angeles. Editors: Andrew Dunn, David E. Rovella

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