A version of this story was co-published by ProPublica and the Albany Times-Union.
In early 2007, when he was New York State attorney general, Andrew Cuomo brought on a longtime confidant as a consultant on mortgage industry investigations, a move that has gone undisclosed until now.
The friend was Howard Glaser and he had another job at the same time: consultant and lobbyist for the very industry Cuomo was investigating.
Glaser, who went on to become a top state official in Cuomo’s gubernatorial administration, was operating a lucrative consulting firm, the Glaser Group, with a host of mortgage industry clients.
Later that year, Glaser provided insights on Cuomo’s investigations to industry players on a conference call hosted by an investment bank.
Cuomo’s office ended up giving immunity to one of Glaser’s clients a year into his term as attorney general.
In the end, experts say, the mortgage investigations Cuomo touted as “wide-ranging” came to little, even as he held one of the country’s most powerful prosecutorial positions through the financial crisis and its aftermath.
Glaser’s role in the attorney general’s investigations was disclosed to ProPublica in response to a public records request. The extent of his work is unclear, as is how long it lasted. Glaser told ProPublica the scope of the work was limited. While it was a formal arrangement, it was unpaid.
Cuomo’s office referred questions to Steven Cohen, who was chief of staff when Cuomo was attorney general. “There is no doubt Glaser provided advice to the governor when he was attorney general,” said Cohen. “The role he served was as a general consultant on the industry overall. He did not provide advice on specific investigations.”
Glaser also said that, despite the investment bank conference call, he never advised clients on Cuomo investigations.
One person who worked in the mortgage industry during that time said Glaser had a reputation as having Cuomo’s ear.
“If you needed to get to Cuomo, Glaser was the guy to go to,” the person said.
Before becoming a lobbyist for the mortgage industry, Glaser worked in the late 1990s under Cuomo at the Department of Housing and Urban Development, where he was known as Cuomo’s “right-hand man” and “hammer.”
Glaser declined to release a list of his clients from the period he worked for the attorney general.
A 2008 bio said his clients included “mortgage insurance companies, real estate and housing trade associations, mortgage bankers, and investment research companies.”
Glaser’s dual role when Cuomo was attorney general “poses a serious conflict of interest,” said Craig Holman of Public Citizen.
At least two of Cuomo’s early investigations involved firms that Glaser acknowledged to ProPublica were his clients. The client that was granted immunity in return for cooperation was the mortgage due diligence firm Clayton Holdings.
Clayton ended up being at the center of the mortgage fiasco. The Connecticut firm worked for banks such as JP Morgan and Merrill Lynch, examining whether the mortgage loans the banks were buying from lending institutions (such as Countrywide) met the lenders’ standards for credit worthiness. The banks would package those loans into securities that were then sold to investors.
Cuomo subpoenaed Clayton in mid-2007 before coming to a deal in January 2008 in which he granted the firm immunity from civil and criminal prosecution in exchange for information about its dealings with the banks.
It’s not clear whether Cuomo used the information he got from Clayton, though it did come up in a case brought by Cuomo’s successor. Clayton data showing how the banks bought, packaged and sold off bad loans was considered key to understanding the complex deals that led to the crisis.
Clayton has never been charged with any wrongdoing. But some reporting has shed light on the firm’s relationship with the big banks.
Clayton workers interviewed by two veteran business reporters for the book Chain of Blame reportedly said they were under pressure “to pass as many loans as possible.”
In the book, Clayton workers recall quotas of one loan per hour, higher-ups changing negative determinations, and “that they were told by their supervisors at Clayton never to use a certain word — ‘fraud.’”
Noting that Cuomo had the power to subpoena Clayton for documents without granting immunity, Erik Gerding, a law professor and author of Law, Bubbles, and Financial Regulation, raised questions about the deal.
“The first question is, why do they need immunity? The second question is, what did the prosecutors get that they otherwise wouldn’t have gotten without immunity?” Gerding asked.
Clayton declined to comment.
When the New York Times broke the news of Cuomo’s immunity deal with Clayton, Glaser was quoted in the story — though the piece did not mention Glaser’s work for either Clayton or Cuomo.
Glaser said Clayton had separate counsel in its dealings with the attorney general’s office. Further, Glaser said the attorney general’s office “never talked about those specific cases with me.”
He added that he was brought in to the attorney general’s office at the beginning of Cuomo’s tenure because he had warned of problems in the industry.
Glaser provided a copy of a March 2007 email to top Cuomo aides in which he outlined ideas for the attorney general’s office “to obtain relief and a good public policy outcome on several fronts.”
The attorney general’s office denied our request for other Glaser emails, citing an exemption in the state’s freedom of information law.
A second Cuomo case involving Glaser clients was the attorney general’s attemptsto reform appraisal standards via deals with mortgage giants Fannie Mae and Freddie Mac.
(Politico reported in 2008 that Glaser was appearing on TV commenting favorably on the government’s efforts to prop up Fannie and Freddie without revealing his work for the faltering companies.)
Glaser said Fannie and Freddie had separate representation with the attorney general’s office in that investigation.
Another curiosity about Glaser’s role is that he was a frequentcommentator on Cuomo’s investigations, both to the press and to industry players. He was usually identified as simply a mortgage industry consultant or occasionally as a lobbyist.
While Glaser denies having advised clients about Cuomo’s investigations, he did just that with industry players. In a November 2007 conference call hosted by the investment bank Keefe, Bruyette & Woods, Glaser held forth about Cuomo’s investigation of inflated appraisals of homes, according to an account in American Banker.
American Banker reported that Glaser “said it is doubtful the attorney general is seeking ‘record-breaking fines’ or to subject lenders to the pain of loan repurchases ‘unless…the industry does not respond to his desire to implement prospective change.’”
Glaser said he was not compensated for “a few” analyst calls he did for Keefe, Bruyette & Woods.
His firm, the Glaser Group, described itself as “the unparalleled leader in Washington for government affairs strategies and analysis specializing in the financial services and mortgage finance arena.”
In early March 2007, during the period he was working for Cuomo’s office, Glaser registered as a lobbyist for a client, a large cooperative of mortgage banks called Lenders One. In an unusual filing more than two years later, he said the lobbying had ended the same day it started.
Glaser said he never “did anything material” for Lenders One as a registered lobbyist.
Glaser also said he never worked for the ratings agencies, who were key players in the run-up to the financial crisis and got immunity in a deal with Cuomo that critics later questioned.
It’s not uncommon for outside consultants to be brought into complex investigations, according to James Tierney, director of the National State Attorneys General Program at Columbia Law School.
“The key is full transparency,” he said, both from the consultant to the prosecutors and from the prosecutors to the public.
“Who are your other clients? And how much are you getting paid by them?” are among the questions prosecutors should ask any consultant, said Tierney, who was previously the attorney general of Maine.
Gerding, the law professor who wrote a book on financial crises, recently studied the crisis-era record of state attorneys general and came away surprised by how few cases Cuomo brought.
“It is pretty striking if you look at all the press releases how few of them really deal with the financial products that were at the heart of the crisis,” Gerding said.
Cuomo nevertheless won his bid for the governor’s office partly by claiming a tough record of going after Wall Street and corporate greed.
After his stint advising the attorney general’s office, Glaser went on to help on Cuomo’s gubernatorial campaign, with a focus on defending Cuomo’s HUD record on mortgage issues.
Glaser then joined the Cuomo administration in the powerful role of director of state operations. He left that post last month to become an executive at OTG Management, an airport development company that lobbies New York officials.
In emailed statements and a series of tweets as we were reporting this story, Glaser criticized ProPublica and it founding chairman and largest funder, Herbert Sandler.
Last month, Glaser said in an email:
Ironically, Herb Sandler, the founder of ProPublica, was a pioneer in the exotic lending business, although the controls he put in place as a portfolio lender were discarded by other players as these products morphed their way into the secondary/investor market; nonetheless ProPublica is built on the fruits of the exotic mortgage market through the fortune Herb made at Golden West and World Savings
This month, he emailed:
In 2006, when propublica’s billionaire subprime founder was denying any problems in the mortgage industry, and continuing to flood the mortgage market with abusive loans, I was warning of the devastating impacts of these toxic loan products and calling for stricter regulation. As Attorney General, Andrew Cuomo held financial institutions accountable, returned billions to investors, and forced lenders to adopt sweeping reforms. Propublica was built on the backs of subprime mortgage victims - while the Attorney General and I worked on ending the kind of abusive lending that Propublica continues to benefit from today. I’m happy to compare that record anytime.
Asked to respond to Glaser’s comments, Sandler noted that he has no information on the story: “It’s an absolute policy at ProPublica that directors and funders do not have any information about any story on which journalists are working.”
Glaser’s statements are “a transparent attempt to deflect attention from the story on him. I have no relevancy to it,” Sandler said. “If anybody is interested in any of the background on this, there is a website goldenwestworld.com that speaks to some of the things he’s talking about.”