TOPICS > Politics

Spitzer Resigns After Detailed Investigation Led to Prostitution Ring

March 12, 2008 at 6:10 PM EST
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New York Gov. Eliot Spitzer announced Wednesday he would resign from office, after being linked to a prostitution ring on Monday. Spitzer cited "private failings" for his resignation. Legal experts examine the federal investigation that led to Spitzer's downfall.
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RAY SUAREZ: With polls showing 70 percent of New Yorkers favored his resignation, and with the threat of an impeachment hanging over him, Eliot Spitzer went before the cameras this morning.

GOV. ELIOT SPITZER (D), New York: To every New Yorker, and to all those who believed in what I tried to stand for, I sincerely apologize. I look at my time as governor with a sense of what might have been.

But I also know that, as a public servant, I, and the remarkable people with whom I worked, have accomplished a great deal. There is much more to be done, and I cannot allow my private failings to disrupt the people’s work.

RAY SUAREZ: His resignation, effective Monday, capped a whirlwind and stunning fall for Spitzer, who took office in January 2007. In just two days, Spitzer went from a rising force within the Democratic Party to disgraced former governor.

The state Senate majority leader, Republican Joseph Bruno, spoke in Albany this morning, ahead of Spitzer. Bruno and Spitzer had an ongoing and very public feud.

JOSEPH BRUNO (R), New York State Senate Majority Leader: My heart goes out to his wife and to his family at this time. He must deal with his own problems in his own way. But it is now time for us and all New Yorkers to move forward.

RAY SUAREZ: It’s unclear whether Spitzer will be charged in the case that’s already seen four people indicted for operating the Emperors Club VIP, a high-priced call-girl racket.

Spitzer was elected governor on the strength of his law-and-order reputation as state attorney general. He may be charged with federal crimes. The U.S. attorney handling the case said his office had not struck a deal with the governor.

Transporting a prostitute across state lines is a federal offense. Spitzer could face federal charges stemming from his payments for the liaisons.

Today’s Washington Post said the FBI had a surveillance team assigned to Spitzer during the governor’s January stay in Washington’s Mayflower Hotel. Sources told the paper the governor might have spent as much as $80,000 on prostitutes over an unspecified length of time.

Possibility of prosecution

David Boies
Trial Lawyer
This is not a normal kind of prosecution. It would be a very unusual and, I think, unfortunate situation if this were to proceed in a criminal prosecution at this time.

RAY SUAREZ: For more on the legal issues, we turn to three people from the world of law and criminal justice. David Boies is a trial lawyer who's been involved in many high-profile cases. He represented Al Gore in the 2000 Florida recount case.

Barry Boss is a criminal defense lawyer at the firm of Cozen O'Connor. He's a former assistant federal public defender.

And Walter Pagano is a former IRS agent. He's a partner at the accounting and litigation firm Eisner LLP.

And, Barry Boss, in the normal run of things, are Johns, the people who retain the services of prostitutes, prosecuted?

BARRY BOSS, Criminal Defense Attorney: In the normal course, at least in the District of Columbia, Johns are prosecuted, but not under these kinds of circumstances.

The Johns that are prosecuted in D.C. are people who actually drive up and proposition police officers who are posing as prostitutes and thereby get arrested for soliciting prosecution (sic). And then they're sent to John school and their case is basically erased.

But I've never seen anybody in this kind of case charged with solicitation or being a John.

RAY SUAREZ: One thing that has been mentioned a lot in the last day-and-a-half is the Mann Act, passed almost 100 years ago, to prohibit people from taking prostitutes across state lines for sexual services. Is that used often?

BARRY BOSS: It's certainly not used often. I mean, it's certainly theoretically possible to use it -- the statute's in the books -- but I've never seen it actually used in these particular circumstances, where a customer is paying a prostitute, the prostitute voluntarily crosses state lines.

RAY SUAREZ: So, David Boies, is it all prosecutorial discretion whether a narrative like this turns into an indictment or not?

DAVID BOIES, Trial Lawyer: I think it is ultimately prosecutorial discretion. I think that if the prosecutors exercise their discretion in order to prosecute, it would be a very, very unusual step under these circumstances.

It is true the Mann Act is still on the books, but it's basically been used to go after people like Jack Johnson and Chuck Berry, who prosecutors wanted to target for other reasons.

This is not a normal kind of prosecution. It would be a very unusual and, I think, unfortunate situation if this were to proceed in a criminal prosecution at this time.

Suspicious bank transactions

Walter Pagano
Former IRS Agent
It would appear that various transactions, both from the bank institution side, as well as from the personal bank account side, caused red flags to be examined by various agents of both the FBI and the Internal Revenue Service.

RAY SUAREZ: Is a high public official, should a high public official be held to a different standard?

DAVID BOIES: I think there's an argument that a high public official should be held to a different standard. But once the public official has resigned and has suffered that loss and that indignity, I think that he has already paid a price that is way, way above the kind of price that any ordinary citizen would pay.

This is a situation in which Eliot Spitzer has already endured an enormous cost. And there is simply no public interest to be served by prolonging this affair in the form of a criminal prosecution.

RAY SUAREZ: Walter Pagano, the story says that this didn't begin with the publicly observed commission of a crime, but with a computer popping up a red flag. How did this all begin with money being moved out of a private account?

WALTER PAGANO, Former IRS Agent: Well, I think it occurred in two basic ways. One is the bank accounts of Mr. Spitzer and others who were involved in this particular matter came to the attention of the authorities. And the increments of disbursements caught the attention of the authorities.

On the other hand, the financial institutions -- which, as you probably are aware, are governed by one of many statutes and acts -- this one in particular, the Bank Secrecy Act, which requires financial institutions to report suspicious activity transactions to the Department of Treasury.

And those suspicious activity transactions are oftentimes reviewed and examined by agents, whether they be agents of the FBI, the Secret Service, Internal Revenue Service, state and local.

So it would appear that various transactions, both from the bank institution side, as well as from the personal bank account side, caused red flags to be examined by various agents of both the FBI and the Internal Revenue Service.

RAY SUAREZ: But, Walter Pagano, in a country of more than 300 million people, there must be billions of transactions a day. What is it that attracts the attention, the amount, the pattern, the companies involved?

WALTER PAGANO: Well, taking it from the financial institution point of view, banks are required to maintain anti-money-laundering software programs of a very sophisticated nature. And those programs search on a daily basis the financial activities of the customers of a particular bank.

And those particular transactions pass through various filters that both the bank sets up, as well as what the government requires in terms of a minimum threshold. And that threshold happens to be $5,000 for purposes of the Bank Secrecy Act.

And what occurs is, as transactions are examined by the software program, those transactions that appear to have a high probability of scrutiny are processed both by the bank examiners within the anti-money-laundering department, as well as those agents who are examining the data at the Department of Treasury.

So if there are transactions that have a reasonable explanation and can be resolved at the bank institution level or the financial institution level, those transactions generally do not appear in a suspicious activity report.

It would be those transactions that appear to be unresolved at the financial institution level that would be passed onto the Department of Treasury for further examination by law enforcement, if those particular transactions are of interest to law enforcement.

Standards for public officials

Barry Boss
Criminal Defense Lawyer
Although politicians, public officials are often held to a higher standard, it usually is a higher standard because it has something to do with the manner in which they govern. This is much more akin to somebody's private life.

RAY SUAREZ: Barry Boss, do you believe the governor is more vulnerable to prosecution under these sorts of laws than anything having to do with prostitution?

BARRY BOSS: Well, I think, as a practical matter, there's no way they're going to prosecute him for being a John. That's just not done.

And although politicians, public officials are often held to a higher standard, it usually is a higher standard because it has something to do with the manner in which they govern. This is much more akin to somebody's private life.

RAY SUAREZ: But you're saying that structuring the transfer of this money is all part of being a John, it's not an attempt to evade the laws that draw more scrutiny to transactions over $10,000?

BARRY BOSS: No, I'm actually distinguishing the structuring. I think that he would never be prosecuted for just being a John.

It becomes possible, I think, at least in sort of an intellectually honest way, for a prosecutor to look and say, "We're not prosecuting him for being a John. We're now prosecuting him for engaging in these financial transactions."

But with the caveat -- and I'm sure Mr. Pagano can confirm this -- that although it is a crime to structure, that is, to engage in transactions under $10,000 in cash in order to avoid the reporting requirement, it is very rarely invoked in terms of a criminal prosecution where there are no criminal proceeds involved in the financial transactions.

So it's potentially a crime that he could be charged with, but I think it's very unlikely he would be charged with that, unless there were criminally direct proceeds. And I don't think that there were.

RAY SUAREZ: Are there many prosecutions, Walter Pagano, under these laws?

WALTER PAGANO: Well, as a former IRS agent and forensic accountant who assists defense attorneys in these matters currently, there are prosecutions. I have been involved assisting defense counsel in structuring prosecutions.

So the answer is, although they are not as frequent as other prosecutions, they do, indeed, occur.

RAY SUAREZ: David Boies, as someone who's used these laws in pursuing various kinds of financial crimes, wouldn't Eliot Spitzer have been very well aware of the existence of these laws and the possible exposure of these transactions?

DAVID BOIES: I think he would have been. I think he also would have been aware of the danger for exposure in terms of patronizing a number of different prostitutes.

I think one of the things that is difficult to understand in this whole situation is why somebody in his position would engage in this conduct.

I don't think he was thinking about structuring transactions at the time he was making these payments. I think he was intent on pursuing the prostitution that was the end game.

I think that there is a technical way that a prosecution could be brought. But, again, it would be very rare in my experience to see a prosecution under these circumstances, where somebody is taking out money and moving it around to hide it from his wife, to get money not to engage in tax evasion, terrorism, money laundering, public corruption, any of the normal kinds of things that you think about, but simply to pay a prostitute. That's not what the law was...

Tracking electronic communication

David Boies
Trial Lawyer
Power tends to delude you into believing that you can get away with things that you can't. On the other hand, I think this may be a product of something more than that. I mean, this kind of pattern is a disease.

RAY SUAREZ: Well, last night on the NewsHour, we ran an excerpt of an Eliot Spitzer interview where he warned that it was a new game for both the quarry and the hunter in the world of electronic communications, that once you put something into electronic communications, e-mail or using a quick Internet message, you were fair game. And here he may have coordinated the activities of these assignations, using, for instance, a BlackBerry-style communications device.

DAVID BOIES: I have been critical, publicly, of some of Eliot Spitzer's prosecutions, in terms of taking what I thought were technical violations and expanding them beyond what was intended by the statute.

I don't think two wrongs make a right. I don't think it's desirable to subject him to this just because he may have subjected others to this.

I think Senator Bruno had it right. It's time for New York, it's time for all of us to move on from this situation.

RAY SUAREZ: Well, you've spent a lot of time in the company of powerful people. Does a mindset develop that makes them think they're bulletproof or that they live under a different set of rules?

DAVID BOIES: I think it can. I think that one of the problems with power is it can make you think that you are above the law, not intellectually. Intellectually, you know you're not above the law, but emotionally you think you can get away with things that "ordinary people," in quotes, can't get away with.

And I think that's one of the great dangers of power. Power not only tends to corrupt, but power tends to delude you into believing that you can get away with things that you can't.

On the other hand, I think this may be a product of something more than that. I mean, this kind of pattern is a disease. This kind of pattern is something that needs to be treated. It's like a drug addiction; it's like alcoholism.

It is something that needs to be looked at from the standpoint of how can you treat the person, not how you can criminally prosecute him.

RAY SUAREZ: David Boies, Barry Boss, Walter Pagano, gentlemen, thank you all.