In my most recent column, I invoked the new year as an opportunity to look back and to reflect on the events of 2010. Now that 2011 has arrived, it's a good opportunity to look forward. As a commercial litigator working in New York, one question on my mind is whether the incoming New York State Attorney General, Eric Schneiderman, will follow the lead of his predecessors, Eliot Spitzer (known as the Sheriff of Wall Street) and Andrew Cuomo, who were perhaps best known for how aggressively they pursued Wall Street and other members of the business community. In light of the profound investigative and enforcement powers that the Attorney General enjoys, this is a question that should also be on the minds of inside counsel who fall within his jurisdiction.
Attorneys General Spitzer and Cuomo received both praise and criticism for their willingness to pursue high-profile industry investigations. Observers noted not only their zeal, but also the means they used for investigating Wall Street: New York's Martin Act, which "authorizes the Attorney General to investigate and enjoin fraudulent practices in the marketing of stocks, bonds and other securities within or from New York State." The Act's purpose may sound ordinary, but the power it grants to the Attorney General is not. The Martin Act authorizes the Attorney General to bring civil or criminal charges. Remarkably, even in criminal cases, the Attorney General need not prove scienter or criminal intent to prove a violation of the Act. And as summarized in a recent Wall Street Journal blog post, the Act grants the Attorney General sweeping investigative authority: "It enables him to subpoena any document from anyone doing business in New York and, if he so desires, keep an investigation entirely secret. People subpoenaed in Martin Act cases aren't afforded a right to counsel or the right against self-incrimination." The Act had been more or less used sparingly for years, until Attorney General Spitzer invoked it to target Merrill Lynch, the hedge fund industry and the mutual fund industry, and then Attorney General Cuomo notably investigated companies involved in the subprime mortgage crises, and others.