Spitzer Gets Spitzered

Some interesting analysis from Daniel Gross at Slate on Spitzer's "mistakes:"

Details are still emerging, and it's uncertain how this will all shake out, but one thing is immediately clear: Spitzer has been hoisted by his own petard, brought down by the same kind of investigation he pioneered as a prosecutor. The analogies between Wall Street and prostitution aren't perfect. (On Wall Street, for example, the transactions involving favors for money are generally conducted when both parties are fully clothed.) But he may have fallen victim to the same types of circumstances that led to his astonishing rise.

1. The unnecessary digital trail.
Spitzer should know that whether you're prostituting out investment analysis for the sake of banking fees, or whether you're a governor using the services of expensive prostitutes, discretion is a paramount value. The first and last rule is not to create a paper trail—or, in this age, a digital trail—that can come back to haunt you.

2. Everybody does it, right?

Many of the Wall Street figures Spitzer nailed were engaging in activities that looked skeevy when exposed to the public but that were generally well-known and accepted by the powers that be. Until Spitzer, investment banks giving buy ratings to their investment banking clients, and spinning shares of hot IPOs to the personal accounts of executives who funneled investment banking fees their way, were common practices at Wall Street's top firms. The executives nailed by Spitzer thought they were engaging in routine activity and never thought they could be indicted for it. The same holds, to a different degree, with high-end prostitution. I

3. The law is an ass.

Wall Street executives who ran afoul of Eliot Spitzer earlier this decade found they were in deep trouble because of a peculiar wrinkle in the law. They found their options were limited because they happened to conduct their business in New York....In Spitzer's case, he may have landed in water that was hotter than it might have otherwise been because he decided to do some of his business in Washington, D.C. (on the night before Valentine's Day, no less). By allegedly arranging for a prostitute to travel across state lines from New York to Washington, D.C., Spitzer may have bumped up his indiscretions from a violation of state to a violation of federal law—a much more serious matter.

4. After-hours trading.

One of Spitzer's signature crusades as attorney general was unearthing the scandals of late-trading—in which mutual funds would allow favored clients (usually hedge funds) to enter and exit rapidly on terms not available to retail investors. When that happened, Spitzer demanded that the executives responsible, among them Richard Strong, founder and chairman of Strong Capital Management, resign and face lifetime bans from the industry. Now that he's apparently been caught trading illicitly after hours, the top executive of the state of New York may be forced to resign and accept a lifetime ban from his industry.