Legal News

Wall Street Moving Cash Into NY Attorney General?s Race

By Ashby Jones

Is it too soon to talk about who might follow Andrew Cuomo as New York’s attorney general?

We think not. Nor does the WSJ’s Kate Kelly, who took a look over the weekend at three leading candidates, and sheds some light on where they fall vis-a-vis Wall Street. The answer: they’re not pointing fingers. Kelly writes that “some of the likeliest contenders are taking a surprisingly conciliatory tone toward Wall Street, blaming its messes more on a broken system than a culture of greed.”

Is it a smart move? Well, yes, it seems, given that Wall Street is playing a leading role in filling the candidates’ war chests. One candidate, Eric Dinallo (pictured), who resigned as New York insurance commissioner last year and now teaches ethics at New York University’s business school, raised nearly $1.8 million in the period ended Jan. 11. Hundreds of thousands of dollars came from contributors connected to Wall Street, including hedge-fund manager David Einhorn, J.P. Morgan Chase Vice Chairman James Lee, and U.S. pay czar Kenneth Feinberg.

But Dinallo (Vassar, NYU Law) is by no means running away with the fundraising contest. Plaintiff’s lawyer Sean Coffey (Navy, Georgetown) got about $1.7 million in contributions, while Nassau County, N.Y., District Attorney Kathleen Rice (Catholic U, Touro Law) collected about $1.4 million. Both Coffey and Rice received much smaller percentages of their money from Wall Street than did Dinallo, reports Kelly.

According to Kelly, the race is wide open, with at least a dozen potential candidates, the top three of which are Democrats. Wall Street, reports Kelly, is taking notice, even if it isn’t taking much heat from current or potential candidates to succeed Cuomo, who hasn’t formally announced plans to run for New York governor, but is widely expected to.

Coffey, a former Navy pilot who won $6 billion for investors in the failed telecommunications company WorldCom while a member of the Bernstien Litowitz firm, was described in a magazine article that followed his victory as “Wall Street’s New Nemesis.” He said in an interview that his reputation “is not going to be an albatross around my neck in this election.”

Not long ago, Dinallo’s words struck fear and anger into the hearts of Wall Street. As bureau chief of Spitzer’s investor-protection division in the early 2000s, he pushed for using a New York law called the Martin Act to expose fraud. The move cleared the way for aggressive cases that helped rid the industry of disingenuous stock research and the practice of “spinning,” or directing hot-stock shares in exchange for financing business, on Wall Street.

In 2003, Mr. Dinallo became a lawyer at Morgan Stanley, then had a post in the insurance industry before taking over as New York’s top insurance regulator in 2007.

And what to make of Dinallo’s Wall Street fundraising efforts so far? Eric Pan, a corporate- and securities-law professor at Cardozo, said even Spitzer “would be uncomfortable if [he] got a lot of money from Wall Street in the current environment.” Still, given Dinallo’s record as insurance commissioner, he “should not be perceived to be in the back pocket of Wall Street.”

Full post as published by Law Blog - WSJ.com on January 25, 2010 (boomark / email).