A Choir Boy Battles Wall Street

Richard Cordray lives in a 130-year-old brick farmhouse near Grove City, Ohio, just four miles from the modest home where he polished his jump shot growing up. He played varsity basketball for the local high school and was valedictorian. In 1987, Cordray won $45,303 on the game show Jeopardy!, retiring as a rare five-time champion. Now, Cordray, 50, is his home state's attorney general. His ethics appear above reproach. When the Dayton Daily News endorsed him for attorney general in 2008 it called him a "choir boy"—a comparison that almost understates the perfection of his résumé. Choir boys sometimes sing off-key.

On Wall Street, Cordray is seen less as too-good-to-be-true than as the heir of pit bull prosecutors-turned-politicians such as Eliot Spitzer and Rudy Giuliani. In the past year, Cordray, a Democrat, has sued Merrill Lynch for allegedly misleading investors and former American International Group (AIG) executives for alleged accounting fraud—winning settlements of $475 million and $115 million, respectively. He's the lead plaintiff in a multistate suit against Bank of America (BAC) alleging that the firm withheld bad news from investors just before its 2009 acquisition of Merrill Lynch. More recently, Cordray has taken on bond-rating agencies Standard & Poor's (MHP), Moody's Investors Service (MCO), and Fitch Ratings, which he says deliberately gave triple-A ratings to junky debt to win fees and retain business. "Some Wall Street corporations seem to act with complete and total disregard for the work of regular Ohioans," says Cordray. "My central goal, and the goal of this office, is to protect those hard-working Ohioans."

...

In suing the rating agencies, Cordray is taking on his biggest challenge yet. The firms may be vilified by people angry about the credit crisis, but they're also tough legal competitors. Over the years the ratings firms have succeeded many times in persuading courts that bond ratings are nothing more than editorial opinions, and thus are subject to free speech protection under the First Amendment of the U.S. Constitution. In 1997, Orange County, Calif., lost a suit against Standard & Poor's on these grounds.

...

Cordray, a corporate lawyer for two decades who has argued seven cases before the U.S. Supreme Court, is bringing in top-flight private litigators for the fight...

While Cordray says he's eager to take on BofA and the ratings agencies, he doesn't want a protracted court fight. He isn't unique among attorneys general, who have historically fought corporate foes in public forums and settled before going to trial...

If Cordray beats the odds and wins a splashy settlement with the ratings agencies, it would certainly bolster his chances of winning the governor's race in 2014. That's if he decides to run, of course. For now, Cordray says he intends to focus on his job as Ohio's top prosecutor. "The key is to do a good job now." A good job for Ohioans might not win him many friends on Wall Street.

Read the full article here.