In recent years, congressional inaction and U.S. Supreme Court decisions have served to offer states lots of latitude in matters once thought the exclusive province of Washington. Few officeholders, though, have made as much of this moment of opportunity as Eliot Spitzer, New York’s attorney general.
Spitzer has become a ubiquitous figure in the major legal fights over social and fiscal policy in our time, including such areas as abortion, labor rules, air pollution, gun control and, perhaps most notably, corporate malfeasance.
Spitzer made his biggest splash this past May, when he announced a settlement with Merrill Lynch, which included a $100 million fine that went to New York and other state treasuries. The deal also called for the brokerage house to abandon the practice of encouraging its analysts to tout the stocks of its investment-banking clients. “Eliot Spitzer did investors everywhere — I mean everywhere — a big service by bringing the issue of analyst conflicts to the fore,” says Ashley Baker of the North American Securities Administrators Association.
Now, as regulators in at least 10 states look into the practices of other firms, Spitzer is going after investment-banking clients of Salomon Smith Barney to whom the firm sold hot initial price offering shares in what Spitzer calls “commercial bribery.”
Earlier, Spitzer had suffered a backlash in Congress, where some House members wanted to strip his office of authority over securities. But he can now point with pride to recent measures announced by the federal Securities and Exchange Commission requiring that Wall Street research departments be kept at arms’ length from investment-banking operations. “It was a lonely endeavor initially,” he says, “but we’ve made a lot of progress.”
Spitzer has stirred up many other pots as well, pursuing high-profile cases in the areas of abortion rights and racial profiling. He shamed the U.S. Environmental Protection Agency into taking action against Midwestern power plants he was suing for air-pollution violations. His work in forcing grocers to pay their immigrant workers a minimum wage continues to result in fresh settlements, and his pursuit of auto insurance fraud has led to 50 indictments in recent months.
Driven and smart, Spitzer grew up and lives among New York’s wealthy classes and holds degrees from Princeton and Harvard Law School. He first won fame as an assistant district attorney prosecuting members of the Gambino crime family. In the late 1980s, Spitzer helped break the Gambino hold on the city’s garment business (he set up a factory of his own rather than rely on moles) then left for private practice soon after. Although he didn’t particularly enjoy corporate work, he recounts with pride the time that William Guthrie, a light-heavyweight boxer on whose behalf Spitzer successfully sued for a shot at a title fight, expressed his gratitude from the ring after his victory. It was, he says, a unique way for a client to offer thanks.
Spitzer’s high-profile triumphs, coupled with an effective press operation, have carried him a long way politically. After finishing fourth in a field of four in the 1994 Democratic primary for his office, he unseated Republican Dennis Vacco by such a narrow margin in 1998 that Vacco refused to concede for six weeks. (Spitzer borrowed $10 million from his developer father to win that latter race.) Spitzer is now universally considered a lock for reelection this month and a probable candidate for higher office in the future.
His more recent crusades against power plants, investment bankers, auto insurers and grocery chains, he says, have led many of his conservative enemies, who in theory support the idea of power shifting from the federal government to the states, to turn against the creed when those new state powers are wielded by him. He recalls receiving a less than gracious welcome from the Federalist Society when the group invited him to speak. He claims they were less interested in displaying him as a paragon of what federalism can accomplish than “to show the risks of the devolution of power to states when the wrong person, in their opinion, is making the decisions.”
— Alan Greenblatt
Photos by David Lubarsky