NEW YORK (Reuters) – Banks challenging bond insurer MBIA Inc's 2009 restructuring don't have to answer questions about whether they pushed state senators to start an investigation, a New York judge ruled on Tuesday.
“What the Senate chose to do or why they chose to do it” was not a matter for the court case, JusticeBarbara Kapnick said.
Two state senators said on May 16 they were considering whether to investigate the approval of MBIA's restructuring, the day after proceedings began in Kapnick's court began.
Bank of America Corp and Societe Generale are seeking to overturn the restructuring, saying that as policyholders they were harmed when $5 billion was siphoned from MBIA's structured-finance arm to its municipal-bond arm.
MBIA's lawyers asked the judge to allow them to demand information from the banks about whether their lawyers, lobbyists or consultants played any role in the announcement by the senators. They also sought communications between the banks' agents and two state senate committees.
Marc Kasowitz, an attorney for MBIA, had argued that the statement by the Senate committee chairmen appeared to “represent an improper effort by the banks and their counsel to influence or prejudice” the case.
While Kapnick said the timing of the announcement was “of some concern,” she denied MBIA's request and said the announcement would not influence her eventual decision.
The judge made her ruling after a lawyer for the state insurance department completed his opening statement in the case.
David Holgado, a state attorney, argued the judge only has to decide whether the insurance department made a rational decision in the midst of the financial crisis to approve the restructuring, not whether it was the right decision.
Robert Giuffra, a lawyer for the banks, has argued the restructuring must be overturned because it was based on inaccurate and misleading information provided by MBIA.
MBIA is scheduled to begin its opening presentation on Thursday.
The case is ABN Amro Bank NV et al V Dinallo, New York state Supreme Court, New York County, No. 601846/2009.
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