Monday, March 24, 2008

On Eliot Spitzer and John Ashcroft

"Michael Bachner, a former prosecutor in the Manhattan [DA's] office said: 'The Mann Act [MA] was designed more towards those who get someone to travel against their will. ... If Spitzer gets indicted, it would seem to me he would be indicted based on who he is rather than what he's done'," WSJ, 11 March 2008.

"When [NY] Governor Eliot Spitzer was implicated Monday as a customer of a multistate prostitution ring, journalists rushed to brush up their knowledge of a 1910 federal law known as the [MA]. The law, once known as the 'white slavery' law, forbids the transportation of women across state lines for 'immoral purposes,' including prostitution. ... Meanwhile the [MA] has been used repeatedly throughout the years in prostitution cases, although normally it was the purveyors of prostitutes, and not their procurers who were charged under it. Perhaps the most famous use of the [MA] was the 1959 case against Chuck Berry, who served three years for transporting a 14-year-old Indian girl across state lines", Editorial at the WSJ, 12 March 2008.

"The investigation into the prostitution ring that Mr. Spitzer is alleged to have patronized is being carried out by a team of public corruption prosecutors in [the SDNY], a unit that U.S. Attorney Michael Garcia has beefed up since his arrival in 2005", WSJ, 12 March 2008.

"Former Attorney General John Ashcroft on Tuesday denied receiving 'a backroom sweetheart deal' after getting a multimilllion-dollar contract aided by the Justice Department. 'There is not a conflict of interest; there is not an appearance of a conflict of interest,' Ashcroft insisted as a hearing on Capitol Hill. ... Rep. Chris Cannon, R-Utah, said the attack on the former attorney general was 'appalling.' He called Ashcroft 'a man with a distinguished history and unquestioned ethics.' ... David Nahmais, a U.S. attorney in Georgia, testified that deferred prosecution was a 'middle ground' that allows corporate wrongdoers to pay fines and penalties but preserves 'financial viability'," Houston Chronicle, 12 March 2008.

"The federal criminal investigation that has led to Eliot Spitzer's resignation as governor of [NY] illustrates the great dangers all Americans face from vague and open-ended sex and money-transaction statutes. Federal law, if read broadly, criminalizes virtually all sexual encounters for which something of value has been given. ... But the very existence of these selectively enforced statutes poses grave dangers of abuse. ... There is no hard evidence that Eliot Spitzer was targeted for investigation, but the story of how he was caught does not entirely ring true to more experienced former prosecutors and current criminal lawyers. The [NYT] reported that the revelations began with a routine tax inquiry by revenue agents. ... We are talking about thousands, not millions of dollars. ... The idea that federal investigators would focus on a few transactions to corporations--that were not themselves under investigation--raises as many questions as answers. ... Money laundering, structuring and related financial crimes are designed to ferret out organized crime, drug dealers, terrorism, and large-scale financial manipulation. They were not enacted to give the federal government the power to inquire into the sexual or financial activities of men who move money in order to hide payments to prostitutes. ... In this case, they intercepted 5,000 phone conversations, intercepted 6,000 emails, used surveillance and undercover tactics that are more appropriate for trapping terrorists than entrapping johns. ... As the [WSJ] has reported: 'It isn't clear why the FBI sought the wiretap warrant. Federal prostitution probes are exceedingly rare, lawyers say, except in cases involving organized crime leaders or child abuse. Federal wiretaps are seldom used to make these cases'," my emphasis, Alan Dershowitz (AD) at the WSJ, 13 March 2008.

"Michael Garcia, Republican hatchet man and U.S. attorney for the [SDNY], is at it again. This time Garcia is after a Democratic governor. ... I, for one, pray Garcia's political career is as short-lived as former U.S. Attorney General Alberto Gonzalez", (PS) Patrick Sweeney letter to the Houston Chronicle, 13 March 2008.

"Something has been overlooked in the Gov. Eliot Spitzer hubbub: A few weeks ago, Spitzer wrote an op-ed piece for the [NYT] that was reprinted in the Houston Chronicle (Please see 'Predatory Lenders had a partner in crime at OCC/Federal agency, made it all worse for unwary borrowers.' Outlook, Feb. 15). ... Now a few weeks later, by quirk of fate, Spitzer is exposed for his sexual shortfalls. And by luck alone, the high powers of the federal government were being used to investigate a prostitution ring! In this era of scant resources and a mountain of mortgage fraud, perpetrated by bankers, the feds have time to investigate some New York sleazebags for what is generally considers a misdemeanor. What an amazing coincidence, indeed!," Gene Hayes (GH) letter to the Houston Chronicle, 13 March 2008.

"For those who have been on Mars the past few days, Governor Spitzer was caught in an FBI wiretap probe. ... The sting that caught him involved a banking institution alerting federal authorities ... to 'suspicious' financial transactions between Spitzer and the call girl service. ... That said, there is a nagging question in the back of my mind. Why did the hammer fall on Governor Spitzer now? ... So, why was Governor Spitzer 'caught?'. ... I do not have the answer to that question, but mark it down, somebody in Washington, D.C. has the answer. There is an old saying inside the Beltway, 'When it comes to politics, there are no accidents or coincidences. How is it that in this elaborate FBI 'sting,' only Governor Eliot Spitzer was 'caught'? ... All this talk about a war on terrorism is a bunch of hooey. What is really happening is a war on freedom", Chuck Baldwin (CB) at, 14 March 2008.

"Spitzer's lynching and the bankers' enriching are intimately tied. ... Spitzer not only took on Countrywide, he took on their predatory enablers in the investment banking community. ... Do I believe the banks called Justice and said, 'Take him down today!' Naw, that's not how the system works. .... Headlines in the financial press--one was 'Wall Street Declares War on Spitzer'--made it clear to Bush's enforcers at Justice who their number one target should be. And it wasn't Bin Laden. ... Back in the day when I was an investigator of racketeers for the government, the federal prosecutor I was assisting was deciding whether to launch a case based on his negotiations for airtime with 60 Minutes. I'm not allowed to tell you the prosecutor's name, but I want to mention he was recently seen shouting, 'Florida is Rudi country! Florida is Rudi country!' ... Naming and shaming and ruining Spitzer--rarely done in these cases--was made at the 'discretion' of Bush's Justice Department. Or maybe we should say, 'indiscretion'," Greg Palast (GP) at, 14 March 2008.

"In another one of those nice coincidences that seem to happen whenever Wall Street is down and out, the unpopular governor of [NY] was found consorting with prostitutes through a Federal investigation that has all the hallmarks of a 'hit job' ordered from the very top. Spitzer was deeply unpopular in the corridors of power, and especially with the current Treasury Secretary Hank Paulson, for daring to take various Wall Street firms down a few notches earlier this decade. ... It is almost too convenient that the disclosures of his extracurricular activities came this week. ... The sorry story of the governor and his extramarital affair though helped to achieve something more important, namely to hide a brewing problem in the securities industry. ... As with the Sherlock Holmes dictum of 'who benefits from the crime', it is clear that this week's moves were intended to help beleaguered brokers", Chan Akya at, 15 March 2008.

"The press has almost solely focused on the salacious aspects of the affair, not least the hefty fee Spitzer apparently paid. Why the scandal breaks now is the more interesting question. ... Spitzer had become increasingly public in blaming the Bush administration for the nation's current financial and economic disaster. ... On February 14, Spitzer published a signed article in the influential Washington Post. ... With that article, Spitzer may well have signed his own political death warrant", William Engdahl at, 19 March 2008.

The Spitzer case looks like another "triumph" for America's worst prosecutor, since Mike Nifong of "Duke Three" fame went to his appropriate professional reward. I nominate Mike Garcia (MG), SDNY US Attorney for my first annual Nifong. I haven't designed the Nifong yet, but it won't look like an Oscar. Why did MG beef up his public corruption unit? How is Spitzer's paying $80,000 evidence of public corruption? I figure MG's almost unprecendented example of prosecutorial overkill merits MG more than a $3.5 million a year large NY law firm partnership. Say, an eight figure slot at: KKR, Blackstone, or dare I think it, Goldman Sachs. Or wherever he will be offered the best deal.

Really Mr. Nahmais? Or does it give AUSAs opportunities to do very well when leaving the DOJ? Further, it gives current AUSAs a basis to avoid trying cases to conceal whatever they wish to conceal. "Deferred prosecution" agreements avoid trials which might expose information useful to the plaintiffs' bar. Should drug distribution gangs "financial viability" be preserved? If not, why not? It seems to have deterrent capability, you don't want to preserve a corporation's financial viability. Or is Nahmais lining up a job with Exxon's or BP's attorneys as soon as 21 January 2009 rolls around?

AD misses this: the lack of "hard evidence" is a defense usually raised in criminal conspiracy cases. It is no element of a prosecution's case in chief. Why do I raise this? Because criminal convictions can be built on circumstantial evidence. AD could look forever for the proverbial "smoking gun" email or memo within the (In)Justice Department that would "prove" Spitzer "was targeted for investigation". How many millions did the FBI and MG spend to "make" this case and why? Some people made the "connections" quickly. The first was at on 10 March. I remember thinking it absurd for the Feds to spend $9 million to prosecute Martha Stewart (MS) over $53,000 of avoided losses. That isn't even 1% of my Blankfein test amount. Remember, MS was a big time criminal, she was a Democrat!

PS, insha Allah.

GH, you built a circumstantial evidence case against MG. Go guy! As I wrote Bill Pickering on 11 March 2008, I've seen criminal convictions sustained on three pieces of circumstantal evidence. I think GH has this knocked. The Bush administration is unsubtly telling anyone opposed to its Wall Street bailout, "We're coming for you". Andrey Vishinsky, Stalin's chief procurator would have been proud to have made MG's Spitzer case. I cited Spitzer's piece on 20 February 2008. The NYT article about the prostitution ring appeared on 7 March, 21 days after Spitzer's piece. Coincidence, I doubt it. As attorneys who pursue wrongful termination cases know, proximity in time between the "protected act" and the "adverse employment decison" is a fact a jury may consider in its deliberations. But there is no "hard evidence" say the corporate defendants when appealing a lost employment case. So?

Some history. The MA is currently codified at 18 USC 2421. It reads, "Whoever knowingly transports any individual in interstate or foreign commerce, ... with intent that such individual engage in prostitution, or in any sexual activity for which any person can be charged with a criminal offense, or attempts to do so, shall be fined under this title or imprisoned not more than 10 years, or both". The MA was made "gender neutral" years ago. WSJ, wake up. What does the MA mean Nifong, excuse me, Garcia? That a 17-year old New York boy, taking his 15-year old girl friend to New Jersey to "do it", can be charged under the MA for doing the "Act". Another MA application: a pornographer drives an actor and actress from Los Angeles to Las Vegas to shoot a film. It appears he could be charged under the MA. I believe the 1910 legislative intent that such "crimes" not be punished under the (appropriately named, I love it) Mann Act as it was then called the "white slave trafficking act". A $4,300 an hour hooker is a "white slave"? Puhleeze. That's about four times the highest rate any NY law firm charges for partner time. Suppose a Debevoise and Plimpton attorney, our old friend Mary Joe White's firm, takes the Washington Bridge to New Jersey with a honey in tow, he could be charged under the MA too. Who knows, if we construe the MA broadly (ugh) enough, MG could be charged under it too if he crossed state lines with the requisite intent. Suppose he takes a "friend" to Mississippi, which has a fornication law. MG and his "friend" could both be charged under the MA. Crazy. The Spitzer case is one of the worst cases of selective prosecution I've seen in years. MG, I salute you. As opposed to spending time with what must be multi-billion dollar Wall Street frauds, you insult the American public with this? You should be ashamed of yourself. Bachner's understanding of the MA is the same as mine.

We should not ignore the "wag the dog" aspects of Spitzer's undoing as Helicopter Ben just bought $200 billion of toxic waste from Wall Street this week as Akya notes.

I remember once seeing Telly Savalas (TS) as Kojak investigating a murder. One witness was a streetwalker. She was unwilling to testify. So what does TS say? This is a paraphrase, "I'm a real cop. A homicide dick. Not one of those vice idiots. If any of those vice idiots gives you any trouble just tell me and I'll take care of them. Now talk". And she did. Has the NY FBI anything important to do?

CB's question is unusual as he is a Baptist pastor from Pensacola, Florida who opposes adultery and fornication among other things. He's asking why?

What more need be said, MG? Who do you think you're fooling? This nonsense will end when the various state police agencies make it a regular practice to investigate US attorneys. After a few of them are sent to state prisons, the remainder will concern themselves with real crimes as opposed to supporting Bush administration policies.

1 comment:

letters said...

Nice blog entry and assembly of relevant facts. You are totally right that the public explanation as to why Eliot Spitzer was being investigated just doesn't make any sence. Spitzer made millions per year and his family was worth some $500 Million dollars. Thousand dollar and ten thousand dollar wire transfers certainly get the mandatory and automated reporting to bank examiners. But there is no way in hell that any federal judge is going to sign a warrant for wiretap surveillance on someone just because of wire transfers. Yuppies wire such sums to their private tennis coaches, their summer chefs, Hamptons beach rentals, Au Pair babysitters, buying artwork, and so forth. But this was the NY Governor! and former Attorney General! A judge could himself be thrown in jail for signing a warrant to allow a wiretap on a state governor if it was done without sufficient evidence. There had to be specific evidence provided in order for a warrant to be signed, and that evidence has not been made public. The theory that Spitzer was brought down for in retaliation for his "sub-prime" op ed article does not make sense either. First, Spitzer and the media framed his reign as Attorney General as the "Wall Street" cop. But in reality, Spitzer did not accomplish much of anything on Wall Street, no serious convictions just a lot of settlements made in the face of big threats from Spitzer. The reality is that Spitzer deserves as much blame as anyone for having done nothing about the pervasive fraud in the Structured Finance market with Ponzi Scheme CDOs and toxic waste collateral. Spitzer's op-ed article was much too little and far too late in the credit bubble having burst to have any affect on the markets, waking up other regulators, or cleansing Spitzer's own failure to stop the fraud. However, a press release from late 2006 drew attention to Eliot Spitzer's protection of Organized Crime vis-a-via a death threat to the whistle-blower to alleged fraud involving the Worldcom Bankruptcy. A far more likely explanation as to why a wire tap was authorized against Spitzer is that the Feds were investigating his apparant protection of organized crime elements by failing to investigate evidence of crimes delivered to his office by certified mail. The wire taps provided the Prostitution Ring connections and there is no denying that Spitzer protected the Rings he was paying money too. But what organized crime families are involved in only one line of business? None, they are involved in many lines of business, just like the Sopranos. Remember the episode where the Sopranos made a bundle by taking the sporting goods store through a fraud laden bankruptcy? Guess what - same thing happens in real like on a much bigger scale. We now know for sure that Eliot Spitzer did business with, and protected, and was vulnerable to, at least one organized crime family. Only a Federal Special Prosecutor stands a chance at unraveling the web of conflicts and crime between Eliot Spitzer and Organized Crime.