President Obama's nominee for head of the new Consumer Finance Protection Bureau, Richard Cordray, was dubbed a "choir boy" by a local newspaper when he ran for attorney general in Ohio in 2008. Wall Street firms probably had a different nickname for him after he sued Bank of America, American International Group, Standard & Poor's and Moody's for various financial misdeeds during his single term as AG, winning hundreds of millions of dollars in settlements.
The animosity of financial types no doubt had a big role in Cordray's defeat to Republican Michael DeWine in 2010. Cordray was wildly popular with one well-heeled segment of the financial industry, however: Securities class-action lawyers. Lawyers at Labaton Sucharow contributed $125,000 to various Cordray campaigns between 2008 and 2010, according to Ohio campaign-finance records. Delaware-based Labaton represented Ohio in the AIG case, which it settled last year for $1 billion including something like $90 million in fees (the final fee payout, surprisingly, isn't on the AG's website).
Lawyers at crosstown Delaware rivals Grant & Eisenhofer ponied up $25,000 for the Cordray campaign; they represented the state in a lawsuit against Marsh & McClennan that netted the state's outside lawyers 13% on a $400 million settlement. Other out-of-state law firms that took a keen interest in Cordray's campaign included Atlanta's Chitwood Harley, which gave $146,000; Berman deValerio of San Francisco and New York's Bernstein Litowitz, known for its generosity in seemingly obscure state political races, which gave $50,000.
Cordray's foes in the financial world are sure to challenge his nomination, just as they managed to keep Harvard prof Elizabeth Warren from even getting to a vote. His record of taking money from lawyers who profit from private litigation that often follows closely on the heels of government investigations could provide fodder for his enemies. The new bureau could make plenty of work -- deliberately or not -- for these firms simply by going after various broadly distributed consumer financial products. The hubbub and incriminating documents that result from such probes would provide grist for not just consumer class actions, but the inevitable securities suit claiming executives caused their company's stock to fall by marketing products that drew the Bureau's ire.
It's these sort of cozy ties between regulators and a particularly profitable segment of the legal industry that led critics to attack the Financial Crisis Inquiry Commission, whose members included lawyer Byron Georgiou, who made a fortune at Bill Lerach's old firm, Robbins Geller; and Phil Angelides, who as California Treasurer also sat on the state's two main pension funds and brought plenty of business to Lerach and other class-action firms. It's not just big banks and industrial companies that try to influence and profit from the government agencies that they do business with. The entrepreneurial, highly profitable business of filing class actions has its own reasons to stay close to government regulators.
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