CORPORATE CRIME REPORTER
Eliot “Roosevelt” Spitzer – New York AG Makes the Case
19 Corporate Crime Reporter 5(1), February 1, 2005
The official title of New York Attorney General Eliot Spitzer’s talk at
the National Press Club luncheon yesterday was “corporate responsibility.”
But to the journalists and lobbyists who packed the Club’s ballroom for
lunch yesterday “corporate responsibility” took a back seat to something
closer to “political opportunity.”
They came to see the next Governor of New York and a probable future Presidential
candidate.
Barring a spectacular collapse, Spitzer will become the next Governor of New
York.
He has $8 million stashed away in his campaign kitty.
He has a commanding lead in early polls.
And every time he cracks down on some corporate crook, his face is plastered
all over the newspapers.
So, everyone assumes that Spitzer will be elected Governor.
The unspoken question on the table was – what about the White House?
Spitzer addressed the question in code.
Over the course of an hour, he spoke Theodore Roosevelt’s name five times.
Yes, that Roosevelt – the former trustbusting Governor of New York who
went on to become President of the United States.
“Teddy Roosevelt attacked the cartels, attacked illegal behavior, and
he was reviled by business leadership,” Spitzer said.
Some familiar?
“If any of you were to listen to their few remnant speeches that he gave
that are on tape – and a friend of ours gave us some CDs of speeches,
great speeches in American history – would listen to it, remarkable things
that he was saying about the failure of ethics in the business leadership and
the perverse effect on our economy of the cartels that he was pursuing,”
Spitzer said. “Now, today, 100 years later, nobody disputes that what
he did 100 years ago, was not only beneficial for the economy, but was absolutely
necessary, and that if he had failed to attack the cartels, attack the illegal
behavior, failed to open up the economy to permit true competition, then we
would not have had the enormous growth that came after Teddy Roosevelt.”
“I would suggest to you that today we're in the midst of the same debate
that occurred 100 years ago, that what we have on one side is a business leadership
that cloaks itself in the language of the free market, but really wants to preserve
an ossified system, and they want to act against those who really support competition,
transparency and integrity.”
And guess who wants to be the new Teddy Roosevelt?
“On my side of the aisle, I would suggest to you we have folks who really
understand the market, who understand what it takes to permit the market to
generate the wealth that has created this marvelous economy that we have and
understand that government must step in every now and again to define the boundary
lines and ensure that there is, indeed, integrity, transparency and fair play,”
Spitzer said.
And which folks might that be, Eliot?
Ramrod straight, supremely confident, speaking without cue cards, with a sharp
sense of humor, and virtually without a linguistic slip, Spitzer made the case
for Spitzer.
Spitzer went down the list of his victories – against the investment banks,
mutual fund industry, pharmaceutical companies and now the insurance industry
– highlighting each with personal stories of defense attorney arrogance,
executive greed, and outright criminality.
And the Attorney General ripped into the former chairman of the Securities and
Exchange Commission (SEC), Harvey Pitt.
“Correct me if I'm wrong -- I think (Pitt) was chairman of the SEC for
a period of time,” Spitzer said to laughter. “I'm not sure he was
aware of it, but I think he was.”
“I shouldn't say that,” Spitzer added quickly. “Harvey was
a fine lawyer. I don't think he understood his job, unfortunately.”
Spitzer said that Pitt was aware of the problem of analysts touting stocks they
didn’t believe in.
“Pitt convened a meeting of the CEOs of the major investment houses on
Wall Street with the chairman of the New York Stock Exchange,” Spitzer
said. “He called them together for the express purpose of remedying the
problem of structurally flawed analytical work that was being distributed to
tens of millions of Americans. But what did he say in his invitation to them
to join him for this meeting? ‘This isn't my problem,’ he said,
‘I will leave it to you.’ Something that went to the fundamental
core of the integrity of the marketplace, and the fact that tens of millions
of investors were investing based on knowingly wrong analytical work, he said,
‘It's not my problem.’ And that was terrible. And then worse than
that, when the self- regulatory bodies that were supposed to do something about
it did absolutely nothing, the SEC under Mr. Pitt went up to Capitol Hill to
support a preemption bill that would have precluded my office, that was trying
to address this problem, from looking into the problem. So he wouldn't do anything
about the problem, but he would support a bill to put handcuffs on the ability
of those offices that wanted to pursue it.”
In prosecuting the investment bank cases, Spitzer related how one corporate
defense lawyer issued a not so veiled threat.
“The lawyer said, – ‘Elliot, be careful. We have powerful
friends.’ Now, I don't know if he meant this as a threat,” Spitzer
said. “If he did, it didn't work. But he was correct. I didn't realize
it at the time. But they do have powerful friends. And the ‘we’
that he was referring to probably was just the investment banks, but writ large
what he was saying was that the existing system has many powerful friends, because
the status quo always has powerful friends. Those who benefit form the status
quo never want change. . . We charged the company. So we filed the case, and
then the lawyers for the company come into my office, and what did they say?
You know, you all in this room know high-priced lawyers. You know what they
are supposed to say. ‘You don't understand the sector. You're taking the
evidence out of context. You don't really mean that. We're nice guys.’
They didn't say any of that. They said, ‘You're right. But we are not
as bad as our competitors.’ Now, how is that for a defense? Think about
it. Isn't that wonderful? I have three daughters. Even my daughters don't try
that defense.”
Spitzer said that big business was on a campaign to fight back against mild
regulation.
“Business leadership in the nation right now is pushing back against the
effort to ensure codes of conduct, ethical behavior, objecting to Sarbanes-Oxley,
objecting to the SEC's effort to mandate disclosure and certain behavior patterns,”
Spitzer said. “The business leadership is saying – ‘Enough.
We got the lesson. Back off.’”
“The U.S. Chamber of Commerce, which is perhaps the preeminent –
or styles itself as the preeminent voice for business leadership – is
going to court to challenge the SEC's capacity to issue the regulations relating
to mutual funds, board behavior, accounting rules and other like series of rules
that the SEC believes are essential to ensure integrity in the capital markets.
The president of the Chamber of Commerce, in a rather direct attack on the cases
that my office has made, said recently that he felt that we were targeting individuals
for honest mistakes. And there has been an enormous effort, sponsored by some
of the business leadership to preempt states, and my office in particular, preempt
us from our capacity to bring the types of cases that we have been bringing
over the past number of years.”
The rap on Spitzer is that he’s a publicity hound, that while he is head
and shoulders above the other 49 state Attorneys General, he pulls his punches
when it comes to settling with big corporations, that he settles for pennies
on the dollar and doesn’t demand that they formally admit wrongdoing,
that he believes in the death penalty for street criminals but not for corporate
criminals.
Spitzer faced none of those issues at the Press Club.
Instead, he kept the crowd in a good mood with his serious narrative about government’s
proper regulatory role.
His family, at least, might be getting sick of it.
“My wife and I have three daughters,” Spitzer said toward the end
of his 40 minute speech. “We were sitting at a dining room table a couple
weeks ago, and I turned to my 15 year old. And those of you who have teenage
daughters know that every now and then you try to start up a conversation with
them, and you meet with utter, abject failure. So this was one of those moments.
I turned to her, and I said, ‘Alyssa, what's your favorite word?’
You know, lousy effort on my part, I admit. But she looked at me, rolled her
eyes, and said, ‘Oh, Dad, cut it out. I don't have one, but I know what
yours is.’
I said, ‘Oh, what's that?’
And she said, ‘Fiduciary duty.’”
Corporate Crime Reporter
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