You have to hand it to New York Times business columnist Joseph Nocera — he has certainly come up with a reason that most folks would not have thought of for why New York Aspiring Governor Eliot Spitzer should drop his propaganda campaign, . . . er, I mean, excessive compensation lawsuit against former New York Stock Exchange chairman Richard Grasso and the former chairman of the NYSE board’s compensation committee, Kenneth Langone.
In this NY Times Select ($) column written in the form of a memo to Spitzer, Nocera starts off by snarking Clear Thinkers favorite Larry Ribstein for “gloating” over Spitzer’s decision earlier in the week to drop fraud and larceny charges against Paul Flynn, the former Canadian Imperial Bank of Commerce executive who Spitzer had accused of aiding hedge funds in improper mutual-fund trading. Then, without ever mentioning the substance of Professor Ribstein’s well-grounded criticism of Spitzer’s dubious regulatory tactics, Nocera proceeds to urge the Lord of Regulation to drop the Grasso lawsuit not because it lacks merit, but because the lawsuit will probably not lead to the type of salutory business reforms that earlier Spitzer lawsuits have prompted — “the Grasso suit doesn’t meet the lofty standard you’ve set for yourself.”
Are you kidding me? The phrase “lofty standard” being associated with Eliot Spitzer?

Does Nocera mean that lofty standard of indulging public envy and resentment of wealthy businesspeople by defaming Maurice “Hank” Greenberg (here and here)?
Or does he mean the lofty standard of criminalizing those who would take the risk of creating a market for home ownership for those who most need it?
Or is Nocera referring to that lofty standard of Spitzer creating employment opportunities for his chums?
Or maybe he means the lofty standard of Spitzer not coordinating his investigations with other agencies?
Or perhaps Nocera is contemplating the lofty standard of Spitzer interfering with the regulatory role of other governmental agencies (here and here and here)?
Or maybe he is simply referring to the lofty standard of Spitzer’s not insubstantial contribution to the drive of U.S. governmental officials to criminalize everything?

Nocera is right that Spitzer should drop the Grasso lawsuit, but for the wrong reason. Spitzer should drop it because it’s a cheap publicity stunt, which is hardly a “lofty standard.”
Update: Professor Bainbridge does an even better job than the examples above in fisking Spitzer’s “lofty principles.”

On my way out the door to College Station, I note that the Lord of Regulation simply cannot stay out of the news.
After publicly flogging former American International Group, Inc. CEO Maurice “Hank” Greenberg for months (note earlier posts here and here), New York Attorney General Eliot Spitzer has decided not to pursue criminal charges against Mr. Greenberg in his probe of the giant insurer’s structured finance transactions, according to this Wall Street Journal ($) article. The WSJ reports that Spitzer has decided to focus on the civil-fraud allegations that he has already filed against Greenberg and AIG and leave any possible criminal fraud charges against Greenberg to federal prosecutors, who currently have ongoing criminal investigations over AIG in New York and D.C. Here is a Reuters article on the WSJ piece, and here are previous posts chronicling Spitzer’s investigation into AIG and Greenberg.

Continue reading →

Apparently disturbed with the adverse publicity earlier this week emanating from the decision not to pursue this case, New York’s Aspiring Governor fought back yesterday by announcing that he is continuing to protect all of us from that sordid business practice of payola — i.e., radio stations owners accepting money from promoters to pay certain types of noise — er, I mean, music — over the airwaves. this NY Times article reports that Mr. Spitzer has reached a $5 million settlement with Warner Music Group Corp. for offering trips, gifts and agreements to cover operating costs in exchange for increased airplay for certain songs. Here is an earlier post on Mr. Spitzer’s payola investigation.
By the way, the Wall Street Journal ($) article on the settlement included the following quote from Mr. Spitzer: “I never like to presume what an investigation will show or conclude.” Oh, really?
Although certainly an effective vehicle for his gubernatorial campaign, Spitzer’s payola investigation is simply another example of his misguided approach to regulating business (Larry Ribstein has been at the forefront of making this point). As with his many other forays, Spitzer has used the leverage of a criminal investigation to force the type of business regulations that he deems appropriate. But Spitzer’s regulations are not developed under any legislative process and are not even reviewable under the normal administrative process for business regulations. In short, Spitzer’s approach is regulation through force rather than the rule of law, without regard to whether the regulations that he is imposing are more costly to the public than the supposed wrongs that the regulations are supposed to correct.

You can’t slip a deal past the New York Times in which too much money is being made.
In this article that is clearly intended to decry capitalists taking advantage of deregulated markets, the Times compares the sellers in the pending Texas Genco deal (more accurately described in earlier posts here and here) with the societal pariah Enron and then mischaracterizes the true risk that the sellers took on the deal.
I was going to criticize the Times’ one-sided analysis of the Texas Genco deal, but then it occurred to me that such puerile analysis is utterly consistent with a news outfit that — in the face of the public’s increasing access to free online news sources — responds to its sagging subscription sales by charging for its web content. For a more astute analysis of the transaction, note Dale Oesterle’s observations on the deal over at the Business Law Prof Blog.