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By Tim McLaughlin and Karen Freifeld
NEW YORK, June 27 (Reuters) - New York Attorney General EricSchneiderman, long seen as a secondary force in policing WallStreet banks, is taking the lead in what may be the mostambitious case of his career: accusing Barclays Plc offavoring its high-frequency trading clients.
By making a case against the bank, Schneiderman has seized alead role in a contentious dispute about whether high-frequencytraders have turned the stock market into a rigged game thathurts regular investors.
The case against Barclays could lead to investigations intoother Wall Street banks and define Schneiderman's career as anattorney general, lawyers say.
"It is the most important attack on practices in the marketthat any AG has engaged in a while," said John Moscow, a formerManhattan prosecutor who now handles white-collar defense cases.
Barclays spokesman Mark Lane declined to comment on Friday.
A former state senator and corporate lawyer, Schneiderman isfollowing a well worn path for New York attorney generals -taking on Wall Street and potentially winning political capital- and could end up, like Eliot Spitzer and Andrew Cuomo beforehim, as the state's governor. He declined to comment for thisstory.
Schneiderman, 59, graduated from Amherst College and earneda Harvard Law degree in 1982. He spent 15 years in corporatelaw, including as a partner at Kirkpatrick & Lockhart, where hehandled white-collar defense cases. He served six terms as astate senator before running for attorney general, taking thatoffice in 20ll.
Early in his tenure, Schneiderman was knocked for seemingmore like the state legislator he used to be than a prosecutor.He has been less adept at grabbing headlines than Spitzer orCuomo, and while he may have held banks accountable, he was lesslikely to push out ahead with cases.
In 2011, in his first year as attorney general, Schneidermanaccused BNY Mellon Corp, the world's largest custodybank, of overcharging pension funds on foreign currency trades,alleging the bank made $2 billion. But the civil action washardly novel, as similar cases had already been filed in otherparts of the country.
He is co-chair of a state-federal task force that in 2013settled with JPMorgan Chase & Co for $13 billion, withmore than $600 million going to New York. The bank admitted tohaving routinely overstated the quality of mortgages it sold tobond investors before the housing crisis. He also is a keynegotiator with Bank of America Corp over similarclaims. But banks have been settling with prosecutors andinvestors over these matters for years.
In contrast, Spitzer busted Wall Street with a $1.4 billionsettlement with big banks and brokerages for urging customers tobuy stocks that their analysts privately said were junk. Cuomoled a nationwide investigation into the auction-rate securitiesmarket, uncovering how the investments were marketed as safewhen in reality they faced increasing liquidity risk. Hisinvestigation resulted in more than $60 billion in investorbuybacks.
People close to Schneiderman characterize him as patient andlow-key. While Spitzer runs in Central Park in his free timeand Cuomo rides a Harley Davidson motorcycle, Schneidermanpractices yoga.
But lawyers say that banks should not be fooled bySchneiderman's demeanor. He carries a big stick, namely the Martin Act, a New York state securities law that is powerful forprosecutors because it often does not require proof of intent todeceive. Some lawyers have criticized the law as too broad, withsome saying it has been superseded by federal law.
"Another bank will pay enormous fines under a law that, inmy mind, no longer exists," said defense lawyer RobertMcTamaney, a critic of the law, referring to the Barclays case. (Reporting By Tim McLaughlin and Karen Freifeld; Editing by DanWilchins and Frances Kerry)
