As noted in earlier posts here and here, New York attorney general Eliot Spitzer does not take kindly to other governmental agencies infringing on his various crusades to demonize wealthy business interests in his seemingly unending quest to promote his political career. But at least he previously maintained the public front of cooperation with other governmental investigators.
But now, as this Washington Post article notes, the Lord of Regulation is no longer maintaining even the pretense of cooperation with other governmental investigators. Apparently, the interagency squabbles were intensified by news leaks from Mr. Spitzer’s office of a high-profile April 11 interview of Warren E. Buffett. Mr. Buffett’s Berkshire Hathaway, Inc., is the parent of General Re Corp., which is the company that — along with AIG and other insurers — is the subject of a criminal investigation into structured finance transactions known as finite risk reinsurance. Here are the previous posts on the various investigations into AIG and Berkshire’s General Re.
Mr. Spitzer did not help relations with his federal counterparts when, as a part of his usual propaganda campaign that parallels his various criminal investigations, he blasted the Department of Justice in a speech on May 2 for failing to investigate allegedly illegal practices in the insurance industry. Now, the feud between Mr. Spitzer’s office and federal investigators has heated to the point where prosecutions of various targeted executives could be compromised.
It would be sweet justice if Mr. Spitzer’s ambition and pride undermines criminal investigations and prosecutions of business executives that never should have been inititated in the first place.
Houston's Clear Thinkers
Longtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.
As I have commented before, the creature that is known as Spitzer is a creation of the S.E.C. itself and the failure of the S.E.C. to act aggressively in discharging its enforcement responsibilities.
Again, most people in the financial services industry knew full well during the internet craze that analysts were giving favorable recommendations to garbage stocks and misleading investors. Heck, companies doing IPO’s were paying analysts cash for favorable ratings prior to the offering of the stock to the public. With the favorable rating bought and paid for, the company represented the rating as legitimate and without conflict. What did the S.E.C. do? They yawned.
The S.E.C. has an agenda that has little in common with the agenda of Eliot Spitzer. Spitzer wants to be seen as tough on wrongdoers. The S.E.C., pursuant to its mandate, wants ‘orderly and efficient markets.’ Messy investigations do not make for ‘orderly and efficient’ markets.
When the S.E.C. begins to be seen as an enforcement entity to be both feared and respected, there will not be an opportunity for individuals such as Spitzer to grandstand. The fact is that today, the S.E.C. will do everything in their power NOT to prosecute wrongdoers. You have to really mess up (or step on the toes of a high profile legialator) to get the S.E.C to even consider prosecuting a case. Corporate America knows this. So does Eliot Spitzer.
That Eliot Spitzer is even given an opportunity to grandstand is the fault of the S.E.C. However, if it weren’t for Eliot Spitzer, it would still be ‘business as usual’ in the financial markets and the investing public would be getting fleeced out of billions.
Spitzer is in over his head and he is sure mucking things up, but at least he’s doing something to solve a long standing problem – lack of enforcement of laws and regulations in the financial markets.