Ohio Attorney General Richard Cordray

is Interviewed by Pomerantz Partner Brian Hufford

 On March 31, 2010, D. Brian Hufford interviewed Mr. Cordray in his Columbus, Ohio office for The Pomerantz Monitor. Following is their conversation:

I'd like to start by congratulating you on receiving the 2010 Henry B. Gonzalez Award from the National Community Reinvestment Coalition for your "unswerving dedication to achieving economic justice for the people of Ohio."

Any award I receive is really a team award. In this case, it had to do with our efforts on foreclosure prevention and mitigation and the community partnerships we've built around the state of Ohio. We've created "Save Our Homes" coalitions of local community groups who have been working real hard to help people stay in their homes, as "foreclosure rescue" scam artists try to dig into people's pockets. The National Community Reinvestment Coalition recognized our work with community groups to build these partnerships, which I think have been important in helping thousands of Ohioans stay in their homes, even as we're having tens of thousands of foreclosure filings each year. It's been a grim problem and a difficult, complex one, and we're continuing to work on it.

Do you see that things are improving?

I'm an optimist, but I look at the numbers and say things have not improved. We had a record number of 89,000 foreclosures filed in Ohio last year. We continue to be in the midst of a serious crisis. I think it's the single biggest drag on the economy in Ohio, creating all kinds of problems for communities, neighborhoods, and local governments.

Your office sued the national credit agencies for misleading evaluations of mortgage-backed securities. What prompted you to get involved in that lawsuit?

Our clients, which in this case are the main pension systems of Ohio, feel very strongly - and I agree - that the credit rating agencies really let down investors across the country. They were rating as triple A some mortgage-backed securities that privately, they knew and acknowledged to be junk, and/or on which they hadn't done the due diligence on the underwriting to understand the tremendous risks that it turned out were involved in a lot of these exotic instruments created on Wall Street. We understand lawsuits against the national credit rating agencies are tough sledding; they have typically beaten back these lawsuits in the past, but we think the climate has changed and that the scope of their involvement in structuring these transactions has changed. We are aggressively pursuing those cases and hope to get a good result for the people we represent.

You, along with some other states' attorneys general, went after companies that processed unauthorized debits through Wachovia Bank. As a result, Wachovia will pay over $150 million in redress checks to victims, which is a substantial recovery. What are the less tangible benefits you see from pursuing these types of actions on behalf of the State?

A benefit that's tangible, but not quantifiable in dollars, is that we show we are stepping up to the plate and taking on people who take advantage of consumers. That hopefully deters others from taking advantage of consumers. This case also exemplifies how we work closely with other states. The attorneys general have recognized, going all the way back to the tobacco lawsuit in the last decade, that we have strength in numbers, and more clout as we work together. This is another great example of us working with not only state but federal officials to seek recovery, which makes us very effective.

Can you describe the process by which various attorneys general work together, how you discuss and make decisions on how to work together in pursuing cases?

It's quite an institutionalized process at this time. In the consumer protection field, for example, there are working groups in which most of the attorneys general's offices participate. Ohio is very active. When matters are identified for possible action, there typically is an executive committee of those who take on more of the labor, and we tend to be on a number of the executive committees and take the lead on these. The Medicaid fraud field is another area. We set a record last year bringing back $91 million for Ohio taxpayers, and we work very effectively not only with other state AGs, but with the federal government, who has the same interest we do, because it's a joint federal-state program. We hear people talk about waste, fraud and abuse in federal government. This is an area where we're actually doing something about it.

The State Teachers Retirement System of Ohio and the Ohio Public Employees Retirement System are lead plaintiff, along with other pension funds both foreign and national, against Bank of America, arising from its acquisition of Merrill Lynch. What led to your involvement and what you hope to achieve from your active role in that litigation?

In our view, that lawsuit arises out of terrible misconduct on the part of Bank of America, Merrill Lynch, and their officials. Bank of America wanted to merge with Merrill Lynch. This was in September of 2008; it takes several months to put a merger of that size together, so it wasn't until December of 2008 that they went to the shareholders for approval. During the three months in between, we allege - and congressional testimony has reinforced - that Bank of America came to realize that on Merrill Lynch's books there were many more bad assets than they had realized. We think it's in the $15 - $16 billion range. They had a duty, in our view, to disclose that to shareholders. They talked about doing so; they strategized on it; but they thought it would hurt their merger and decided not to say anything. Before the merger closed, the Merrill Lynch executives - the same executives that had just racked up $16 billion in bad assets on their books - wanted their yearly bonuses. I always thought a bonus was a special reward for special performance. They paid about $3.8 billion, we believe, in bonuses before the merger closed. Again, this was not disclosed to shareholders. After the merger closed and these things seeped out into the public, the stock prices crashed. The New York Times has described it as the single greatest destruction of shareholder wealth in the history of the country. And that has led to our lawsuits. We think they're good lawsuits and expect a good recovery on behalf of our pension systems, and, since it's a class action, on behalf of investors and retirees from across the spectrum.

Sometimes you've been involved in cases where Ohio is pursuing individualized damages, and sometimes as part of a class. How do you decide which angle you want to pursue?

We always think that where appropriate, a class action is a better way to go, because it's a more efficient recovery for more people. But sometimes we can't do that. Our ratings agencies case, for example, we brought specifically on behalf of Ohio pension systems. The reason is that we're suing under state law in court here, and that's often why a case can't be a class action - different states have different laws, and that just won't lend itself to uniform resolution.

In the Bank of America case, plaintiffs included funds from Sweden and the Netherlands. Given the increasingly global nature of the securities marketplace, what are your views on the kinds of legislation that may be needed to protect shareholder rights, both in the United States and internationally?

Well, that's been an interesting feature of the Bank of America case and an increasingly interesting feature of securities litigation. The victims are not simply Ohioans. They're all Americans, and frankly, more and more, they include international investors, who have invested in the American markets, who have confidence in the American markets and thought they were properly regulated, and then find to their regret that the SEC was pretty much asleep on the job for about a decade. The world is increasingly interconnected in investing and in markets. In terms of legislation, there are court cases, including one in front of the Supreme Court right now, to determine the extra-territorial rights of the American antitrust laws. I think the courts will have to continue to take a more permissive view of how our laws apply internationally. Congress may have to revisit that issue. I don't have any strong prescriptions for them at the moment, but it is certainly a different environment than it was twenty years ago, and fifty years ago. Many more international investors invest in our markets, and conversely, many more Americans invest in global markets where we're going to have to be sure that we get proper reimbursement and compensation if there are problems.

The Supreme Court eliminated aiding and abetting liability as part of the securities laws. Do you have a view with regard to whether there should be actions taken to restore aiding and abetting liability?

We think there should. I have written to Congress and urged them to re-enact aider and abettor liability, which we thought was the law, but the Supreme Court held otherwise. One of the reasons we brought our rating agencies in court here under Ohio law is that our Blue Sky Law does have aider and abettor liability, and that gives us a better chance of recovering. It is a principle throughout criminal and civil law that not only those who perpetrate a fraud but those who aid and abet them in perpetrating fraud should be held to account. I think that's the right principle and I think it should be embodied in federal law.

Your office has taken innovative steps to protect your constituents against predatory financial practices and consumer fraud. You teamed with the Better Business Bureau to introduce a real-time scam alert widget for web sites and profile pages. What is it?

We've been frustrated because the scammers are so nimble and creative that it feels like we're always chasing them. The idea of the scam alert widget is you can download it to your Facebook page or web site and then report to us when you see a potential scam, whether or not you're a victim of the scam. In turn, you'll get the most up-to-date reports on the scams and frauds we and others are seeing out there, and be forewarned in real time about things happening in real time. We urge people to download the scam alert widget from www.ohioattorneygeneral.gov to participate in the evolving mix of information - you can share with us, and we will share with you.

President Obama recently was successful, after a long battle, in getting the healthcare bill approved and signed. But at the same time, there's a lot of activity about it, including other attorneys general who are bringing lawsuits. Have you had an opportunity yet to evaluate the law and do you have a perception of what it will do for the country?

We have, and actually our focus principally has been on these constitutional challenges to the validity of the law, because I had received correspondence from the eight Republican members of the Ohio Congressional delegation and from the twenty-one Republican members of the Ohio Senate, urging me to join the lawsuits that have been filed. So we've sized this up pretty carefully. Recently I laid out my considered judgment, which is that I think the lawsuits lack merit; I think they would be a waste of taxpayer money; I think both the Commerce Clause and Tenth Amendment claims would be out of step with long-standing precedents of the kind that the people urging the lawsuits normally deplore as the work of activist judges. So we're not going to be taking our eye off our ball, which is to pursue holding Wall Street accountable, consumer protection, and what I call the financial security issues for Ohioans - that's going to remain our focus and this will not be our focus.

You have the impressive distinction of being an undefeated five-time champion and Tournament of Champions semifinalist on Jeopardy! Has your clear gift for recall and knowing facts given you an edge, you believe, in life?

My memory is not as good as it was twenty-three years ago. But the fact people think that's an impressive achievement has certainly been helpful, because it tends to give people an outsized view of my abilities and accomplishments.

The interview has been condensed and edited.

D. Brian Hufford is the partner-in-charge of American Medical Assoc. v. United HealthGroup, in which the Court appointed Pomerantz as Settlement Class Counsel and granted preliminary approval to a $350 million settlement. With Pomerantz serving as Co-Lead Counsel, Mr. Hufford was also the Court-appointed plaintiffs' spokesperson in Wachtel v. Health Net, Inc., which settled for $250 million, one of the largest settlements ever reached in a health insurance litigation. In addition, Pomerantz was selected by the Court overseeing the Aetna Health Insurance MDL to serve as chair of the Plaintiffs' Executive Committee; in doing so, the Court specifically acknowledged the work of Mr. Hufford as a critical basis for its decision.



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