IN the fall of 2006, with Eliot Spitzer plainly on his way to a landslide win in the governor’s race, I commiserated with one of Attorney General Spitzer’s chief targets, former New York Stock Exchange chief Dick Grasso.
“He’s going to be governor,” Grasso told me, sounding wounded and enraged, “and nothing will stop him.”
Yes, I replied – but he’ll ultimately blow himself up.
I can’t repeat the phrase I actually used in a family newspaper; let’s just say I predicted Spitzer would someday step on a most sensitive part of his own anatomy.
As a reporter covering him – and then becoming the target of one his office’s no-holds-barred intimidation games – I saw Spitzer’s shortcomings first hand: his zealotry, his wild temperament and his penchant for sleazy tactics.
But I never thought I’d be proven right in the most literal sense – with Spitzer entangled in a high-end prostitution ring and now suffering the kind of public humiliation that he and his minions inflicted upon many targets.
Wall Street, of course, is rejoicing about the downfall of “Client 9.” Seen from there, he was a public menace who used his position, the threat of indictment and the leaking of innuendo against his targets to advance his political career.
Ken Langone, the only NYSE board member charged in Spitzer’s case against Grasso, said publicly what others are saying and thinking privately: “We all have our own private hells,” he told CNBC, “I hope his private hell is hotter than anybody else’s.”
It’s not just schadenfreude – Spitzer’s foes reveling in his suffering. It’s that Spitzer became governor largely thanks to his many hyper-publicized cases against Wall Street titans like Dick Grasso and Hank Greenberg- cases that he pursued by going after everything and everyone connected with his targets, no matter how personal, by leaking constantly to the press and by making his own nasty, off-hand public comments.
Keep in mind, Spitzer was charging Dick Grasso with making too much money. Yet, as chronicled in my book on Grasso, “King of the Club,” when Grasso refused to settle, Spitzer’s “investigation” wound up probing whether Grasso had had sex with his secretary and fathered a child out of wedlock. The apparent effort to beat Grasso into submission included threats of tawdry press leaks about alleged personal indiscretions – allegations Grasso denies, and for which little evidence ever materialized.
To be sure, Spitzer had his virtues. His initial big case, back in 2002 was first-rate, when he went after Wall Street’s top firms for misleading small investors with overly optimistic and fraudulent research influenced by the payment of massive investment-banking fees. Later, in attacking other financial-world abuses, he would often fill a void left by less-activist regulators.
But even in his best moments, there was always something askew about Spitzer’s pose as a “white knight,” an image he cultivated with tips to reporters hungry for scoops on some of Wall Street’s biggest names.
Getting leaks is a reporter’s dream – yet the media wound up ignoring not only the countervailing evidence in Spitzer’s cases, but even the prosecutor’s own shortcomings.
The press downplayed Spitzer’s early brush with scandal – his lying about how his father helped finance his campaign, a possible violation of campaign-finance laws. Reporters largely ignored the implications of this prosecutor threatening to put a “spike” through the heart of one of his targets – as he bullied Ken Langone, because Langone had decided to fight Spitzer rather than cave.
The media skipped past Spitzer’s threat to be coming after one of the most decent and honorable men on Wall Street, former Goldman Sachs Chairman John Whitehead, who had dared to defend the integrity of another Spitzer target, Hank Greenberg, the then-chairman of insurance giant AIG.
They all but ignored how Spitzer cut breaks to political allies like Carl McCall, the former state comptroller who was head of the Stock Exchange compensation committee that ultimately approved Grasso’s pay package.
Spitzer said he wouldn’t take money from companies he was investigating, but had no problem taking money from their attorneys. Where was the outrage?
And where was the outrage over all of those settlements that Spitzer crafted with the financial industry that did little to address the problems they were designed to end – but gave Spitzer another press conference to burnish his heroic image?
Above all, the press ignored his immense vanity.
It doesn’t take a rocket scientist to figure out that Spitzer was in it for himself, but it was more than that. He outdid even Rudy Giuliani, the last New York prosecutor to use his office to make it big in politics. Spitzer didn’t just charge his targets with crimes, he publicly beheaded them at press conferences where he drew sharp distinctions between right and wrong like a fundamentalist preacher who sees the world in nothing but black and white.
And like those fallen ministers we know far too much about, Spitzer now suffers poetic justice – a phrase every one of my Wall Street contacts has been using these past two days.
It’s also poetic justice for many of my colleagues in the press – who built Spitzer into the “Enforcer,” the man who tamed Wall Street on behalf of the aggrieved small investor, while ignoring his obvious shortcomings.
I’m not much of a Bible-quoting man, but the Gospel of John has it right: “Let he who is without sin among you, cast the first stone.”
Charles Gasparino is on-air editor at CNBC and author of “King of the Club: Richard Grasso and the Survival of the New York Stock Exchange.”