By Karen Freifeld
NEW YORK, Feb 21 (Reuters) - JPMorgan Chase & Co has raised
questions about the involvement of a senior lawyer from the New
York Attorney General's office in one of the few government
lawsuits alleging wrongdoing by banks in the run-up to the
The case against JPMorgan is similar to one that the lawyer
had worked on before joining the Attorney General's office,
JPMorgan said in court papers this week, raising the possibility
of a conflict of interest.
JPMorgan said it had asked New York Attorney General Eric
Schneiderman "whether there is additional information about this
lawyer's involvement ... before deciding what further action is
The bank did not specify what action it could take, but
legal experts said JPMorgan could argue that the New York
Attorney General's office had a conflict of interest.
Schneiderman's office did not immediately comment on
JPMorgan's request for information.
JPMorgan's court filing did not identify the lawyer by name
but gave the title of executive deputy attorney general for
economic justice - the position held by former Paterson Belknap
Webb & Tyler partner Karla Sanchez.
While at Paterson Belknap, Sanchez helped bring a case by
bond insurer Ambac against JPMorgan over the sale of toxic
assets by its Bear Stearns unit before the financial crisis.
Schneiderman brought the new, similar case against JPMorgan
Sanchez joined Schneiderman's team in January 2011. On June
7, 2011, the AG's office barred her from working on its probe of
mortgage-backed securities, citing her work in private practice,
according to documents obtained by Reuters under New York's
Freedom of Information Law.
The AG's office lifted the restriction on April 23, 2012,
according to the documents, allowing her to work on the Bear
Six months later, on Nov. 9, 2012, she was once again banned
from certain mortgage-backed securities cases, according to the
documents. In its court filing this week, JPMorgan said the
attorney general's office apparently reimposed the ban after the
bank raised concerns.
Sanchez did not respond to a request to comment on her
involvement in the case.
James Freedland, a spokesman for Schneiderman, said recusal
decisions are based on the facts at any given time. "These
decisions were made not only out of an abundance of caution, but
also based on changing circumstances," Freedland told Reuters in
Bennett Gershman, an expert on prosecutorial misconduct at
Pace University Law School, called it "highly unusual" for a
lawyer in the attorney general's office to be recused from
working on a probe, then back on the case, and then recused
"I think a judge would be seriously concerned," he said.
JPMorgan could bring a motion to disqualify Schneiderman's
office from the case, Gershman said. The bank could argue that
an irreparable conflict of interest exists, he said.
It is unclear which other probes of mortgage-backed
securities Sanchez has worked on.
Schneiderman filed a similar lawsuit against Credit Suisse
in November. Patterson Belknap had also sued Credit Suisse on
behalf of Ambac.
The New York Attorney General case is People v. J.P. Morgan
Securities LLC, 451556/2012 New York state Supreme Court (New
The private lawsuit is Ambac Assurance Corporation v. EMC
Mortgage LLC, 650421/2011, New York state Supreme Court (New
(Additional reporting by Anna Sussman)
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