IN early 2004 Eliot Spitzer was at the height of his powers as the sheriff of
Wall Street, the highflying New York prosecutor who had set his sights on
the cosy corporate kleptocracy that was pocketing millions from insider
deals while ordinary investors went bankrupt.
His latest victim was Richard Grasso, the chief executive of the New York
Stock Exchange, who had made headlines around the world by negotiating
himself a $140m (£69m) retirement package that Spitzer alleged was illegal.
Grasso claimed he had done nothing wrong and when it became clear he was
prepared for a fight, Spitzer’s investigators went to work. What happened
next helps to explain why much of Wall Street cheered – and the rest of
America gasped – when Spitzer, who was later elected governor of New York
state, became enmeshed in a call-girl scandal that cost him his political
career last week.
Not since the Monica Lewinsky affair have Americans enjoyed so mesmerising a
spectacle of a powerful politician laid low by seemingly inexplicable lust.
The ineffably sleazy case of the “Luv Guv” and his pneumatic tart has all the
elements of tragedy as well as farce: a crushed wife standing by her man (at
least temporarily); frightened teenaged daughters hidden from public view; a
smirking brunette ready to cash in on her amorous adventures; and a parade
of psychologists, therapists and – in Spitzer’s case – former hookers lining
up to explain why men are so stupid.
Yet in one key respect, Spitzer’s self-inflicted ordeal differs from the
Monica extravaganza that stained Bill Clinton’s presidency as severely as it
did her blue velvet dress.
There are intriguing reports in New York that the man who was once dubbed
Eliot Ness – after the “untouchable” FBI crime-buster – may have owed his
fall at least in part to the bankers he once pursued with ruthless moral
zeal.
Was the governor a victim of Wall Street’s revenge? “Only one thing is certain
– it’s an Eliot mess,” declared one former prosecutor.
As the Grasso investigation unfolded in the summer of 2004, it became clear to
reporters following the case that Spitzer’s team was interested in more than
financial matters. Aides in the attorney-general’s office hinted that Grasso
was having an affair with his secretary, Soo-Jee Lee; Grasso was also
questioned about whether he had fathered an illegitimate child.
Charles Gasparino, a television reporter who wrote a book on the Grasso case,
claims he was told by a Spitzer adviser: “Everyone knows Grasso was boning
Soo-Jee.” Grasso vehemently denied both allegations, but the message was
clear to all of Wall Street: Spitzer would stop at nothing once he had taken
on a case. He even described himself as “a f****** bulldozer”.
While many outside Wall Street applauded Spitzer for tackling murky insider
trading, his readiness to delve into his targets’ private lives magnified
the hostility towards him. Last week there was no doubting the financial
world’s glee at his fall.
One of his victims, Kenneth Langone, the founder of Home Depot superstores,
bluntly condemned Spitzer as a “hypocrite”, and added: “We all have our
private hell. I hope his private hell is hotter than anyone else’s.”
The Grasso case was scarcely the first time Spitzer had focused on sexual
themes. After becoming attorney-general in 1999 he went after several
prostitution rings, promising to “clean up neighbourhoods” and “prevent the
abuse of young women”.
In 2003 he filed charges against a New York travel agency, alleging that it
organised “sex tours” to southeast Asia, where its operations led “to the
systematic exploitation and suppression of young women”.
Yet the praise he earned as “crusader of the year” (Time magazine), and “the
enforcer” (Fortune magazine) evaporated the moment he was exposed last week
as “client No 9” of the Emperors Club, a purportedly high-class escort
service that was revealed in court papers to be a seedy and mostly shambolic
front for a low-class prostitution network that stretched from Los Angeles
to London.
Far from providing “an exquisite array of carefully selected companions” who
would make clients’ lives “more peaceful, balanced, beautiful and
meaningful” – as the club’s website boasted – it often scrambled to find
prostitutes not addled by drugs.
The court papers, including extracts from wiretaps and reports from an
undercover agent who infiltrated the club, reveal endless haggling between
clients and pimps over payment and the quality of the girls provided. One
girl was described as looking “like a butcher”; another was described as
“clueless”.
One girl left an assignation early because she had to pick up her children
from school. A London-based girl did not want to provide sex because £500 an
hour was “not a price I would ever consider of doing it for [sic]”.
It has also become clear that although the club rated its girls according to
their “education, sophistication and ambiance [sic]” – with a three-diamond
girl fetching $1,000 an hour and a seven-diamond girl rating $3,100 an hour
– the prostitutes were interchangeable and adopted different names to meet a
client’s request. One girl had to be reminded that her name for a date was
Samantha.
According to the court papers, the Emperors Club nonetheless netted more than
$1m over three years, of which $400,000 was kept by about 50 prostitutes.
As comedians guffawed at the spectacle of Mr Clean caught up in such a sordid
enterprise, Barack Obama and Hillary Clinton suddenly found themselves
pushed off the front pages by Ashley Alexandra Dupré, a curvaceous
22-year-old wannabe singer from New Jersey, who turned out to be the
prostitute at the heart of the story.
Using the name “Kristen”, she allegedly serviced the governor during a visit
to Washington on February 13 this year. It is not yet known whether she knew
his real identity at the time.
The money she earned from that brief encounter pales by comparison with the
sums now being offered to her. Dupré, whose real name is Ashley Youmans, was
estimated yesterday to have made $200,000 in the last four days from
internet downloads of two of her songs.
Hustler magazine has offered her $1m to pose nude; a pornographic film studio
has offered her another $1m to star in a film and a leading vodka company
has reportedly offered her a six-figure sum to promote a new brand called
“Vodka No 9”.
Yet not even a hoard of saucy Dupré photographs unearthed by the New York Post
on Friday could distract Wall Street lawyers and bankers from intriguing
anomalies in the small print of the prosecution case against Spitzer, who
announced his resignation as governor on Wednesday and will formally yield
power to his deputy, David Paterson, tomorrow. Paterson will become both the
first African-American and first partially blind governor of New York.
While there was little sympathy, there were plenty of questions about how a
handful of outwardly innocuous payments from his bank account came to
trigger a federal investigation into his sexual activities.
“The movement of the amounts of cash required to pay prostitutes, even
high-priced prostitutes over a long period of time, does not commonly
generate a full-scale investigation,” noted Alan Dershowitz, the Harvard law
professor and former member of OJ Simpson’s legal team. Others on Wall
Street were wondering whether Spitzer’s financial dealings had been singled
out for scrutiny as revenge for his past prosecutions.
The beginning of Spitzer’s end can be traced to three banking transfers that
left his personal account at the North Fork Bank in New York last spring and
summer. For reasons that have not been satisfactorily explained, these
payments totalling $15,000 attracted the attention of bank employees who
monitor accounts for signs of suspicious activity.
After the terrorist attacks of 2001 on New York and Washington, laws relating
to money-laundering were significantly tightened, requiring banks to file
so-called “suspicious activity reports” whenever there is evidence that
clients might be trying to sidestep routine regulations.
Spitzer’s transfers to a company called QAT International Inc – later revealed
to be a front for the Emperors Club – were reportedly considered by the bank
to be an attempt to avoid another law that requires all transactions over
$10,000 to be reported to the US Treasury. Breaking down payments with
intent to avoid reporting is an offence known as “structuring”.
Yet Spitzer is the son of a multi-millionaire property tycoon and has
substantial assets of his own. The notion that as few as three payments from
his account of less than $10,000 might be considered suspicious “raises as
many questions as answers”, said Dershowitz.
“We are talking about a man who is a multi-millionaire with numerous
investments and purchases,” he said. “It’s simply none of the federal
government’s business that a man may have been moving his own money around
in order to keep his wife in the dark about his private sexual peccadilloes.”
Prosecution sources said last week they had no idea at first that the money
was related to prostitution. Even after a second bank, HSBC, reported
suspicious activity at QAT’s account – and a link was found to Spitzer – it
was at first assumed that the money might be related to corruption or
improper use of political campaign funds.
The case was initially turned over to the section of the Manhattan
prosecutor’s office that deals with political corruption. The ensuing
investigation duly established QAT was banking payments to a prostitution
network and that Spitzer was a client.
When the case against the one man and three women accused of running the
international network reached court earlier this month, it was the presence
of a federal prosecutor from the political corruption squad that first
alerted New York Times reporters to the possibility that a politician might
be involved.
It has since been established that both North Fork and HSBC were on the
receiving end of Spitzer investigations in his days as attorney-general. In
2003 North Fork was obliged to refund $20,000 to dozens of home-owners after
Spitzer claimed that the bank had been charging illegal fees.
No evidence has been produced that the bank reporting of Spitzer’s
transactions was maliciously intended, yet Dershowitz and other commentators
have noted that the system was designed to ferret out drug dealers, the
mafia, terrorists and major financial fraud.
“Once federal authorities concluded that the ‘suspicious financial
transactions’ attributed to Mr Spitzer did not fit any of [these
categories], they should have closed the investigation,” said Dershowitz.
Instead, they went after Spitzer with the raw, relentless enthusiasm that the
governor had so often displayed towards his own targets in the past. And
although his speedy resignation defused much of the political tension in New
York, many questions remain about how a man so familiar with the politics of
personal destruction exposed himself to inevitable ruin.
For Tracy Quan, who has written a novel about her call girl experiences in
Manhattan, Spitzer was simply nuts to have used an escort agency. “They are
constantly being investigated, infiltrated and spied upon,” she said. “That
someone like the governor would shop for sex through an internet escort
service is mind-boggling.”
Former prostitutes lined up to tell television interviewers that powerful men
needed an “escape and release” from the pressures of their high-profile
lives.
“As a professional escort, I spend most of my time with my clothes ON,”
declared Ava Xi’an to a newspaper website. “I have found that men are
usually looking for companionship and appreciation.”
Feminists were infuriated by a number of commentators who blamed it all on
wives who fail to make their husbands feel loved. One popular television
chat show held a discussion called “refresh your romance”, during which an
expert urged wives to take erotic dancing lessons to “unleash the inner
vixen”.
Spitzer was variously portrayed as an arrogant fool who considered himself
above the law; as a burnt-out powermonger who was desperate to be
discovered; and as a balder Bill Clinton, doing it simply because he could.
The soon-to-be ex-governor still faces possible financial charges, and
investigators are checking whether public money may have been used to
further his sexual activities. There are also security questions about the
whereabouts of his bodyguards while he was secretly meeting prostitutes.
The identities of nine other clients mentioned in the prosecution brief remain
a mystery. One is reported to be a New York judge; at least one prostitute,
named Astrid, operated out of London, where she entertained client No 6.
On its website, adorned with the photographs of statuesque escorts, the club
declares that “every client is an emperor”. In Spitzer’s case, both
literally and figuratively, the emperor turned out to have no clothes.
Comics sink their hooks into Spitzer
America’s comedians and tabloid headline writers have had a field day with the
prostitution scandal featuring Eliot Spitzer:
- “Hillary Clinton is now only the second-angriest wife in the state of New
York” – Jay Leno
- “The governor was only supporting New York’s No 1 industry” – David
Letterman
- “Eliot Spitzer is set to leave office on Monday – which means a hooker party
at the governor’s mansion this weekend” – Jimmy Kimmel
- “Politics is the only profession where, when a guy gets caught with a
hooker, the wife has to stand by his side. You know, if this guy was a
plumber and he got caught with a prostitute, he’d have his wife’s tyre
tracks over his head” – Leno
- “It’s sad. Spitzer said there is so much he left undone: Amber, Ashley,
Rhonda” – Letterman
- “The governor-erect” – New York Post
- “The name of this prostitute service is the Emperors Club, which sounds
better than Whore House, doesn’t it? . . . On the website they rank the
girls from one to seven diamonds. The diamonds represent how many you have
to buy for your wife after you get caught” – Leno
- “He thought Bill Clinton legalised this years ago” – Letterman
Next in line
New York’s next governor could scarcely be more different from his disgraced
predecessor. David Paterson, 53, is a partially blind African-American who
was Eliot Spitzer’s running mate in the 2006 elections. He was expected to
deliver black votes and nobody imagined that he would step into the top job.
Unlike Spitzer he is laid back, self-deprecating and displays a sharp wit.
Asked last week if he had ever used a prostitute, he said: “Only the
lobbyists.”
