Bring Back Eliot Spitzer!

I must say that I rather enjoyed writing this column for Portfolio.com.

Yes, Portfolio.com, and with the same name as my late, lamented blog, the Weiss File. Boy gets blog, boy loses blog (and magazine gig), boy gets column. Hollywood formula.

Portfolio.com is run by the good folks at American City Business Journals, a unit of Conde Nast, publisher of the late, lamented Portfolio magazine.

© 2009 Gary Weiss. All rights reserved.

Veteran Crime Fighter Seeks Spitzer's Old Job

I was pleased to see that Eric Dinallo has thrown his hat in the ring, more or less, for New York State Attorney General. Evidently the job has a good chance of becoming vacant, since Andrew Cuomo is likely to run for governor.

Dinallo is mainly known for his role in the rescue of AIG when he was Superintendent of Insurance, and he drew high marks for his work in that job from consumer advocates. I remember Dinallo well from his days as lead prosecutor in the trial of the chief financial officer of A.R. Baron, and he went on to become a top deputy to Eliot Spitzer when he was attorney general.

Whatever the revisionist historians like to say about Spitzer, he certainly put the fear of God into Wall Street--not enough fear, as it turned out.

It would be interesting to see what happens if Dinallo gets the job. Hopefully he'll pick up from where Spitzer left off, and also continue Cuomo's credible job in consumer affairs issues.

© 2009 Gary Weiss. All rights reserved.

Spitzer and the Hookers -- When Did He Start?

A New York Post story today says that Eliot Spitzer was being serviced by high-priced call girls as far back as 2003 -- when he was Attorney General.

This is deeply troublesome, because it raises serious questions in my mind as to whether his work as AG might have been compromised by his (apparent) "hooker habit."

There's no hint of that yet, but I think that it needs to be thoroughly examined by investigators. By patronizing prostitutes, Spitzer was leaving himself open to blackmail. It was not only reckless and self-destructive, but potentially damaging to the people of New York. As I've pointed out before, it's no secret that prostitution rings are often tied in with the Russian mob.

© 2008 Gary Weiss. All rights reserved.

Spitzer and the Media

Slate's Jack Shafer is justifiably upset with Kimberly Strassel's Wall Street Journal op-ed, "Spitzer's Media Enablers."

Strassel said:

. . . from the start, the press corps acted as an adjunct of Spitzer power, rather than a skeptic of it. Many journalists get into this business because they want to see wrongs righted. Mr. Spitzer portrayed himself as the moral avenger. He was the slayer of the big guy, the fat cat, the Wall Street titan -- all allegedly on behalf of the little guy. The press ate it up, and came back for more.

There's some truth to this, but Shafer's points outs that the articles on Eliot Spitzer cited by Strassel weren't as puffy as she implies in her piece. (Actually I think that Spitzer's reputation as a dragon-slayer was way overblown, as I pointed out in Wall Street Versus America, and I have pointed out many times that his pursuit of Dick Grasso was a waste of his office's resources, but that is another story.)

The Strassel column struck me as odd for another reason. The "enablers" she cites were actually situated in her own newspaper. The Journal was a beneficiary of many Spitzer leaks.

I think David Weidner's article in Marketwatch, also operated by Dow Jones, does a better job of laying out the issues and of noting the Journal's role as a beneficiary of Spitzer leaks (though Weidner may have gone a bit too far in his depiction of an ex-Journal reporter, as this response points out).

© 2008 Gary Weiss. All rights reserved.

Eliot Spitzer and the 'B Word'

How long has Eliot Spitzer been patronizing prostitutes?

To me that's the only question worth exploring in the Eliot Spitzer sex scandal. Reading the New York Times article, you have to wonder if he's been "No. 9" or some other number with other hookers for a long time. While he was attorney general, for instance?

That's because the key word here is not "hypocrisy" or "morality," it's "blackmail." If Spitzer has been patronizing prostitutes, he'd be leaving himself open to being shaken down, perhaps by the mob. The Russian mob is heavily involved in prostitution.

While I doubt that Spitzer would have succumbed to blackmail, had it been attempted, it was a risk he should not have allowed the citizens of the state to take. If, that is, this was not an isolated incident. If it was, then this is a big, fat nothing. (Unless the accusations about his committing a felony in the structuring of his payments to the prostitutes turn out to be true. That ain't nuthin'.)

UPDATE: Congressman Peter King made the same point in National Review Online:

"Spitzer himself was very severe going after prostitution rings that had to do with white collar crimes. He was very hard-nosed with his tactics. To leave himself open to blackmail — putting himself and the state in a compromised position like that — it's just awful."

So did Dealbreaker:

That a man so versed in the blackmail style of prosecution would so readily open himself up to that dark art is, at the very least, extraordinary. One would think that a man who deployed his aides to whisper about a corporate executive allegedly “banging” his assistant, would be wise enough to the ways of the world to avoid putting himself in a position where he could be blackmailed. That he lacked such wisdom—or ignored it—shows a reckless disregard for the responsibilities of the high office to which the people of New York elected him.

© 2008 Gary Weiss. All rights reserved.

Dear Eliot and Andrew

My suggestions to the outgoing and incoming New York State Attorney General can be found at Forbes.com, here.

I call on Eliot Spitzer to stop the absurd legal case against Dick Grasso, and I urge his successor Andrew Cuomo and move against issues of real concern to investors -- arbitration, pump and dump, hedge funds and naked shorting. (Move ahead on the first three and repudiate the fourth.)

The need for a strong and feisty NYAG is underlined by reports in the media that the Securities and Exchange Commission is going to mount a full frontal assault against whistleblower Gary Aguirre at a Senate Judiciary Committee hearing today. The New York Times reports that another SEC official shared Aguirre's concerns about the SEC's handling of a major insider trading case.

Spitzer has totally ignored hedge funds during his tenure. Perhaps his successor can take a stab at that issue and the others I mention, and repudiate the fraudulent "naked shorting conspiracy" diversion campaign.

UPDATE: Turns out that it wasn't much of an assault on Aguirre at the hearing today. The SEC came away with several cartons of egg smeared on its face. See this account in the New York Times Dealbook blog.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Probe the NYSE (again)?

New York Post columnist John Crudele, reacting to Dick Grasso taking the Fifth, suggests today that prosecutors initiate a criminal investigation of the New York Stock Exchange.

"Let's see whether illegal activity was condoned under Grasso's watch," says Crudele, who has been doggedly following NYSE floor-trading improprieties for some years.

Actually the operative term is "re-initiate," as there have been both civil and criminal proceedings involving the NYSE in recent years. The paper trail is pretty clear on just what happened, as I describe in Wall Street Versus America, and that means only one thing: Absolutely nothing is going to happen.

Still, as long as we're talking about stuff that isn't going to happen, why limit such a theoretical criminal probe to the Grasso era?

There's considerable evidence that floor trading improprieties go back quite a few years, and occurred during the administration of his predecessor, ex-SEC chairman Bill Donaldson. Why not probe the Donaldson era? Or his predecessors? (I know, I know... statute of limitations and all that.... Still, I can ask, can't I?)

Meanwhile I really wish Spitzer would stop wasting state resources with this silly Grasso litigation. There are so many other investor and consumer issues of greater importance, as anyone who has ever rented an apartment in New York City can attest.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

"Spitzer vs. the Little Guys"

That's the title of a terrific op-ed piece today in the Wall Street Journal by Jacob Zamansky, the noted plaintiff's lawyer. Zamansky points out that despite all the hype over Eliot Spitzer's settlement with Wall Street firms over their tainted research, "it has become apparent that Wall Street successfully played Mr. Spitzer as a sucker."

Zamansky puts his finger on the reasons for that, one of which was that Spitzer did not require the firms to admit liability. That put small investors at a disadvantage when they pursued their claims in the stacked-deck arbitration system.

Frankly I'm not sure investors would have had a slam dunk even if the firms had admitted liability. However, I think his point concerning arbitration is correct. The unfairness of mandatory arbitration is one of the issues that I explore in Wall Street Versus America. If the system is as fair as the Street says it is, why not make it voluntary?

Zamansky goes on to make some pointed comments about Spitzer's Grasso litigation, noting that it benefits the millionaire owners of the NYSE: "If Mr. Spitzer were truly committed to reform, he'd insist the NYSE become more responsive to individual shareholders's needs as a condition of his involvement in the pursuit of Mr. Grasso."

Great piece. Here's a link.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Dick Grasso and the Constitution

The Wall Street Journal and Washington Post reported yesterday that Dick Grasso is getting some more bad publicity. Oh my. Seems he cited his Fifth Amendment right against self-incrimination during an SEC investigation into alleged trading improprieties at the New York Stock Exchange several years ago.

Now, what in heaven's name is the relevancy of this? After all, Grasso was never charged by the SEC or anything like that. Also, as one SEC Law blog points out, "taking the Fifth" could mean a variety of things other than "I'm hiding something."

So dragging Grasso's name through the mud over this seems to be overreaching at best. What makes it worse is that it's being done to make a "point." Which is that Grasso's not answering those question somehow indicates whether or not he was a "good market regulator" and thus maybe should pay back some of the bucks he received.

I'm serious. There are people out there who really think -- or at least say with a straight face -- that Grasso was paid $140 million to keep NYSE floor traders in line!

Is that or is that not the funniest thing you've ever heard?

The Post quoted a Spitzer deputy as saying: "The question here is whether the compensation [Grasso] received was reasonable. The stock exchange is first and foremost a regulator. . . He was questioned about his performance of his regulatory role." [Emphasis added.]

I placed one of the sentences in italics because it captuires one of the many misconceptions about the NYSE. The Big Board's principal function, as I describe in Wall Street Versus America, is self-perpetuation for the benefit of its members.

Dick did an outstanding job in that capacity, so I really wish they'd leave the man alone.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

The NYSE (yawn) Goes Public

Tomorrow, for the first time in its 200-something-year history, the New York Stock Exchange becomes a publicly traded company! Isn't that exciting? Isn't that terrific? Isn't that ...zzzzzzzzzz....

I'm just mentioning this NYSE-going-public thing because it is an example of the kind of story of which I would like to see less in the financial press, in favor of stuff that really matters to people.

I know, it has to be covered. Here's one good piece in Marketwatch, for example, and I am sure tomorrow there will be a lot of other nice stories on the subject. Can we give it a rest after that, guys?

The financial media spends far too much of its limited resources pursuing inside-baseball stuff of little interest to anyone north of Chambers Street. After Dick Grasso's self-destruction in September 2003, you couldn't grab a sheet of newspaper to line a litterbox without finding a story with "NYSE" or "Grasso" somewhere. It was ridiculous.

As I say in you-know-what, the actual location where a stock is traded -- whether it is a "trading floor" or a "trading ceiling" or a computer network or whatever -- is a matter of little consequence to most investors. True, it matters greatly to high-volume institutional traders. The rest of us couldn't, and shouldn't, care less.

The same thing goes for the "governance" of the NYSE. Again, who cares? If the NYSE wants to be a paragon of lousy management, that is of little concern to anyone except the NYSE's owners, who are currently 3,000 or so retired millionaire seatholders.

Meanwhile, I read in the Wall Street Journal law blog that Dick Grasso is being deposed by Eliot Spitzer today as part of that ridiculous lawsuit that was filed against him. Good gawd. So Grasso was paid a lot of money. Again, who the hell cares? As I say in you-know-what, he earned every penny of what he was paid (though not exactly for the reasons outlined in NYSE press releases).

If he hadn't been overpaid he wouldn't have lost his job, and if he hadn't have lost his job the NYSE would not be going public, and those 3,000 retired millionaires wouldn't be getting a nice hunk of change. They're making out nicely, so who's got a reason to complain? Or perhaps I should say, "Who's got a reason to complain who's not running for governor?"

At least Spitzer isn't doing something even less useful, like being led around by the nose by the anti-naked-shorting cultists of the Baloney Brigade. Perhaps he could have a word with the ones who are, at the SEC and other state regulatory agencies.

P.S. I'd like to welcome all the very nice (I am sure) people who have signed up via Notifylist to get updates when this blog is updated. Among them are a grand total of 23 people with email addresses from our financial regulatory agencies! A extra-special welcome to y'all.

A prime number. How lucky!


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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

THE GRASSO CIRCUS IS COMING TO TOWN: I see from the Wall Street Journal today that the Grasso Circus Train is approaching the station: "Having sparred for 20 months, New York state's attorney general, Eliot Spitzer, and former New York Stock Exchange chief Dick Grasso say they are ready to take their legal fight over Mr. Grasso's Big Board compensation to court."

I expect that the Grasso Circus will be one of the hottest-selling tickets in town. The only problem is that, like most circuses, the Grasso Circus is just that -- a show. An expensive, politically motivated entertainment.

If he wins, who benefits? The Journal reports today that "Mr. Spitzer has alleged that Mr. Grasso's $188 million compensation package was excessive under New York's not-for-profit law and that Mr. Grasso should return much of the money to the NYSE."

So Spitzer is essentially functioning as a kind of government-paid attorney for the millionaire retirees and securities firms that are the owners of the NYSE. I hope he loses. Grasso was paid fairly, and I can prove it! In fact, I did prove it. However, you'll have to read about it in April.....

UPDATE: Bloomberg says the trial may be moved until after next year -- after the gubernatorial elections. Good news for Grasso -- and for Spitzer, who was not pursuing a slam dunk case after all. I'll bet the case is dropped.

So, if the case is delayed, Spitzer gets the publicity without the chance of losing a high-profile case before the elections. Grasso probably gets off the hook entirely, as he deserves. The man earned the money, as I say.

A win-win situation! Unfortunately, the judge hearing the case is a killjoy who believes in an outmoded concept called "speedy justice." Come on, judge! Get with the program.