Just who is Eliot Spitzer?
Wall Street crusader took on Gambino family
Peter Morton
Financial Post
Kathy Willens, The Associated Press
ELIOT SPITZER: "I'm skeptical of that right now," he said of his earlier plan to force a split between investment firms' research and investment banking operations.
WASHINGTON - Making enemies on Wall Street is hardly a big deal for a man who is not afraid to take on the Gambino crime family.
Eliot Spitzer, the 42-year-old New York State Attorney General, has little qualms on taking on the most powerful institutions in New York even though he lives in the city and, he says, half of his friends work in the business.
"A good friend of mine a few days ago e-mailed me to say he was coming to the city and wanted to know if I wanted to get together," he said recently. "I said, 'Sure. I may not have any friends left by the time you get here.' "
Mr. Spitzer's timing for a sweeping probe of how Wall Street shills stocks while its analysts privately disparage them does seem rather odd.
And yesterday he expanded his investigation of brokers to include Morgan Stanley. At least four other top firms are also expected to be subpoened, Credit Suisse First Boston among them.
Wall Street is in its deepest trough in more than two decades with 43,000 jobs lost in the past 12 months. Struggling stock markets are still reeling from the Sept. 11 terrorist attacks and investors are rattled by the collapse of Enron Corp. and the near demise of Arthur Andersen LLP.
And it does not help the optics that Mr. Spitzer is up for re-election this year although few see any serious challengers. But his critics have accused him of grandstanding in the past as he builds his reputation -- according to his own bio -- as "the People's Lawyer." Among his critics is the New York Civil Liberties Union, which has complained that Mr. Spitzer focuses on criminal law enforcement to the detriment of protecting civil rights.
Despite the prominent headlines for his latest probe, Mr. Spitzer has already begun to back away from some of his more controversial remedies for Wall Street, including one that would force investment firms to split their investment banking and research operations.
"I'm skeptical of that right now," Mr. Spitzer said yesterday. "I'm not sure it works."
Mr. Spitzer last week released the results of his 10-month investigation into Merrill Lynch research that, he said, found "dramatic evidence" the firm's analysts deliberately recommended stocks to win new banking business. He also said at the time he was considering forcing Merrill Lynch and other investment dealers to split their investment and research divisions.
Merrill Lynch and Mr. Spitzer are negotiating a settlement that would allow the firm to avoid criminal charges that it misled investors with its research, sources have said. However, Mr. Spitzer wants Merrill Lynch to admit wrongdoing and pay restitution to clients, something that could cost upwards of US$100 million.
"There appears be a basis for productive discussion," said Juanita Scarlett, a spokeswoman for Mr. Spitzer. "The attorney general would like to resolve the matter through negotiations."
Even if there is a deal, the damage may have already been done. Congress is expected to call top Wall Street executives to explain their analysts' reports, especially in the wake of the collapse of Enron, where few analysts had given any sell recommendations.
The son of a wealthy real estate developer, Mr. Spitzer attended Princeton before getting his law degree at Harvard. In 1994, at 35, he ran for attorney general after a year as a federal court clerk and six years as an assistant district attorney, when he gained prominence prosecuting the Gambino crime family.
The only political newcomer in the race, Mr. Spitzer finished last in a field of four candidates after spending more than US$4-million of his family's fortune on his campaign. He successfully ran again in 1998 although winning with a extremely narrow margin. He runs again this year.
"Anybody who thinks going after, or being perceived as going after, the core industry of New York City in an election year is good politics has it dead wrong," Mr. Spitzer told a reporter.
pmorton@nationalpost.com |
