State Securities Cop, Attorney General Wrangle for Power

California Corporations Commissioner Demetrios A. Boutris and the state’s attorney general, Bill Lockyer, both say they want to go after corporate criminals. But for the moment, they seem just as intent on going after each other.

The issue is a turf battle over securities enforcement.

Lockyer, who in an interview recently referred to Boutris as “a mosquito,” announced last month that he would ask the Legislature for broader authority to pursue securities law violations, akin to that wielded by New York’s high-profile attorney general, Eliot Spitzer.

“I would wish for greater cooperation and collaboration between the Department of Justice and the Department of Corporations, but I haven’t seen it,” Lockyer said Tuesday.

The attorney general said he would seek “concurrent jurisdiction” over securities cases in order to get a first look at criminal matters and to share authority for bringing civil enforcement actions.

Deputy Corporations Commissioner Andre Pineda, speaking for Boutris on Wednesday, defended the job the department is doing and said overlapping jurisdiction would be inefficient and confusing.

Boutris, who declined to be interviewed for this article, has generated a lot of sparks lately as head of what traditionally has been an obscure agency.

Last week, Boutris irritated securities officials from other states by criticizing as too lenient a proposed national settlement that they and federal authorities were negotiating with a dozen Wall Street brokerage firms over research analyst conflicts of interest.

Other regulators said Boutris’ position conflicted with that of his own staff people involved in the negotiations and threatened to disrupt the deal.

To Lockyer, the incident brought a sense of deja vu.

Earlier this fall, Boutris interposed himself in a multi-state negotiation with subprime lending giant Household International Inc. in a way that Lockyer said stunned him and his staff.

When regulators from California and other states gathered in Chicago in September to work out details of the $484-million settlement of lending violations, Household’s top lawyer produced a letter written by Boutris that criticized the deal as not tough enough and questioned the authority of the attorney general’s office to sign it without the Corporations Department’s consent.Lockyer said he and his staff feared Household might try to use the dissension between the California officials as leverage to hold up the deal or get better terms. As things worked out, “we disagreed with his legal theory and settled without his assent,” Lockyer said.

Pineda said Boutris provided the letter to Household in response to the company’s inquiry about whether the national deal affected the terms of an earlier, $12-million civil settlement of unrelated violations that Household had reached with the Corporations Department.

“There was no attempt to derail anything ... Lockyer was doing,” he said.

Aside from any personality or political issues that may color the current dispute, Lockyer said the conflict exposes a soft spot in California law.

Historically, the attorney general acted as the lawyer for the Corporations Department in securities cases. But in the mid-1970s, the Legislature stripped that authority away.

As a result, Lockyer said, the California attorney general lacks the tools to pursue civil litigation in the way that Spitzer has done on Wall Street.

At the federal level, he noted, the Securities and Exchange Commission and Justice Department work securities cases together from the outset, with the SEC taking the civil side and the Justice Department pursuing criminal action.

There’s nothing in the law to prevent that type of cooperation in California, but in practice it hasn’t happened, Lockyer said. He added that in the two years since Gov. Gray Davis appointed Boutris to the job, he has referred no criminal cases to the attorney general’s office. That’s why he wants such criminal referrals to be made mandatory.

Pineda said the department regularly refers criminal cases to district attorneys, as well as to other regional and federal enforcement authorities.

Still, “there does need to be a better working relationship between the Department of Corporations” and Lockyer’s office, he said. “We’re committed to making that happen.”

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Times staff writer Nancy Rivera Brooks contributed to this report.