When confronted with allegations of manipulations of the auction-rate securities market by New York Attorney General Andrew Cuomo, most firms have decided to settle up and keep quiet. Not Charles Schwab. Last month, in anticipation of the fraud suit Cuomo filed on Monday, Schwab’s outside counsel, Faith Gay of Quinn Emanuel Urquhart Oliver & Hedges, sent a letter to David Markowitz, who heads the Investor Protection Bureau at Cuomo’s office. The letter, which responds to an earlier report that a lawsuit was coming, was made public by Schwab on Monday. It makes for pretty juicy reading.

Gay alleges that the New York AG’s investigation was flawed from the start. “The attorney general’s decision to sue Schwab for a market calamity that it neither caused nor could have foreseen is the foregone conclusion of an investigation that was driven from the outset by a self-imposed mandate to reach a predetermined result: nationwide buybacks of illiquid ARS by every firm, regardless of fault and despite major differences in the roles that each firm played in the ARS market,” she wrote.

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