Andrew Cuomo and Benjamin Lawsky (L)
New York State Governor Andrew Cuomo speaks on Wall Street in October, 2008, when he was Attorney General. At left is Ben Lawsky, his long-time aide and currently the state's top financial services regulator. REUTERS

"You [expletive] Americans," Richard Meddings, then executive director for risk at British bank Standard Chartered, wrote a U.S.-based subordinate in an October 2006 email, replying to concerns that the bank's activities with Iranian clients were exposing the institution to "very serious or even catastrophic reputational damage."

"Who are you to tell us, the rest of the world, that we're not going to deal with Iranians[?]"

Nearly six years later, Meddings got his answer in three terse syllables: Ben Lawsky.

Lawsky, the New York state superintendent of financial services, became the talk of the powerful financial communities in New York, London and Washington this week after he filed a complaint document against the United Kingdom’s Standard Chartered Bank, in which he savaged the company for engaging "in deceptive and fraudulent misconduct in order to move at least $250 billion through its New York branch on behalf of client Iranian financial institutions that were subject to U.S. economic sanctions." The bank, according to the order, "then covered up its transgressions."

Blaming the bank's "evident zeal to make hundreds of millions of dollars at almost any cost," the filing alleged the financial institution "indisputably helped sustain a global threat to peace and stability" by supporting a massive money-laundering scheme. Lawsky claimed that Standard Chartered had committed seven violations of federal and state banking rules and he threatened to revoke its license to operate in New York.

That document (officially called an Order Pursuant to Banking Law) was met with shock and confusion on both sides of the Atlantic – a complicated shot across the bow from the state's one-year-old Department of Financial Services, a 1,700-person agency set up to oversee nearly 4,000 New York-based banks, insurers, mortgage brokers and loan servicers with about $6 trillion in assets.

In Washington, federal regulators fumed that Lawsky had pre-empted them, after they had worked with his office in the investigation that led to the filing. They asked themselves what could be done to save face and gain some involvement in the impending regulatory actions against Standard Chartered.

In London, Standard Chartered denied Lawsky’s claims, while conceding that the firm “made mistakes – worth $14 million, not $250 billion as alleged.” At the same time, high-level UK political figures railed against the public nature in which the bank had been shamed, suggesting a growing rivalry between U.S. and British financial centers. They called their American counterparts to ask what they were planning to do about the imbroglio.

And in New York, the financial press struggled to explain what was going on, the journalists’ efforts fed by anonymous sniping from Washington regulators just as Lawsky and his office went into a media blackout.

But to less connected observers, the questions were not about "what," but, like the Standard Chartered bank director now immortalized for his obscene language in the legal filing, about "who."

Who is this Benjamin Lawsky?

"Rogue," "Hard Worker," "Nice Guy," "Egomaniac"

The picture that immediately emerged about the man in the middle of the newest Wall Street scandal can hardly be described as glowing. Standard Chartered, which had been tagged a "rogue institution" in Lawsky's filing, immediately tried to perform a type of defamatory ju-jitsu on Lawsky, making it seem like it was the regulator, and not the bank, who was out of line.

Portraying the whole blowup as a technical disagreement over whether the bank had gone through the appropriate procedure to exempt its actions from regulatory oversight -- in essence, claiming the bank was innocent because it had gone through the proper loophole -- the firm noted in a statement that "such matters normally proceed through a coordinated approach" between the bank and its regulators, painting Lawsky as unreasonably jumping the gun.

"The Group was ... surprised to receive the order, given that discussions with the agencies were ongoing," it said.

Regulators in the U.S. also privately cast aspersions on Lawsky. A profile in the New York Times on Friday noted that federal regulators "say that the state banking regulator is encroaching on their territory and even overstating his case." One unidentified regulator tagged Lawsky’s action as "a product of political ambition."

But interviews with former colleagues of Lawsky, as well as strategists who have followed his trajectory in Albany over the past few years, painted a completely different picture of him: as a sharp, tough regulator who would never take a controversial step without the proper due diligence, and as man who, while clearly full of personal political ambition, knows how to not overstep his authority and how to restrain his impulses to the interests of higher power-brokers.

Calling him "smart" and a "hard worker," Blair Horner, Lawsky’s colleague in the U.S. Attorney's Office for the Southern District of New York in the mid-oughts, said "he was in many ways what you'd like to see in a public servant."

Horner, who is currently vice president for advocacy at the American Cancer Society and has worked with Lawsky in pursuing insurance regulation violations, noted that Lawsky's style as a regulator was formed by his experiences as U.S. Sen. Chuck Schumer’s chief counsel and former New York Gov. Mario Cuomo’s chief of staff. Those jobs taught him that "in politics, if you have done your research, being aggressive means you can often win."

Alex Lipman, a partner at the New York office of law firm Nixon Peabody who is also an alum of the U.S. Attorney's Office, says Lawsky was "known by his reputation" as a "strong, tough, prosecutor.”

To be sure, not everyone had good things to say about Lawsky. Referring to his tenure as deputy counsel to then-New York State Attorney General Cuomo, some Albany insiders said Lawsky’s clear ambition to strike out on his own had led him to bump sharp elbows with colleagues. One politico, who used the word "egomaniac" to describe some of Lawsky's behavior, explained that while Lawsky was solidly part of a team, he was not always a team player.

Indeed, that character trait appears to be very much in evidence in the Standard Chartered scandal. People familiar with the situation say Lawsky worked in tandem with regulators at other agencies that were investigating the firm until April, among them, the U.S. Treasury, the Department of Justice, the Federal Reserve, and the Manhattan District Attorney's Office. At that point, though, the DFS told the other regulators that it was planning to take a more aggressive stance against the bank than the group was considering. The agency noted that it believed Standard Chartered was not being forthcoming and had been involved in money-laundering violations until a date much later than was being investigated. No one, these people said, told Lawsky not to go ahead.

But clearly the other regulators expected him to wait for them to move in concert anyway.

Law of the Jungle

But although the disconnect between Albany and Washington may have surprised Standard Chartered and, indeed, the financial services community writ large, various people who know Lawsky and Cuomo say that the notion that Lawsky is playing political chess with his peers in Washington gets ahead of the fact that he is still very much a creature of the New York political jungle.

The actions of the regulator, these people said, should be seen as an extension of Cuomo’s political ambitions. The governor has telegraphed his strong desire to run for president in 2016 and is burnishing his image as an indomitable liberal populist and an aggressive politician who can be tough on white-collar crime.

In particular, Lawsky’s aggressive steps were taken to undermine New York Attorney General Eric Schneiderman, Cuomo's successor, who oversees a separate regulatory wing in the state that could outshine the governor’s office in being tough on misdeeds by public officials and companies – and grab the spotlight. Indeed, Cuomo knows the depth of this competition well: As AG, Cuomo launched an investigation into leaks in then-Gov. Eliot Spitzer's administration, weakening Spitzer in the process. And Cuomo played a big role in pushing Spitzer’s successor, David Paterson, out of office as ethics scandals swirled around the governor.

Schneiderman has already earned plaudits for standing up to pressures from the financial industry after he rejected a multi-state settlement on mortgage servicing fraud and forced banks back to the bargaining table. Moreover, his office has its own division dedicated to investigating money-laundering and more legal firepower than the DFS; yet, it was notably left out of the Standard Chartered investigation.

"It is very clear that Cuomo is using him [Lawsky] to cut Schneiderman's b-lls off," an Albany politico noted.

The Attorney General's Office has publicly downplayed any rift with Cuomo, telling the New York Post on Tuesday that "the last few years have taught us that there are not enough cops on the beat policing Wall Street."

And then there are the more cynical views about Lawsky’s actions vis a vis the governor’s presidential aspirations. A Republican strategist framed the attack on Standard Chartered as a way for Cuomo to scare big banks into the campaign donor line.

"This can also be seen as warning to all the other, U.S.-based financial institutions: Get behind Cuomo... or else," the strategist said.

"A Myth"

Besides Lawsky's motivations, much has been speculated about his ability to hold fast to his interpretation of facts in the Standard Chartered case and to fend off other regulators in pursuing strong penalties against the firm. To some, the financial media have played too big a role in portraying this story as one that will surely end with Lawsky being brought back into line by his peers in Washington and New York.

Yves Smith, who runs the liberal financial blog Naked Capitalism, and has strongly criticized the media's coverage of the Standard Chartered debacle, said that the press is helping cement the notion "that there are these ways these regulators are supposed to behave" and that Lawsky's somewhat rogue actions "are like somebody coming to a black tie event in swimming trunks."

But citing several examples of regulators who broke off from group their counterparts in other agencies, including Schneiderman's mortgage-settlement posture earlier this year, Smith added that "this idea that everybody acts together, that's a myth."

Myth might also accurately describe the contention of unnamed regulators that Lawsky might have overstated the dollar figures involved in the Standard Chartered case by several multiples. This, of course, is the position held by the firm itself – that is, while Standard Chartered might have engaged in actions in violation of money-laundering statutes, the amount involved was a small percentage of the $250 billion cited by Lawsky.

People close to Lawsky note that rather than negate Lawsky’s dollar claims, these reports more accurately describe the conflict among regulators that led Lawsky to tell his colleagues he was going forward alone. The lower figure – that is, Standard Chartered’s admission of $14 million in money laundering – was taken at face value by some of the regulators, but rejected as nothing but a self-serving conclusion drawn from the firm’s own less than reliable investigation by Lawsky.

People who know Lawsky well, including his critics, said that it is highly unlikely that he got the numbers wrong in this case, noting that he "always does his homework" and is "not a cowboy."

Barring any pre-emptive settlements or further developments, the next step in the Standard Chartered case will occur on Wednesday, when the bank is scheduled to meet with Lawsky, as the Order requires.

And now that he has the Standard Chartered situation mostly under control, it is expected that Lawsky will continue to drive investigations into other financial giants that play hard and fast with the rules. In other words, banks may be looking at a long couple of years ahead of them.

Indeed, financial services firms may actually be happy if Cuomo’s Washington ambitions play out and he ends up in the White House – undoubtedly taking Lawsky with him.