A crusading, polarizing attorney general

NEW YORK — Politics is not “about individuals,” Gov. Eliot Spitzer said Monday. But his own legacy as a politician is inseparable from his personal style, admirers and detractors say.

During his eight years as New York state’s attorney general, Spitzer took on Wall Street securities brokerages, mutual-fund companies and insurance firms -- all in the name of consumers who he said weren’t being protected by other regulators. In doing so, Spitzer obtained legal settlements and brought questionable industry practices to light.

In 2003, he helped arm-twist a $1.4-billion settlement from 10 major securities firms after an investigation that uncovered embarrassing e-mails in which Wall Street analysts were dismissive of stocks that they were publicly urging investors to buy. Analysts, the evidence showed, were using positive stock ratings to help their firms win lucrative investment-banking business from the companies being rated.

Spitzer’s office also exposed illegal market-timing and late trading that victimized mutual-fund investors, as well sales practices by insurance brokers that he said amounted to bid-rigging and taking kickbacks. The latter probe resulted in the resignation of the top three executives at Marsh & McLennan Companies Inc., the nation’s largest insurance brokerage.

In perhaps his most publicized case, Spitzer sued former New York Stock Exchange Chairman Richard Grasso, accusing him of manipulating his board of directors to obtain pay of more than $187.5 million, an amount Spitzer called excessive and illegal. That case is pending.

Spitzer’s aggressiveness earned him praise from consumer advocates and won him the governorship, but it also made him a flock of enemies -- some of whom were privately indulging in schadenfreude at Monday’s turn of events. Some not so privately.

“There is a God,” an unidentified trader told CNBC stock market reporter Bob Pisani.

“Eliot Spitzer Vows to Crack Down on Excess Prostitute Pay,” read the headline over a mock news story on the Wall Street gossip site Dealbreaker.com.

What tended to polarize opinion about Spitzer as attorney general was his verbal combativeness and his refusal to give quarter, sometimes even to those who should have been his natural allies.

Although Spitzer picked worthy targets for his investigations, he didn’t cooperate as well as he should have with the Securities and Exchange Commission and other agencies that in some cases had primary jurisdiction, said David S. Ruder, a Northwestern University law professor who served as SEC chairman in the 1980s.

“He was the role model for the activist attorney general,” Barbara Roper, director of investor protection for the Consumer Federation of America, said of Spitzer. “I guess it depends on your perspective as to whether that was a good thing,” she added, “but we thought it was.”

It is unclear whether legal settlements Spitzer obtained made any permanent change in, for example, the way Wall Street analysts and investment bankers operate, Roper said. But it is clear that he gave investors fair warning that they should be skeptical.

If Spitzer could be criticized as attorney general, it would be mainly for lack of follow-through, Roper said, adding: “Once the big headlines passed, he was on to better things.”

Michael Perlis, a securities lawyer at Stroock, Stroock & Lavan in Century City and a former SEC enforcement attorney, said the headlines were part of the point with Spitzer.

“He certainly brought to light some serious abuses,” Perlis said, “but he spent too much time running for office.”

Perlis compared Spitzer to televangelist Jim Bakker, who was brought down by a sex scandal.

“If you’re going to set yourself up as a bit self-righteous, you’ve got to live the life,” he said.

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