Eliot Spitzer and the Rule of Law

On Monday, after it was announced that New York Governor Eliot Spitzer is linked to a prostitution ring, politicians and commentators alike were universally “shocked” by the behavior of a man who they perceived as a squeaky clean champion against corruption. Yes, many considered him arrogant; but almost all considered him an uncompromising champion of the law. Nothing could be further from the truth.

No one should be shocked by Spitzer’s conduct. Rather than a champion of the law, Spitzer, in recent years, has undermined the Rule of Law. This is how Nobel laureate Friedrich Hayek explained the Rule of Law:

It is the Rule of Law, …the absence of legal privileges of particular people designated by authority, which safeguards the equality before the law which is the opposite of arbitrary government.

In 2005, Spitzer was New York’s Attorney General. How did Spitzer perform on the standard of insuring “equality before the law”? In 2005 John Whitehead, former chairman of Goldman Sachs, related a phone call that Spitzer placed to him in April 2005 after Whitehead defended Hank Greenberg in a Wall Street Journal op-ed. Greenberg is the former head American International Group (AIG). Spitzer had publicly charged Greenberg with fraud, but then Spitzer declined to file criminal charges. When Whitehead decried Spitzer’s abuses, Spitzer phoned him and said:

Mr. Whitehead, it’s now a war between us and you’ve fired the first shot. I will be coming after you. You will pay the price. This is only the beginning and you will pay dearly for what you have done. You will wish you had never written that letter.

In 2005 the president of the U.S. Chamber of Commerce, Thomas Donohue, called Spitzer’s prosecutorial excesses “the most egregious and unacceptable form of intimidation we’ve seen in this country in modern times.”

In 2006 Spitzer was elected Governor of New York. Within months of assuming office, it was revealed that Spitzer had ordered the New York State Police to record the whereabouts of New York State Senate majority leader, Joseph Bruno.

Official abuse undermines the rule of law far more than the behavior of any criminal. It is the job of government to be an impartial umpire, upholding the rule of law. When umpires use the law to further their own ends, our institutions erode in very alarming ways. In other words, judges who take bribes from drug dealers do far more damage to the system than the damage done by drug dealers on the street corner.

It is the human condition to be prone to excesses. When we are in the grip of our ego and cut off from our Source, we seek remedies to drown the existential angst that we feel. We can acknowledge our own humanness; and in that way, we can all feel for Spitzer and his family.

Despots are notoriously prone to excesses. Why? They live more of their lifetime in an egoic state-of-mind. They are trying to control their little corner of the world. They hold press conferences to denounce individuals before they have indicted them. They threaten those who dare to oppose them. They order state police to spy on their enemies.

There should have been calls for Spitzer to resign long before today. He has been out of control for many years. A Course in Miracles offers this advice: “You who cannot even control yourselves, should hardly aspire to control the universe.” Good advice for us all!

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18 Responses to Eliot Spitzer and the Rule of Law

  1. Sam says:

    Amazing rise and fall. As an attorney in the financial services industry, the former AG kept me quite busy. To quote Dirty Harry in “Magnum Force,” “man has got to know his limitations.” The former Governor obviously did not. As the WSJ wrote yesterday, “One might call it Shakespearian if there were a shred of nobleness in the story of Eliot Spitzer’s fall. There is none. Governor Spitzer, who made his career by specializing in not just the prosecution, but the ruin, of other men, is himself almost certainly ruined.” Its quite ironic that the bank transaction monitoring systems that he advocated as AG, and required to be put into place circa 2001, were the ones that alerted authorities to his questionable movements of cash. The ego, stupidity, and certain other motivations, all converged to bring him back down to earth (and farther, according to Ken Langone!).

  2. E says:

    Prof B,

    Is it just me, or do I detect a distaste for all Democrats on your website? There are so many points in your op-ed piece, I’m just going to fire-for-effect on a few. First, Spitzer is what he is. He’s no better or worse than any of the big shots who have big power. He should have known better. How does one hide $5,500 remits from the Governor’s office to shell companies? Stupidity. Second, “the rule of law” is a bogus slogan. Whenever you hear it, ask, “whose rule? and What law?” As with other catch phrases, it is a convenient shorthand for “we’re going to do this because we can.” Because we can bring it. Like everything in life, there are finite resources with which to pursue things. It’s amazing what is enforced and what’s not based on this. Shipping lanes and bills of lading? Enforced. Overfishing in the Pacific Northwest by foreign fishermen? Ignored (hard to catch them in the act). Indigent caught with bag of coke. Enforced (slam dunk). Banker caught with same bag? Plead out for community service (he’s going to bring the A-Team). You want to know who your umpires are? Want to know who the government is? It’s a bunch of guys who are doing the best they can with the resources they have to enforce the laws the can. Like Cruise says in A Few Good Men, “It doesn’t matter what I believe. It only matters what I can prove!” Point is, the “Rule of Law” as a slogan is applied unevenly and, in some instances, arbitrarily based on what can be done (and whether “we can do it”).

  3. E says:

    Sam, I know he had it coming to him… well, that’s what the bankers I work with chant… because Spitz as AG broke up the Banker/Research Analyst practice that was part of banking prior to his tenure. Chickens come home to roost.

  4. Sam says:

    E,

    I don’t think I would have guessed that he had this coming. If you look at his early career and educational achievements, they are impressive, to say the least. I also don’t see a correlation between being the top cop/enforcement lawyer prior to Governor and becoming “Client #9” in a prostitution ring. Regarding investment banking, that part I can live with, without any issues; it was good for investment banking practices in general. Personal attacks, and those bordering on slander, libel, etc. I can’t. When you go after someone as AG, do it with integrity, not to malign them and destroy a name because he/she is the CEO of XYZ, Inc. and offered an opinion on the office of the AG that was adverse to your own. You have the facts, take it to court. Don’t use the media to wage a slash and burn campaign with the official seal of the AG’s office. Its an unfair advantage. Last time I checked, the AGs are officials tasked with enforcing the laws of their state, and should not be immune to criticism, or public inquiry.

    Continuing this trait in the Governor’s mansion demonstrated his obsession with asserting power at the expense of others without a justifiable purpose. Dangerous grounds to walk.

  5. E,

    Actually what you are detecting is a distaste for the conduct of most politicians not just Democrats :-). I agree with you that our societal commitment to the Rule of Law may be breaking down. This will have grave consequences for our future.

  6. E says:

    Sam,

    There is no such thing as “unfair advantage” (repetitive phrase). Know the rules and work within them. The rest is fair game. In this case, there was certainly some level of hubris. It’s ironic.

    Prof B,

    The Rule of Law is great, especially for those who have good lawyers (usually means the rich). For the rest of us not clever enough to know anything about the “rule of law”, it’s a crap-shoot. How is this? I’ve gotten people out of contracts, charges, etc by pleading strict application of the law (defect in the document, defect in procedure, knowing the courthouse, etc.). It’s all “fair”.

  7. E,

    It is the Rule of Law which protects us all from arbitrary government. The progress of Western civilization is dependent on the Rule of Law. When it breaks down—when Spitzer as attorney general can threaten innocent people; when ethanol producers are subsidized to the detriment of the rest of society; when the rules of the game in the housing market can change after the game is played etc. etc. everyone loses.

  8. E says:

    Prof B,

    Generally, I’d agree. But seeing the way it’s been applied, enforced, and litigated. I’m all for progress, Western civilization and liberty and justice for all. (I’m sure Mr. Whitehead is entirely innocent of any charges so I won’t even go there.) As a general matter, “Rule of Law” protects us from arbitrary government, because it’s generally in the “respect for the law/process” realm. As a practical matter, it’s as arbitrary right now as you can get (mostly these are policy issues). For instance, “the rules of the game in housing market” issue is not a legal issue, it’s a public policy debate. If it were a straight line legal issue, it’s not even up for debate: it’s a contracts issue. That said, I’ve seen application of law where it’s … amazingly arbitrary (this happens when something “falls in the cracks” of code, or where something may be classified as falling “outside of the realm of” based on verbage/diction).

  9. Frank v2 says:

    Dr. B et al,
    Spitzer’s rise and fall certainly is a great example of how one’s ego can create a life of its own. It is also interesting to me as to how often history repeats itself. There is a saying I have heard many times that suggests that “power corrupts; absolute power corrupts absolutely” (Unknown). I also find it amusing as to how often the righteous-holier-than-thou individual is actually a closet supporter of the very thing that he or she publicly despises. My take away is that the louder the drum is beaten in terms of fighting a cause, the more important it is for the audience to peel the onion back and understand what is really motivating that individual to beat that drum so loudly. Clearly we need to be cognoscente and careful that we don’t allow the pot to suggest that the frying pan is stained without first making sure that pot is squeaky-clean.

  10. E says:

    Because I can’t resist — I’m just going to give you the example of RICO because it’s a household name (instead of something obscure like Gramm-Leach-Bliley Act). RICO was constructed to combat racketeering, specifically, the Mafia. However, because of the civil component of RICO, lawyers nationwide began using it in civil claims against business, individuals, and covers almost everything (common fraud, products liability, breach of contract, etc.). RICO in the past 18 years has almost never applied to organized crime. It’s become complex, and is applied to individuals, businesses, and political protest groups. It’s about as unpredictable as you can get.

  11. Sam says:

    Using the office of the AG to slander and libel someone is not an unfair advantage?? I think you’re saying that from the comfort of your office without having been the subject of any form of investigation by a law enforcement authority.

  12. E says:

    See the news this morning? BSC is done. Down 40% and not enough cash to save them. Too bad they bet the farm (two major funds) on mortgage assets. Let’s hope it doesn’t spill over to Lehman…

  13. E,

    Before this is all over, the spill over will surprise us all many times. On BSC see Mish Shedlock’s always astute analysis.

  14. E says:

    I don’t know about the case of “using AG office to slander and libel” people in Spitzer’s case. While I’d like to believe Prof B, I’m just going to take it for what it is — an allegation on a blog. When press conferences are usually held, it’s because there’s something going on. I don’t really care. CEO’s usually have their own baggage, and have war chests to wage a campaign (as they do against competitors, the board, etc.). I’m not sympathetic.

  15. E says:

    Prof B, crazy huh? What is JP Morgan thinking? Giving them 28 days of carry-around money… backed by the fed reserve no less. Maybe we can peddle the office chairs at BSC to the Saudi’s…

  16. Frank v2 says:

    Dr. B et al,
    First Elliot Spitzer, and then this morning I caught myself blinking twice when I read the article on the Washington Post website that stated that Richard F. Scruggs, a famous lawyer, pleaded guilty to attempting to bribe a Mississippi judge. (http://www.washingtonpost.com/wp-dyn/content/article/2008/03/14/AR2008031403470.html ) Wow! And this guy, much like Spitzer, was regarded as a first rate champion of the law and specifically was the one who wrestled the tobacco industry successful, cultivating a very lucrative career for himself. He was also a large donor to his alma mater, the University of Mississippi, and has a building named after him at the university. Ironically it is the music building; I bet the school isn’t singing his praises today. Again, in my mind, this is just another example of how the combination of power, greed and self-righteous attitudes can inflate a person’s ego to the point that he or she feels entitled to operate above the law. Well they are not. Thank goodness the judge blew the whistle and did not succumb to the temptation. One does have to wonder though how deep Scruggs unethical behavior really went. I believe we have another dirty pot. And I am now going to go and clean up the dinner dishes: both my pot and frying pan are getting a little extra scrubbing tonight.

  17. Bob G. says:

    The rule of law does indeed protect us all from arbitrary government.

    The fact that there are consequences for those in positions of trust who breach their obligations is an indication that the overall framework is working.

    There will always be a certain amount of judgement necessary in which people need to apply judgement to an application of law or regulatory rule to a particular circumstance.

    This is much different than the policy guidance and oversight of the executive branch that our legislators have failed to adequately provide over the last 30 years. It is this failure of the legislative branch that has posed one of the most serious threats to our nation in it’s 230 year history to date.

    This career politicians who have become mini-institutions and magnets for special interests dollars for themselves and their parties have essentially sold the people a bill of goods. Direct dialogue and then action that require difficult decisions and long term critical thinking have disappeared becasue those that are interested in advancing such leadership are a threat to the comfortable career types.

    Our biggest concern ought to be the subtle shift of law and policy towards making it diificult to challenge those that sit in power. This is essentially changing the framework construct that this republic was designed to function in. Such things as the fairness doctrine, the Patriot act, immunity for potentially breaching privacy rights, no declaration of war or true oversight by a timid and weak congress, subsidization policies that inhibit natural innovation and the overall ignorance about the difference between private charity and the public use of funds has created a downward spiral for this once great nation that is slipping into decline.

    Yes – it is still the greatest nation on earth but we have lost tremendous ground over the last 30 years and most of us know this.

    The likes of an occasional Eliot Spitzer is not what I fear as they still suffer the consequences of their actions (see Mike Wilfong – Duke rape case). In fact, under our system we should expect this every so often and be vigilant for such breaches of trust.

    Bob G.

  18. Tesh says:

    Late to this party, but apparently the charges against Spitzer in the prostitution ring have been dropped. The tin foil hat crowd has suggested that the timing of Spitzer’s “fall from grace” neatly coincided with his efforts at stopping those who abused the housing market. That the prostitution charge itself would be dropped now that the bailout bill has passed would seem to bolster the idea that Spitzer was just pushed out of the way only when he was pushing against some bigger bullies with bigger pocketbooks.

    I’m not sure how far down the yellow brick road of paranoia I want to go, but if Spitzer really has been a loose cannon for a long time, why was he taken down when he was? Why have the charges now been dropped? In the States, we love to see hubris taken down a peg or two, but some aspects of Spitzer’s case certainly have a… diversionary feel to them. A little scandal, especially if a bikini is involved, can catch the attention of the media and the population. Bread and circuses, as it were. (Meanwhile, the bailout bill passes with an insane amount of pork, and rather unConstitutional powers for Henry Paulson.)

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