An auction-rate securities lawsuit against Charles Schwab, filed by New York Governor Andrew Cuomo when he was NY Attorney General, has been thrown out by a state court judge. The 2009 lawsuit accused Schwab of fraud in the marketing and sale of auction-rate securities. It also claimed the company's brokers falsely represented the securities as safe, liquid investments. Manhattan state Supreme Court Justice O. Peter Sherwood granted Schwab's motion to dismiss, ruling the alleged misrepresentations were true when they were made. Auction-rate securities are long-term debt similar to bonds whose interest rates reset periodically through auctions. The banks that handled the auctions abandoned the $330bn market in February 2008 and the market collapsed, leaving thousands of investors without the ability to sell the supposedly liquid securities. Citigroup, UBS, Bank of America Corp's Merrill Lynch & Co and other banks and brokerages have already agreed to repurchase more than $60bn in debt to settle claims that they marketed auction-rate securities as safe cash alternatives. Schwab said Cuomo was trying to blame the company for the collapse of the market. Schwab said that the brokerage and its customers were misled by the underwriters, who it said were the real culprits who got off easy. Other brokerages that also only sold the securities, including Fidelity Investments and TD Ameritade Holding Corp, previously settled with Cuomo's office. As of 2007, the auction-rate securities market had been operational for two decades and conducted hundreds of auctions every seven, 28 and 35 days, the judge said in his decision. There were no failures before Aug. 13, 2007. Thousands of customers of Schwab held about $787.9mn of auction-rate securities as of Feb. 13, 2008, Cuomo's office estimated. The lawsuit sought to have Schwab buy back securities from customers and pay restitution and civil penalties. [Reuters, 10/31/11]