The Kentucky Bankers Association is suing Attorney General Daniel Cameron for allegedly exceeding his statutory authority and violating the right to free speech with his recent subpoenas and requests for information from six major banks doing business in the state.
The lawsuit, filed two weeks ago in Franklin Circuit Court, comes in response to Cameron’s push to target banks’ ESG investment practices, which integrate environmental, social and governance factors into their asset and risk decisions – particularly those related to climate change and reducing carbon emissions.
The trade association of 150 banks doing business in Kentucky has challenged the attorney general’s demands as breaking the law, claiming they represent major government interference with private companies that could create “an ongoing government surveillance system.”
Cameron’s office issued a press release Oct. 19 announcing that he joins 14 other Republican attorney generals who are suing Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo for alleged violations investigate antitrust and consumer protection laws related to ESG practices .
Its press release cited the banks’ membership of the United Nations’ Net-Zero Banking Alliance, which aims to reduce greenhouse gas emissions to as close to zero as possible by 2050, including copies of subpoenas and civil investigation requests (CIDs) sent to each bank has been sent Bank seeking information and documents related to a link to a “Global Climate Action Initiative”.
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“Kentucky’s consumer protection and antitrust laws prohibit companies from engaging in coordinated practices that prevent certain Kentucky businesses from accessing banking services,” Cameron said in his office’s release. “We joined this investigation to ensure that Kentucky companies that oppose the Biden administration’s anti-fossil fuel climate agenda have the same financial freedoms as those who accept it.”
At its 2022 session, the Kentucky General Assembly passed legislation banning state money from going to companies that have policies of boycotting fossil fuel-based energy companies. Cameron will enter his final year as attorney general in 2023, when he also seeks the Republican nomination for governor.
The Kentucky Bankers Association filed the lawsuit against Cameron along with its subsidiary HOPE of Kentucky — a limited liability company focused on financing affordable multi-family housing projects — alleging that he not only exceeded his legal authority but was “wasting and improperly monies.” the taxpayer at his wrong from efforts to do so.”
Noting the HOPE affiliate’s apparent social concerns, the complaint said that Cameron’s investigative demands amounted to “an astounding and disturbing gross exaggeration” and requested information and communications even remotely related to environmental issues.
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“(The claims) clearly create undue burdens and regulatory investigations against companies and individuals concerned about, discussing, or even considering global climate change or environmental activities,” the plaintiffs’ complaint reads.
The bank plaintiffs add that they were heavily involved in relief and investment efforts in response to the deadly 2021 tornadoes in western Kentucky and the 2022 floods in eastern Kentucky, noting that many have debated whether they “exacerbated by climate change”.
The complaint said their response to such disasters includes “which have impacted or compromised environmental objectives and policies, including zoning and building standards, or involve the remediation of those disasters,” as well as “loans to affected individuals who may be at risk of an eventual Repayment include a borrower’s ‘ESG factors’.”
“Unjustified State Intervention”
The first count of the complaint alleges that Cameron exceeded his statutory authority because the law allows the Kentucky Department of Financial Institutions to regulate and require information from banks but not from the Attorney General.
While the Attorney General can make requests for investigations under the Kentucky Consumer Protection Act, the complaint alleges that Cameron is not investigating anything illegal under that law, while also seeking information beyond the statute of limitations and out of state.
The banking organization also alleges that Cameron is violating a state law that protects individuals from “improper investigative action” by the government, calling Cameron’s demands “unreasonable and illegal.”
Another count in the complaint alleges that it violated both the banks’ state and federal rights of speech and association because “the mere existence of the CIDs violated the plaintiffs’ right to think freely and without undue government.” and connecting challenges and undermines interference or criticism.”
Noting that Cameron’s demands included the banks’ “continued obligation” to disclose the information in question, the complaint adds: “The fact is that the CIDs constitute an ongoing government surveillance system over the communications and activities of a recipient and with the individuals who a receiver is create interact.”
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The complaint’s third count alleges that Cameron’s actions violated Senate Bill 205, the bill passed earlier this year related to boycotts of energy companies.
Under this new law, the state treasurer is responsible for compiling a list of companies boycotting energy companies, while the attorney general can only make such demands after filing a civil lawsuit against a bank, according to the bankers’ complaint.
In addition, SB 205 does not prohibit any entity from boycotting an energy company because it only requires government entities to sell their interest in a company with such a boycott and prevents such companies from entering into a contract worth $100,000 or more with a government entity to lock.
The banks trade group is seeking that the court — chaired by recently re-elected Justice Phillip Shepherd — declare that Cameron’s actions exceeded its authority and violated the rights of the plaintiffs, and set aside the claims against them.
Cameron’s office has not provided a response to the court, but has filed a motion to refer the matter to federal court as the plaintiffs have made some First Amendment claims.
Investment “maximized, not politicized”
The Attorney General’s prosecution of companies with ESG investment practices is not just limited to these six banks that were the subject of the banking association lawsuit.
Cameron and State Treasurer Allison Ball requested information from the Kentucky Teachers’ Retirement System and the Kentucky Public Pension Authority in late October on the role of ESG investment practices in the administration of the state’s major public pension plans. A press release announcing the move said they did this to ensure retirees’ investments are “maximized, not politicized.”
Also on Monday, Cameron’s office announced a new investigation into alleged ESG investment practices by The Vanguard Group Inc. and State Street Bank, which had received civil warrants for documents and information as a result of their membership in the Glasgow Financial Alliance for Net Zero climate protection initiatives . Climate 100+ and Net Zero Asset Managers.
“Kentucky’s consumer protection laws prohibit companies from putting a climate agenda ahead of the financial return on their customers’ investments,” Cameron said. “We launched this investigation to protect consumers in Kentucky, and we look forward to hearing from Vanguard and State Street on these matters.”