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When Eliot Spitzer the lawyer-turned-Attorney General-turned-Governor-turned disgraced former Governor pulled out a little used 75-year old law, he raised eyebrows. The ruling which was initially meant as a scheme to give a powerful tool against Wall Street’s biggest players was turned, by Spitzer, into a bludgeon against shady pharmacists, Ponzi schemes, and Fraudulent Dali works.
When Spitzer occupied New York’s attorney general’s office, he took ‘The Martin Act‘ out of storage and started thrusting in Merrill Lynch’s direction and towards Salomon Smith Barney. The rest of New York’s investment banking industry didn’t get off free.
When investors’ cash was followed into construction in Nevada, the money trail served as the path for New York to investigate and ultimately indict.
The sponsor’s offering is a detailed report intended to provide condo buyers with full disclosure. Complete disclosure — construction, financial and other areas — must be fully disclosed. Both the unit they are buying and the building in which the unit is located must be thoroughly discussed, and all conditions/requirements made transparently. The provisions of what must be set forth were promulgated by the Martin Act.
Any Nevada construction which is linked — however tenuous to a New York-based financial agency— is subject to review by the New York Attorney General’s office. The NYAG reviews the disclosure and discusses any offering plans. If a condominium builder fails to disclose what is required by the Martin Act, the NYAG is allowed to bring an action against the sponsor for the omission and construction defects if they are not disclosed.
Construction defects often include acts such as a faulty roof or facade which results in water leaks, plumbing installations which produce noisy pipes or weak water flow and failure to properly submeter gas and electrical utilities.
To solve the defects, there are a few types of legal claims which can be brought against parties involved in the building’s construction.
New York’s toolkit is loaded for bear with the Martin Act and the act, passed in 1921, permits its attorney general wide latitude to bring fraud cases.
The channel which gives Nevada law enforcement access to New York statutes is the Residential Mortgage Backed Securities (RMBS) Working Group, installed by President Obama in 2012. The RMBS establishes collaboration between multiple state and federal authorities led by the Federal Justice Department.
When Obama created the group, activists were skeptical. Over 60-day following the former president’s first mention of the team, the working group, under current-Attorney General Eric Schneiderman, had no office, no phones, and no staff.
Despite the rocky start, the group is now a powerhouse which includes over 200 lawyers, investigators, analysts, and staff. More than ten state Attorneys General are on board and active and include Massachusetts, Illinois, California, Delaware, and Maryland. Connecticut, Kentucky as well as Nevada, New York, and others.
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