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Ambitious Eliot Spitzer

By Sam Munson

It seems increasingly likely that Eliot Spitzer -- sometime scourge of the fund managers, the people's champion, part Rudolph Giuliani and part Fighting Bob LaFollette -- will become the next governor of the Empire State. And while the office may no longer be the stepping stone to the presidential candidacy that it once was, Spitzer's accession to it, should he succeed, holds out at least the distinct possibility of his taking a run at the White House in the not-too-distant future. Whether one considers this a sobering or an elating prospect, the spectacle of Spitzer in pursuit of the highest office in the land would doubtlessly be long remembered, if he were to display even only a fraction of the keen intelligence, tenacity, fierceness, media savvy, and fathomless self-confidence he has shown as attorney general of New York.

But before the American populace can contemplate the prospect of Eliot 2012, Spitzer must successfully fulfill a different dire commission: the management, fiscal and political, of New York's state government­­­ -- sclerotic, graft-rich, and in as permanent a crisis, it seems, as the government of the city itself -- an office, it must be noted, that counts among its past holders both the great Theodore Roosevelt and the stunningly ineffectual George Pataki. Only the prospect of this job, one imagines, could make a man think wistfully of weeks engrossed in mind-numbingly complicated data-mining on a hunt to pinpoint managerial malfeasance in the seemingly dull but apparently quite seamy world of mom-and-pop mutual fund investment.

Spitzer's meteoric rise into America's political consciousness has as much to do with the times as with the man. The lean years after the dot-com collapse left the investing public with a hankering for visible, swift revenge on its defrauders, real and alleged. Practices that had gone uncriticized throughout the 1990s (to the point, nearly, where they had become standard operating procedure for growing corporations) suddenly emerged as proofs of the utter moral bankruptcy of America's corporate culture. Something, to coin a phrase, had to be done, and Spitzer -- in his own mind, certainly, and in the media's collective imagination -- was just the man to do it. But while his success as a reformer seems undeniable, his record in ensuring that the wrongdoers actually received their just punishment is far spottier.

The source of this curious disconnect forms the implicit subject of Brooke Masters' open-eyed treatment of Spitzer. This theme, indeed, first appears in the book's title. Masters' book is a studious and objective account of the life and times of Eliot Spitzer, and one fact of Spitzer's character emerges over the course of it as undeniably clear: This is a man whose considerable worldly success is founded, in the end, on his bottomless font of aggression. (That, and his father's money.) What this may mean for his political future is unclear at present. But it is eminently worth considering.

Eliot Spitzer was born in Riverdale, a tony near-suburb of New York City, in 1959, the middle of three children. His father, Bernard, an engineer-turned-developer, was in the midst of amassing his fortune; his mother was teaching college English. He attended the famed Horace Mann School and Princeton, and earned his jd from Harvard (where he served as an intern in Alan Dershowitz's defense of Claus von Bulow). Spitzer did a stint as a clerk for Judge Robert Abrams, and another at Paul, Weiss, Rifkind, Wharton & Garrison, but really began to hit his stride when he joined the Manhattan da's office in 1985, under the renowned Robert Morgenthau. Here he worked closely with Michael Cherkasky (whom Spitzer's prosecutorial efforts would, more than 20 years later, propel into the limelight as a newly-appointed ceo in charge of cleaning up insurance giant Marsh & McClennan) in its organized crime department. In 1988, Spitzer negotiated a high-profile plea deal with mobsters caught in a sting operation aimed at exposing corruption in the garment trucking industry, and immediately stepped into a whirl of media controversy that has not quieted appreciably up to the present day.

Spitzer left the da's office in 1992 to return to private practice at Paul, Weiss, but in late 1993 the state attorney general's office began to look tempting: It was filled by appointee G. Oliver Koppell, who would have no real incumbent status come the election in 1994. Spitzer entered the race late, took out a huge bank loan to offset his lack of fundraising time, and began spending like a sailor. (This loan would come back to haunt him: His father paid it off through a series of self-dealing real estate transactions, an act that pushed the envelope of New York's campaign finance laws and provided fodder for Spitzer's political foes). The hard-and-fast approach did not avail, however. Spitzer placed dead last in the Democratic primary. But by 1998, when the office came up for contest once again, he was ready. He had spent the intervening four years quietly campaigning and building a political support network. Spitzer took the primary (with a little more financial help from his father) and, in one of the most hotly contested elections in state history, defeated Republican Dennis Vacco by just over 25,000 votes. Spitzer was sworn in on January 1, 1999.

He began his career as attorney general with an investigation into Delta Funding, a home equity loan company with highly questionable business practices. After backing out of a plea deal with Spitzer's office, Delta was penalized by the state's banking department to the tune of $12 million without any requirement of reform. But Spitzer was not to be deterred. He filed a civil rights lawsuit against Delta and won, and forced the firm to amend its lending practices according to a program he laid out. This victory, though it was against an obscure company in an obscure financial arena, was the overture to Spitzer's first world-shaking effort: his office's public battle with investment bankers Merrill Lynch.

In 2001, Merrill quietly made a large monetary settlement with a customer who had lost hundreds of thousands of dollars through an unsound investment made on its advice. Spitzer's office took note -- such settlements are unusual -- and began issuing subpoenas. As Merrill's interoffice emails rolled in, a huge disconnect between what Merrill's brokers told their retail clients and what they told each other became apparent. Merrill's star telecom analyst, Henry Blodget, had been enthusiastically recommending stocks to customers while privately deriding them. Spitzer went after Merrill, accusing it of offering good broker recommendations in exchange for IPO business from the companies whose stocks Merrill analysts pushed. Merrill, long seen as incorruptible in the world of investment banking, denied these charges loudly. Spitzer's office began a coordinated effort with the SEC to force Merrill to admit wrongdoing, and after a series of acrimonious legal meetings (and a press conference mounted by Spitzer without the knowledge of the SEC's enforcement team) Merrill agreed to settle the suit for $100 million and to take steps to keep its analysts honest.

The Merrill suit would become the model for Spitzer's office: avalanches of bad publicity and fiery rhetoric; public displays of contempt for the SEC, with whom the office was allegedly cooperating; a preference for quick, seemingly large settlements; and, often, the forcing of high-ranking corporate officers to resign with the threat of imprisonment or public humiliation. (Spitzer borrowed a few pages from Giuliani's book, it's true). Spitzer followed this pattern with his investigations of Citigroup and telecom analyst Jack Grubman; with this relentless pursuit of market timing and late trading (recondite ways for mutual fund managers to exploit for personal advantage differences in price at the differing closing times of stock markets worldwide) at Canary and Pilgrim Baxter; with his investigation of too-high fees at Alliance Capital Management; with Dick Grasso, the former NYSE chief whose compensation package was, in Spitzer's opinion, "simply too much"; with his exposure of questionable practices at insurance giant Marsh & MacLennan; and his takedown of AIG's legendary Maurice Greenberg. In all of these cases Spitzer and his team displayed a rare ability to dig up old corporate statutes and put them to use in new ways, and a dogged, vocal championship of the small investors and average American consumers who had been hurt so deeply by the dishonesty of these modern captains of industry.

Masters lays out these complex and murky issues in a way that renders them not only immediately intelligible to the lay reader, but also downright exciting. She has a real gift for animating scenes of boardroom conflict and backroom dealing. And her objectivity is, if not unquestionable, certainly much in evidence. One of the book's most memorable scenes occurs early on: the Spitzer family gathered around a monopoly board, Bernard serving as a ruthless banker, the seven-year-old Eliot weeping with frustration as his father forces him to pony up brightly-colored rent dollars. Masters suggests that a large helping of this trait was passed on from father to son, quoting one of Eliot's employees, David Brown: "Eliot lends a speed and violence to this process that you wouldn't believe. . . . We will come to your house at night." She makes no bones about the fact that Spitzer is hugely ambitious, has a real gift for alienating potential allies with arrogance and open disrespect, and a real love of the limelight. He is a natural autocrat, in other words. But powerful and fascinating though he may be, he comes off in Masters' hands as more than a little ridiculous at times. It is difficult to tell how much of this she intends, and how much is ridiculousness of his own making, as, for example, in the book's final chapter, which covers the opening of his gubernatorial campaign, where she gives us Spitzer, a quintessential child of New York's privileged class, referring to his "friends in labor." And though her eyes are clearly open to his idiosyncrasies, she skirts without directly raising what must be a primary question for any observer of the Spitzer phenomenon: For all of his self-touting as a reformer, has he actually delivered on his promise to the victims of corporate malfeasance?

The answer, simply, is no. The $100 million his office wrung out of Merrill went entirely into the tax coffers of the State of New York. (Masters points out, furthermore, that Merrill spent three times as much on office supplies alone in the same year.) Market timing and late trading do dilute value for mutual fund investors, but the severity of the dilution is debatable. And Dick Grasso's pay package (most of which, it should be noted, he has so far ended up retaining), excessive or not, has very little to do with the financial health of America's poor and middle class. Spitzer did not even manage to convict Theodore Sihpol, one of the Canary managers involved in the late-trading scheme. The more closely one examines Spitzer's career, in fact, the more full of sound and fury it seems, and the less it seems to signify. For a firebrand reformer, Spitzer has done almost nothing actually to benefit materially those purportedly hurt by these practices. His precipitous rush to settlement or court and his at-times unthinking aggression have undoubtedly contributed to this. What Masters does not openly say, but what seems just as obvious, is that these cases were orchestrated as much with an eye to the political capital they could generate as to the redressing of wrongs done to mutual fund customers, home equity loan applicants, and whatever mysterious constituency excessive executive compensation allegedly harms. And while self-seeking of that kind may, indeed, be the primary qualification for life as a modern politician, a man who passes himself off as an enemy of the avaricious and powerful runs a grave political risk as long as any skeptic can give voice to an accusing tu quoque.

Spoiling for a Fight closes with Spitzer stumping for governor, addressing a crowd at a fundraiser. We are now four months away from zero hour. His election is, at this point, more or less a foregone conclusion. As Masters notes, though he poor-mouths his own larger ambitions, he has made extensive use of a famous quote of Teddy Roosevelt's (one of his political idols, and another populist reformer descended from New York's upper social echelons) on the campaign trail: "Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure . . . than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a grey twilight that knows not victory or defeat." Whether Spitzer fails or conquers in Albany, and whether or not he goes on to higher office, his daring -- and his arrogance -- will be long remembered. Whether he will be good for New York, or for America, may take years to answer. But if he holds true to form, Eliot Spitzer will make certain that all eyes are on him for the duration, however long that may be.

Sam Munson is a writer living in New York.

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