A court-appointed judicial hearing officer has determined that e-mails sent between New York Insurance Department officials showed bias regarding the restructuring of bond insurer MBIA Insurance Corp.
The findings will be used in an ongoing lawsuit filed by a group of MBIA policyholders against the NYID.
In a document filed June 3, judicial hearing officer John Bradley wrote that he reviewed 1,630 pages of documents and found several documents containing statements that “preempted, or biased, or steered the department’s decision” or attempted to do so, regarding the restructuring of MBIA Insurance into two entities. The split resulted in one entity comprising its municipal bond policies and the other its riskier policies, such as mortgage-backed securities.
The e-mails and documents reviewed by Bradley were sent between January 1, 2009, and Feb. 28, 2009, include the terms “MBIA” or “transformation,” and were sent between or among Jack Buchmiller, Eric Dinallo, Hampton Finer, Michael Moriarty and Scott Fischer.
At the time of the original order for the hearing officer to search documents, a lawyer for the NYID, David Holgado, said the number of documents that show bias will be “zero”. He added, “We don’t believe there’s any documents that will demonstrate bias.”
The plaintiffs say that the regulators were biased in favor of a division of MBIA that protected municipal policyholders at the expense of other policyholders.
A spokesman for MBIA and a lawyer for the policyholders declined to comment. A spokesman for NYID did not return calls seeking comment.
The department now has until June 17 to try to assert privilege over some or all of the documents, or argue that the hearing officer made an error. The hearing officer will then review the documents that the NYID asserts privilege or error and make a final determination.
Last May, the New York State appeals court ruled that the department must hand over e-mails and documents regarding the restructuring of bond insurer MBIA Insurance Corp. At the time, associate Justice Leland DeGrasse wrote that the NYID could not appeal a state Supreme Court order to produce the e-mails as potential evidence in a lawsuit brought by a group of MBIA policyholders.
