Bank policyholders suing the New York Insurance Department and MBIA Inc. say new documents made available to the public show MBIA senior executives concealed critical information from the NYID about the size of future losses at MBIA Insurance Corp.

The lawsuit claims the $5 billion restructuring of MBIA Insurance into two subsidiaries — MBIA Insurance Corp. and National Public Finance Guarantee Corp., which were approved by the NYID and its former superintendent Eric Dinallo — was fraudulent. The restructuring took place after MBIA Insurance Corp. lost its triple-A ratings in the financial crisis.

The MBIA bank policyholders are challenging the restructuring, claiming that the transfer of municipal bond insurance policies to National left them with the riskier assets.

In one e-mail, dated Feb. 17, 2009, MBIA chairman Jay Brown said, “I need somebody to push the wheelbarrow across the bank vault,” to which David Coulter, co-head of the financial institutions group at private equity firm Warburg Pincus, and member of MBIA’s board of directors, responded: “Very happy to do that … assume you guys are set to give Eric his political support.”

Marc Kasowitz, lead counsel at Kasowitz Benson Torres & Friedman LLP, which represents MBIA, said Brown’s statement of pushing the wheelbarrow across the bank vault is in no way hinting that MBIA’s executives were trying to benefit financially from the transformation.

“This conversation took place just after the transformation was approved and the e-mail chain also shows that Brown was referring to moving funds within the MBIA corporate family in order to complete the transformation that had been approved,” he said.

Regarding the statement by Coulter about giving Dinallo political support, Kasowitz said Brown was clear under oath that he never had conversations with Dinallo about MBIA’s transformation affecting his political career.

Brown was asked, “Did you ever have any discussions with Mr. Dinallo about the impact of his approval of the transformation transactions on his political career?” to which he replied, “No, I have not.”

Brown also wrote a March 11, 2008, e-mail where he discussed more of Dinallo’s political ambitions. “Eric Dinallo seems to be a normal insurance [superintendent] who has big political ambitions but plans to accomplish it by saving the monolines, not destroying [them],” he said.

Kasowitz said the e-mail simply observes that Dinallo understood monoline insurers such as MBIA were and are essential to public and other markets. “At that time, there were discussions in New York and Washington on how to save the monolines and get markets going again, and this was part of that,” Kasowitz said. He added it was generally believed at that time, like many other governmental officials, Dinallo had political ambitions.

On Feb. 18, 2009, Ari Zweig, vice president in the structured finance special situations group, wrote, “Maybe MBIA should have a statue of Dinallo in front of the building,” to Anthony McKiernan, chief risk officer of MBIA Insurance, referring to Dinallo announcing he approved the restructuring of MBIA Insurance.

To that e-mail, Kasowitz said, “I think, although I have not spoken to him about this, it is clear from the e-mail that Mr. Zweig was saying in a joking manner that Mr. Dinallo had made the right decision.”

Kasowitz added that in McKiernan’s deposition, the banks understood it was a joke, asking McKiernan, “Do you recall anybody at MBIA ever joking to you about erecting a statue of Mr. Dinallo at MBIA headquarters after the transformation was approved?” McKiernan responded, “I don’t recall.”

Chuck Chaplin, chief administrative and financial officer, testified that as a result of the transformation, the existing insurance company would be solvent and fully capitalized. Chaplin was asked, “As of the approval of the transformation transaction, did MBIA Inc. have further intention to put capital into MBIA Insurance?” He answered, “MBIA Corp. had no need of capital from the outside as of the date of transformation because it was so fully capitalized, and therefore, there was no plan to put additional capital in.”

A spokesman for the bank policyholders declined to comment.

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