Eliot Spitzer

Eliot Laurence Spitzer (born June 10, 1959 in Bronx, New York) is the current Attorney General for New York State and a candidate for the 2006 Democratic nomination for Governor of New York.

Political career

In 1994 Spitzer put aside his private practice to concentrate on attaining the elected office of New York Attorney General. He would fail in the 1994 election, only to win in 1998 and become one of New York's most recognizable Democratic politicians.

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Campaigns for Attorney General

In 1994, the long serving Democratic New York State Attorney General Robert Abrams decided to vacate the office after unsuccessfully challenging Al D'Amato for the seat of U.S. Senator from New York in 1992. Perceiving the weakness of Abrams's replacement as Attorney General, G. Oliver Koppell, several Democrats ran for the party's nomination, Spitzer among them. At the time he was young and unknown, and despite a war chest funded heavily by his family's wealth, Spitzer had his campaign ended early by placing last among the four candidates for the Democratic nomination, with Karen Burstein the winner. Burstein eventually lost to Dennis Vacco in the general election, part of a Republican electoral sweep that also elected George Pataki.

Related Topics:
1994 - Robert Abrams - Al D'Amato - 1992 - G. Oliver Koppell - Democratic - Karen Burstein - Dennis Vacco - George Pataki

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The election of a Republican in 1994 allowed Spitzer to seek the Democratic nomination again in 1998. More experienced in party politics, and again relying heavily on family wealth, he won the Democratic primary, then narrowly defeated then-incumbent Vacco, with 48.2% of the vote to 47.6% for Vacco. He would run for re-election in 2002, facing token Republican opposition, and won by an increased margin.

Related Topics:
1998 - 2002

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Work as Attorney General

As Attorney General, Spitzer has stepped up the profile of the office, taking on cases that an Attorney General would normally avoid. Traditionally, state attorneys general have pursued consumer rights cases, concentrating on fraud that is local and unique, while deferring national issues to the federal government, which traditionally holds jurisdiction over them. Breaking with this traditional deferrence, Spitzer has taken up civil actions and criminal prosecutions of white-collar crime, securities fraud, internet fraud, and environmental protection

Related Topics:
Consumer rights - Fraud - Federal government - White-collar

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A number of experts, including economists, lawyers, and political analysts have offered explanations for Spitzer's active role in public policy debates. The New York Attorney General's office has the unique advantage of having Wall Street (and thus many leading corporate and financial institutions) within its jurisdiction. In addition to this, the New York Attorney General wields greater than usual powers of investigation and prosecution with regard to corporations under New York State's General Business Law. In particular, under Article 23-A, § 352 (more commonly known as the Martin Act of 1921) the New York Attorney General has the power to subpoena witnesses and company documents pertaining to investigations of fraud or illegal activity by a corporation.

Related Topics:
Wall Street - 1921 - Subpoena

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In practice, Spitzer has used this authority as leverage in his civil actions against corporations and criminal prosecutions against their officers. It proved its usefulness in the wake of several American corporate scandals that began with the collapse of Enron in 2001. In these scandals, several corporations, as well as the brokerage houses that sold their stock were accused of having inflated stock values by unethical means throughout the 1990s. When inquiries by the U.S. Securities and Exchange Commission and the Congress of the United States into the accusations failed to gain traction, Spitzer's office used its subpoena power to obtain corporate documents, building cases against the firms both in courtrooms and in public opinion.

Related Topics:
Corporate scandals - Enron - 2001 - 1990s - U.S. Securities and Exchange Commission - Congress of the United States - Public opinion

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Through this public approach, Spitzer has won settlements and plea deals from prospective defendants. The ability of the Attorney General's office to obtain and publicize embarrassing or incriminating internal documents carries with it the implicit threat that a defendant's reputation may be damaged. This has been demonstrated in Spitzer's investigations of public corporations, in which the very issuance of subpoenas have been enough to drive down stock prices of the corporation in question. The daunting prospects of a Spitzer investigation has led corporations facing civil action to choose to settle, and suspects in criminal investigations to seek plea bargains. Supporters have hailed Spitzer's use of this tactic as an innovation in dealing with white collar crime that threatens investor confidence; critics maintain that Spitzer engages in legal blackmail that damages the economy, while only benefitting his own political ambitions.

Related Topics:
Plea bargain - White collar crime - Blackmail

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Notable cases

In addition to prosecutions and civil actions in the financial sector, Spitzer has pursued cases in both state and federal courts involving pollution, entertainment, technology, occupational safety and health and other fields in which New York plays a part in setting and maintaining national standards of conduct.

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Securities

• Global Settlement (2002): Spitzer sued several investment banks for inflating stock prices, using affiliated brokerage firms to give biased investment advice and "spin" initial public offerings of stock by offering them to CEO's and other influential members of the business community. In 2002, a settlement of these lawsuits was negotiated by Spitzer, federal regulatory bodies, stock exchanges, and the investment banks and brokerage houses in question. The result was $1.4 billion in compensation and fines paid by the brokerages and investment banks ; new rules and enforcement bodies created to govern stock analysts and IPO's ; and the insulation of brokerage firms from pressures by investment banks.
• Late Trading & Market Timing Investigations (2003): Investigations by the office of Eliot Spitzer beginning in 2003 uncovered mutual fund brokers allowing select clients privileges deprived to ordinary customers. Spitzer targeted two practices in particular: "late trading" which allows hedge fund investors to file trades at the previous day's price after the market close, something ordinary customers cannot do; and "market timing" which allows privileged investors to buy and sell shares in funds more frequently than allowed under the fund's rules. The implications of these practices are that the brokerages and a small number of investors profit at the expense of other fund shareholders. In essence, by placing winning trades the priviliged investors diluted the profit pool available to all fund shareholders while they sidestepped their share of the pool's losses. Their trading also increased administrative fees borne by ordinary customers and caused fund managers to increase the cash their held to meet liquidity needs. Through a number of prosecutions and lawsuits, Spitzer forced those involved to resign and face jail time, while securing more than one billion dollars in fines and remuneration for investors as well as forcing reforms to eliminate the practice.

Insurance

• Contingent commissions (2005): In the commercial insurance business "contingent commissions" are fees paid based on the volume and profitability of insurance business generated by producers. They provide an incentive for insurance brokers to recommend more costly insurance to their clients, presenting a conflict of interest. While many large brokerages such as Marsh & McLennan Companies (against whom Spitzer filed his original suit), Aon and Willis announced plans to stop the practice of contingent commissions, many argued that the practice was not to blame for the rigged bids uncovered by Spitzer. Indeed, the practice accounted for about only five to seven percent of total revenues for brokers and did address a traditional misalignment of interests in insurance between the carrier and the producer. Under a traditional flat commission structure the latter has less incentive to submit risks with an eye for long-term loss potential in mind. So-called finite insurance products, that may more closely resemble a loan than insurance, were also investigated, even if there was "transferrence of risk" involved.

Entertainment

• Music Royalty Settlement (2004): Through an investigation of music industry practices, Spitzer's office uncovered $50 million in royalties owed to musicians whose record labels had failed to keep in contact with them. Spitzer reminded label executives that under New York State's Abandoned Property Law, those royalties not being sent to their rightful owners would have to be surrendered to the state. Under a settlement, the labels were required to take measures to contact artists owed royalties.
• Payola Settlement: The office of Eliot Spitzer served subpoenas against record labels in an investigation into "payola" , the illegal compensation of radio stations for playing certain songs. These subpoenas uncovered deals for disc jockeys to receive gifts from promoters in exchange for playing the songs a certain number of times during the day. On July 25, 2005, Spitzer announced an agreement with Sony/BMG to halt the practice.

Safety and health

• In 2002, Spitzer's office issued subpoenas to 24 non-profit crisis pregnancy centers that sought to dissuade women from having abortions. Right to life groups criticized Spitzer, charging that he was harassing the centers on behalf of a political ally, NARAL Pro-Choice America. Spitzer's spokesman responded that the subpoenas were part of a legitimate investigation into complaints of deceptive advertising, practicing medicine without a license, and other misconduct. http://www.townhall.com/news/politics/200201/NAT20020131a.shtml The centers often use graphic videotapes and photographs to turn women against abortion, and have been accused of deceiving women who come to them for advice. http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&contentId=A42118-2002Feb20¬Found=true