One of five officials co-chairing the working group, Schneiderman was a natural choice to launch the first attack. New York prosecutors have been working on their investigation since spring 2011. And Schneiderman has a powerful weapon to punish Wall Street — the state’s Martin Act.
The law gives “gives an immense amount of power to the New York attorney general,” said David Reiss, a Brooklyn Law School professor who has written about mortgage markets, predatory lending and housing policy. Under the Martin Act, the state has a lower burden of proof than proceeding with a similar suit in federal district court, Reiss said. “It makes New York courts an attractive vehicle to push certain issues,” he said. (Schneiderman drew laughter Tuesday when he said “we have an extraordinary judiciary in the state of New York” — a nod to the home court advantage the law gives him.)
The JPMorgan case has a “well-worn path” in the New York state courts, said Robert Kurucza, a partner in Goodwin Procter in Washington and former director of the Securities and Corporate Practices Division of the Office of the Comptroller of the Currency.
Successive state attorneys general have used the breadth of the Martin Act to pursue civil claims that might otherwise fall within the jurisdiction of federal financial regulators, and the JP Morgan suit is “carrying on the tradition,” Kurucza said.
“Given the subject matter and magnitude of it, we can anticipate actions by the New York attorney general are likely to continue,” Kurucza said. “Clearly, the banking industry is trying mightily to put these cases behind them.”
Schneiderman on Tuesday said additional suits would be forthcoming. He didn’t elaborate on timing, and he didn’t say whether subsequent cases would end up in federal district court.