SASHA MASLOV FOR THE NEW YORK TIMES
By BEN PROTESS and JESSICA SILVER-GREENBERG
MAY 20, 2015
It has been a grim few years for the banks that Benjamin M. Lawsky regulates. He threatened to pull their licenses, fined them hundreds of millions of dollars and forced dozens of their employees to resign.
Now, much to Wall Street’s delight, the New York State regulator will be leaving government to start his own legal and consulting firm.
Mr. Lawsky, a onetime Democratic aide and former federal prosecutor, announced on Wednesday that he would vacate his post as the state’s overseer of banking and insurance in late June, capping a polarizing four-year tenure that shook up the sleepy world of financial regulation in New York. With cases against the likes of Deutsche Bank, Standard Chartered and PricewaterhouseCoopers, Mr. Lawsky cemented his reputation as the new sheriff of Wall Street — and as a burr in the side of the financial industry and even some fellow regulators.
Mr. Lawsky’s departure will set off speculation about whom Gov. Andrew M. Cuomo will select as his successor. Although those discussions are in their infancy, people briefed on the matter said, names of possible contenders are circulating: Michele Hirshman, a former federal prosecutor and a partner at Paul Weiss; Hector Gonzalez, another former prosecutor who is a partner at Dechert; Marshall L. Miller, a senior Justice Department official; and Jonathan Schwartz, a former JPMorgan Chase executive who is now the general counsel of Univision. Bridget M. Healy, ING’s top lawyer in the United States, is also thought to be in the running.
Timeline | Key Cases for the Sheriff of Wall Street Benjamin M. Lawky’s four-year tenure as New York’s overseer of banking and insurance shook up the sleepy world of financial regulation in New York.
Mr. Lawsky’s departure from the Department of Financial Services — an agency created in the aftermath of the financial crisis by Mr. Cuomo — was announced on the same day that Mr. Lawsky filed his latest enforcement action, a case against Barclays for manipulating foreign currencies. As part of that action, which also involved the Justice Department, Mr. Lawsky forced the bank to dismiss several employees.
“I am deeply proud of the work our team has done building this new agency and helping strengthen oversight of the financial markets,” Mr. Lawsky said in a statement.
Such cases thrust him into the public spotlight, a position he embraced, with supporters and detractors alike presenting outsize portraits. In 2013, The Village Voice splashed on its cover an illustration of Mr. Lawsky, whom they called “Johnny Lawsky,” donning a cowboy hat and sheriff’s badge. In contrast, after Mr. Lawsky released plans to regulate virtual currencies, an online image surfaced of him seated atop the “Game of Thrones” locus of power with the caption “Hail King Lawsky.”
Mr. Lawsky, who has spent his entire two-decade legal career in government, plans to open his own firm and serve as a lecturer at Stanford University, the people briefed on the matter said.
Both roles are likely to center on cybersecurity, a growing area of the law that Mr. Lawsky has focused on as a regulator. At Stanford, he will be a visiting scholar at the school’s cyber initiative.
And with Mr. Lawsky’s own firm, which will be based in New York, he will provide compliance and risk management advice to a range of companies grappling with data breaches and other technological challenges. His clients are likely to include technology companies.
Of all the career moves Mr. Lawsky pursued, a law firm start-up seemed the least likely. Mr. Lawsky spoke with a number of companies in recent months, generating speculation that he would take the typical path through the so-called revolving door. Mr. Lawsky — a onetime aide to Senator Chuck Schumer and Mr. Cuomo, the latter of whom appointed Mr. Lawsky to run the Department of Financial Services — is also thought to harbor political aspirations.
When Mr. Cuomo created the Department of Financial Services in 2011, he handed the reins to Mr. Lawsky, his longtime aide and former chief of staff. The decision consolidated regulatory oversight into a single agency, but it also served to grab power and headlines from one of Mr. Cuomo’s political rivals, the New York attorney general, Eric T. Schneiderman. And the fines Mr. Lawsky collected became a revenue stream for the state, with Mr. Cuomo recently trumpeting the money as “basically a gift from above” that he will use for infrastructure upgrades and other expenses.
Mr. Lawsky became synonymous with the agency, delivering speeches and generating enforcement cases that made him a favorite among consumer advocates and critics of Wall Street. An Occupy Wall Street group even created a website to champion Mr. Lawsky as the candidate to replace Attorney General Eric H. Holder Jr.
The media attention — and his aggressive streak — drew comparisons to another prominent New York prosecutor, Eliot Spitzer. And like Mr. Spitzer, Mr. Lawsky came to be seen by some banks as a symbol of prosecutorial overreach.
It started with Mr. Lawsky’s case against Standard Chartered, the big British bank suspected of transferring billions of dollars on behalf of companies in Iran and other sanctioned nations. When Mr. Lawsky filed an order against the bank in August 2012, he ran ahead of several other government agencies that had been investigating the bank for years, unnerving Wall Street firms and rankling his regulatory and prosecutorial counterparts.
By threatening to revoke Standard Chartered’s license to operate in New York — the corporate equivalent of the death penalty — Mr. Lawsky secured a $340 million punishment from the bank. And when he caught Standard Chartered backsliding two years later, he imposed another $300 million penalty.
Mr. Lawsky made those cases of corporate recidivism a centerpiece of his enforcement agenda. For example, he twice penalized the Bank of Tokyo Mitsubishi over concerns about routing tainted money through the United States.
And his fines often surpassed those that federal authorities secured. In the initial Bank of Tokyo Mitsubishi case, Mr. Lawsky obtained a $250 million settlement, nearly 30 times what federal regulators received.
Despite the tension, Mr. Lawsky collaborated with other agencies on a number of recent Wall Street cases, including actions against BNP Paribas, Credit Suisse and Commerzbank. He remained something of a wild card, though, because he held a weapon that the others did not: the threat of revoking a bank’s license.
Banks complained that the threat amounted to a shakedown. Faced with the choice of settle or die, the banks understandably chose to settle.
Even so, Mr. Lawsky still prohibited BNP from certain business practices in New York. And in actions against consulting firms that advised the banks he regulated, he temporarily banned Deloitte and PricewaterhouseCoopers from certain assignments in the state.
Mr. Lawsky, a 45-year-old triathlete who walked onto the basketball team at Columbia, has never held a full-time position at a law firm. He spent a summer at Paul Weiss while attending Columbia Law School, but has worked in the government ever since graduation.
Still, his legal connections run deep. Mr. Lawsky, who was born near a naval base in San Diego and grew up in Pittsburgh, is married to Jessica Roth, a former litigator and prosecutor who is a professor at Cardozo Law School. And her father, Paul Roth, is a prominent investment funds lawyer. The guest list at Mr. Lawsky’s son’s bris included Theodore V. Wells Jr., a close friend of Mr. Roth’s and one of the country’s top trial lawyers as a partner at Paul Weiss.
Years later, Mr. Wells and Mr. Lawsky crossed paths in a more painful setting: Mr. Wells defended Standard Chartered and Deutsche Bank as Mr. Lawsky was penalizing them.