Spoiling for a Fight The Rise of Eliot Spitzer

Chapter One When Markets Need to Be Tamed Eliot Spitzer had had enough. It was October 2004. For six months, the hard-charging New York State attorney general and his staff had been following a tip that the huge corporate insurance broker Marsh Inc. was taking secret payments to steer clients to particular insurance companies. And for six months the company's corporate parent, Marsh & McLennan, had been effectively stonewalling, contending that there had been no underhandednessthat Marsh's clients had known about the payments and that the money hadn't affected the recommendations of the firm's brokers. Months of combing through e-mails and company documents had shown just the opposite, and worse. Some Marsh brokers had solicited false bids and told insurance companies what fees to charge so that they could steer business to favored firms. That was price-fixing, which was not only fraudulent behavior but a crime. Several insurance executives involved had already confessed and agreed to plead guilty. But when Spitzer and his lawyers met with Marsh & McLennan's general counsel, William Rosoff, on October 12, they didn't get the mea culpa they had expected. Instead, they got the brush-off. Rosoff insisted that his company didn't understand what all the fuss was about. It wasn't really clear what had happened. No clients had been hurt by the arrangements. This was just the way things worked. And finally he said dismissively, "You just don't understand the insurance business." It was time to go public. Spitzer wasn't about to let an insurance broker push him around, even if it was the world's largest. As New York attorney general, Spitzer had spent much of the past six years mounting legal attacks on a variety of wrongs, which in his estimation included everything from Wall Street corruption to President George W. Bush's environmental policies. His balding pate, jutting chin, and pointing finger were ubiquitous on television news shows and in the pages of the country's top newspapers. When he ventured outside his downtown Manhattan office, he couldn't walk two blocks without being stopped by well-wishers who praised him for standing up to Big Business. Tipsters jammed his office phone lines with tales of woe and financial malfeasance. What's more, his investigations got results. Spitzer had faced down all kinds of giant firms, from the investment banks Citigroup and Merrill Lynch to the drug maker GlaxoSmithKline to the Food Emporium supermarket chain. He had exacted reforms and huge penalties: more than $1.5 billion from a dozen Wall Street investment banks for issuing biased research; more than $3.5 billion from mutual funds and brokers for improper short-term trading. And he was still only forty-five years old. All of this made him a rising star in the Democratic Party. But in the Marsh case, Spitzer wanted to do more. He had decided to send a strong message to corporate America that his investigations were about more than money. From now on, top executives who presided over bad behavior couldn't simply claim they had had no idea what was happening, pay a fine, and expect to walk away unscathed. "We've been trying, through these cases, to make the larger point that some core ethical behavior is necessary," Spitzer reflected. "At some point you have to say, wait a minute, fellows. That's it. It's only when you hold the CEO accountable that you show people that something must change. The question is how to do that." Dogged lawyers in Spitzer's office had already spent sleepless nights crafting a detailed and dramatic legal complaint that laid out theMasters, Brooke A. is the author of 'Spoiling for a Fight The Rise of Eliot Spitzer', published 2007 under ISBN 9780805083026 and ISBN 0805083022.