When Eliot Spitzer became New York's attorney-general six years ago, few expected much of him or from the office he won control of only after a Florida-style recount and expenditure of a good deal of his father's money.
Nowadays, nobody is in doubt what the 45-year-old prosecutor stands for. With swagger and arrogance, he has single-handedly taken the good fight to Wall Street -- and won. Almost every week he starts another high-profile fight with yet another industry; where federal regulatory bodies such as the Securities and Exchange Commission (SEC) slumber, Spitzer crusades.
His targets have included everyone from securities analysts and investment bankers to the US$7.5 trillion mutual fund industry, polluting power plants and supermarket chains that underpaid delivery workers. Earlier this year, he tangled with former New York Stock Exchange chief Richard Grasso over his US$200 million "golden parachute" and in June took aim at GlaxoSmithKline, saying it withheld safety data on its anti-depressant for children.
In September he clashed with Marsh & McLennan, the US' largest insurance firm, threatened to investigate the music industry for the decades-old practice of payola and won a pay rise for the toilet attendants at fancy restaurants.
Like many New York prosecutors before him (including former mayor Rudy Giuliani), he had made a name for himself prosecuting Mafia dons. But by the early 1990s, Mafiosi were comparatively soft targets -- good for crime-fighting publicity, but more of a nuisance than a worthy adversary for a young man whose jaw, the New York Times wrote, "actually juts."
But Spitzer's technique is not to put the cuffs on executives, but to threaten their firms with financial ruin. His forebears, such as Giuliani, liked to try cases; Spitzer likes to settle. Indeed, such is his reputation that the announcement of a Spitzer investigation is an excuse to sell and an invitation for shareholder law-suits and proxy campaigns.
During last year's mutual fund scandal he said he was not shy of imposing the "death penalty" -- bringing charges even if it meant driving them out of business.
"Where there's recidivism, whether it's a robbery or a street crime, there will be no second chance," Spitzer said. "That may mean the death penalty for them. In my view that's the only option we are now left with."
As a result, firms almost invariably agree to punishment, remedy, and structural change rather than suffer the consequences. In the case of the recent insurance fraud investigation, the stocks of the biggest players implicated, Marsh & McLen-nan and AIG, have lost a combined US$38 billion in market capitalization since the investigation was announced on Oct. 14.
Indeed, it's come to the point that firms would rather settle than be probed, let alone prosecuted. Marsh & McLennan is a case in point. When Spitzer asked the firm about its practice of receiving "contingent commissions" from insurance companies, Marsh apparently denied the practice (Spitzer called the fees "kickbacks") and, according to the attorney-general, "fed us the same foolishness they've been feeding the public over the years."
According to Spitzer, roughly US$800 million of the US$1.5 billion in net income Marsh earned last year came from those commissions.
Alleged wrongdoing is one thing, but stonewalling Spitzer is another. He vowed he would not negotiate with the existing management and last week forced the resignation of Marsh chief executive officer Jeffrey Greenberg, son of Hank Green-berg, the legendary boss of insurance giant American International Group (AIG).