Auction-Rate Securities scandal rocks Merrill Lynch - New York State Attorney General Andrew M. Cuomo ready to move to ensure his Governorship
Joseph Purdue
Aug. 16, 2008

New York has subpoenaed about 25 firms involved in sales of auction-rate securities, including five that have already settled, he said.

New York State Attorney General Andrew M. Cuomo stepped up pressure yesterday on Merrill Lynch and Goldman Sachs to settle claims that they misled investors in auction-rate securities after Wachovia agreed to buy back about $9 billion of the bonds.

The larger the firm, the larger the portfolio, the more intense our effort," Cuomo said. "We have an ongoing investigation with Goldman Sachs. In the course of investigations we''re also having discussions."

Wall Street insiders point to the fact that like Spitzer, Cuomo wants to establish himself strong in the political map. He wants to make sure his seat in the NY Governor’s mansion is secured.

According to Bloomberg, Mark Herr, a Merrill spokesman, said in a statement following Cuomo's news conference, "we were surprised that New York sent us a letter threatening legal action on auction rate securities. We have been discussing this issue with New York and other regulators since we announced last week our plan to purchase our retail clients'' ARS and we thought we were making progress. We anticipated further talks."

Goldman spokeswoman Andrea Raphael, repeating comments made Thursday said that the New York-based investment bank was "cooperating fully with all regulators" and "working with clients to address their liquidity needs."

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