NEW YORK — In his four years as New York's attorney general, Andrew Cuomo had his way with Wall Street, muscling banks and bankers into paying fines, making reforms and eating crow for their errors during the financial crisis.
Few bothered to fight back. Most figured it was smarter to take their lumps than risk a public showdown, even in instances where Cuomo appeared to lack clear authority to investigate or regulate.
But finally, Cuomo has a battle on his hands – just as he is leaving office.
Steven Rattner, the financier who led the Obama administration's restructuring of the auto industry and is connected to the city's most rich and powerful people, called Cuomo a bully and said he'd see him in court after the two men failed to reach a deal to resolve civil wrongdoing charges in an influence-peddling scandal.
For months, the two had been at odds over what kind of penalty Rattner should pay for being among a number of money managers who tried to curry favor with state officials while trying to land lucrative government pension fund investment deals in 2004 and 2005.
The juiciest allegation was that he helped the brother of a state official get a DVD distribution deal for his stalled film project.
Whatever negotiations the two sides had finally failed this autumn, when Cuomo – as he campaigned to become governor – demanded that Rattner pay a far stiffer fine than anyone else involved in the case.
When Rattner resisted – as he promoted his book about overhauling the auto industry – the attorney general got a chance to wield the stick he often brandishes, but rarely uses. He sued Rattner for $26.2 million and sought to have him banned from the securities industry for life.
At that point, Rattner, who had settled identical allegations with the SEC for $6.2 million, abandoned the safe course, first saying in a press release that he "wouldn't be bullied" into paying a fine he considered extortive, and then accusing Cuomo of behavior unbecoming to the state's highest elected official.
"Over the past 15 months ... I have been subjected to every kind of threat of prosecution and punishment known to man practically," he told journalist Charlie Rose – a personal friend – in a program broadcast Nov. 22.
"I don't think as a prosecutor you should let emotion get in the way. You should deal with facts. The SEC looked at facts and came to a set of conclusions. Andrew Cuomo chose instead to rely on his emotions."
He added, "This is not the kind of behavior I think we want out of an attorney general or a governor."
Cuomo hasn't commented, but spokesman Richard Bamberger said anyone familiar with the facts of the case would find Rattner's claim that he had done nothing wrong, "ridiculous."
In calling Cuomo a bully, Rattner was merely repeating a charge that has been lobbed against New York's governor-elect since his earliest days in politics.
As an aide to his father, Mario, Cuomo was nicknamed "The Prince of Darkness" for serving as the campaign's enforcer. Wall Street types have grumbled about Cuomo's sharp elbows, too, but not publicly – in part because that for all his toughness, Cuomo also had a reputation for being willing to settle his regulatory actions quickly, on terms far less expensive than a court fight.
Even federal officials have had issues with Cuomo's aggressiveness.
In a report, the SEC's inspector general revealed that the commission delayed its fraud lawsuit against Goldman Sachs by a day to avoid stealing thunder from a Cuomo announcement of a settlement in the pension fund kickback case. SEC Chairwoman Mary Schapiro said she was worried Cuomo would be "very upset" if the commission trumped his announcement.
As attorney general, the tough-guy approach served Cuomo well. It is unclear how it will fare in Albany. The last crusading attorney general to take the office, Eliot Spitzer, bragged that he was a political "steamroller," but his style as an intimidator doomed his initiatives, even before he lost his office in a prostitution scandal.
Cuomo's legal battle with Rattner is filled with subtleties about where to draw the line between legal influence-building and outright corruption.
Regulators said that in addition to the DVD distribution deal, Rattner's firm, The Quadrangle Group, also agreed to pay $1 million in unnecessary "placement agent" fees to the state comptroller's top campaign aide.
Neither side has an easy argument, and while Cuomo's office and the Securities and Exchange Commission have filed civil suits and criminal charges against several financial advisers and state officials, everyone involved in the matter has sought to keep it out of a courtroom.
Financial firms collectively paid more than $150 million in penalties to put the matter behind them. Everyone facing a criminal charge has pleaded guilty, though usually to lesser counts unlikely to carry jail time.
It is unclear how much Cuomo will be engaged in the case going forward.
In a matter of weeks, he will turn over the attorney general's office to Eric Schneiderman, another Democrat
The big question may be whether Schneiderman is willing to break from Cuomo's view and adopt the more moderate stance taken by the Securities and Exchange Commission.
Rattner, a former New York Times reporter who made a fortune on Wall Street and counts his former newspaper's publisher and billionaire Mayor Michael Bloomberg among his closest friends, has the money to fight indefinitely if he chooses.
"I am more in a fighting mode today than I was two weeks ago," he told The Wall Street Journal in an interview Nov. 29, although he added that he was ready to settle at any time – for a fine within reason.
Rattner has also brandished a stick of his own, threatening to raise Cuomo's conduct in the case as an issue in the litigation.
Already, the financier's lawyers have sought records from people involved in the case, including former state officials who have pleaded guilty to criminal charges. They have filed a lawsuit accusing partners at his former firm, the Quadrangle Group, of selling him out and taking his money, and asked a judge to force Cuomo's office to turn over any correspondence his staff had with journalists.