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Spitzer spurs lots of crowing
By Al Lewis
Denver Post
Tuesday, March 11, 2008

Anyone who ever sat in Eliot Spitzer's cross hairs can feel better now, laughing about his dark side.

At the New York Stock Exchange once a Spitzer target itself traders reportedly cheered as news of Spitzer's alleged indiscretions with a high-dollar prostitution service broke.

"Spitzer's been no friend to Wall Street," said Hank Smith, chief investment officer of Haverford Investments, a Pennsylvania firm that manages $6.5 billion.  "We're likely to see stocks rally on Tuesday because this news will kick the subprime mess off the front page."

Don't count on that rally, or even a lull in the subprime news.  But it's a sure bet the man Time magazine called "Crusader of the Year" will be better remembered as "Client 9" of the "Emperor's Club."

A big no-comment came from Denver-based Janus mutual funds, which Spitzer accused of trading improprieties in 2004.  But you can bet there is jubilation in the halls.

Spitzer's case against Janus never went to court, and no Janus official was implicated.  But several executives, including chief executive Mark Whiston, were forced to resign.  And the company paid $226.2 million to settle accusations that in retrospect seem like parking violations.

Janus officials decided this was cheaper than battling Spitzer in the national media potentially losing investors to negative headlines.

"All he did was make headlines," said Anthony Accetta, a former federal prosecutor. "He announced investigations.  He bullied people around.  And then he forced settlements that the consumers not the companies had to pay."

It's hard to think of an industry that Spitzer did not target as New York's attorney general from 1999 to November 2006.

New York law gave him broad powers to sue investment banks, mutual funds, insurance companies, gun manufacturers, drugmakers and plenty of companies here in Colorado.

Denver-based Invesco Funds, for instance, paid $451.5 million to settle Spitzer charges.

In 2003, Qwest founder Philip Anschutz paid $4.4 million and former Qwest chief executive Joe Nacchio paid $400,000 to settle Spitzer's claims that they violated New York securities laws by receiving shares of stock in exchange for steering business to the issuers.  Anschutz said he did nothing improper but paid the settlement to get Spitzer off his back.

Spitzer also dinged Scott Richter, a Westminster e-mail advertiser known as the Spam King, for $50,000, although Spitzer originally sought $20 million.

Plenty of people deserved what Spitzer threw at them.  But now it's Spitzer's turn to take the hit.  And Spitzer without ethics is like Mr. Clean without the clean.

"It's an attack to the core identity," said Michael Pfarrer, an assistant professor at the University of Denver who studies reputation management.  "His salience is ethical behavior, and he violated it."

In 2005, Spitzer was gracious enough to meet me in his Manhattan office.  By that time, he'd been accused of everything from extortion to aggressively positioning himself for a gubernatorial race.

"People spend a lot of time challenging my motives," he said. "But . . . challenging the motive of the prosecutor is the last refuge of the guilty."

I loved that line. I loved his righteous indignation.  I loved his ability to humiliate powerful wrongdoers.

Too bad he blew it all on a hooker.

Respond to Al Lewis at blogs .denverpost.com/lewis, 303-954-1967 or alewis@denverpost.com.

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