We saw this one coming a mile away, didn’t we?
WASHINGTON — The Justice Department used some of its most intrusive tactics against Eliot Spitzer, examining his financial records, eavesdropping on his phone calls and tailing him during its criminal investigation of the Emperor’s Club prostitution ring.
The scale and intensity of the investigation of Mr. Spitzer, then the governor of New York, seemed on its face to be a departure for the Justice Department, which aggressively investigates allegations of wrongdoing by public officials, but almost never investigates people who pay prostitutes for sex.
A review of recent federal cases shows that federal prosecutors go sparingly after owners and operators of prostitution enterprises, and usually only when millions of dollars are involved or there are aggravating circumstances, like human trafficking or child exploitation.
Government lawyers and investigators defend the expenditure of resources on Mr. Spitzer in the Emperor’s Club V.I.P. case as justifiable and necessary since it involved the possibility of criminal wrongdoing by New York’s highest elected official, who had been the state’s top prosecutor.
Bradley D. Simon, a veteran Justice Department trial lawyer who was federal prosecutor in Brooklyn throughout the 1990s, said that although it was rare for the department to use so many resources on the workings of a prostitution ring, the involvement of such a high-level politician must change the equation.
“If they’ve got some evidence of a high-ranking public official involved in violations of federal criminal code, it may not be unreasonable for them to pursue it” he said. Still, he said, “I don’t think prostitution has been a high priority at the Justice Department.”
The focus on Mr. Spitzer was so intense that the F.B.I. used surveillance teams to follow both him and the prostitute in Washington in February. The surveillance teams had followed him at least once before — when he visited the city in January but did not engage a prostitute, officials said, confirming a report in The Washington Post. Stakeouts and surveillance are labor-intensive and often involve teams of a dozen or more agents and non-agent specialists.
Several current and former federal prosecutors and prominent defense lawyers who reviewed the document said the inclusion of such salacious details about Mr. Spitzer’s encounter with the prostitute went far beyond what was necessary to provide probable cause for the arrests and for searches, the purpose of the affidavit.
The government has not accused Mr. Spitzer, a Democrat, of any wrongdoing, although last week the top federal prosecutor in Manhattan, Michael J. Garcia, issued a statement saying there had been no deal with Mr. Spitzer’s lawyers, suggesting that a prosecution of some kind might still be a possibility. Some officials have cautioned against drawing conclusions about the case, since it is still under way while investigators try to determine whether Mr. Spitzer misused public or campaign funds.
Ah! Well he might be innocent after all, and all the fanfare over him stepping down due to “private failings” might be over nothing (chuckle).
Meanwhile, the conspiracy theories are already being laid out, with allegations and implications that the gov’t deliberately “pursued” Spitz for politically motivated reasons.
Let’s review what led to the “pursual” of Spitzer in the first place. Not anything that was initiated by federal authorities, but instead by Spitzer’s bank as we learned, ironically, from the NYT last week:
Last July, the North Fork Bank raised a red flag about suspicious financial transactions involving Gov. Eliot Spitzer. But for several months, the electronic report languished unnoticed in a vast Treasury Department database in Detroit.
In early fall, however, a separate report was filed by the HSBC bank about suspicious transactions connected to two shell companies, which drew the attention of investigators. That touched off an inquiry that led investigators to discover the July report on Mr. Spitzer, which showed he had made several wire transfers to those companies, according to three people briefed on the inquiry.
When HSBC employees investigated the two companies, QAT International and QAT Consulting Group, they discovered that the bank’s files for the companies included virtually no information, one of the people briefed said.
“The bank found that the due diligence was not done — there was no Dun & Bradstreet, no documentation, almost nothing in the file” the person said. “They probably got scared and said, â€˜Uh oh, one of our bankers didn’t follow our protocol.’ ”
Following the bank’s alert, agents for the Internal Revenue Service in Hauppauge, on Long Island, began examining the shell companies, which are allegedly connected to a Web-based prostitution service named Emperor’s Club V.I.P. At that time, the agents had no idea how the QAT front companies had collected hundreds of thousands of dollars in revenue.
“They still didn’t know what the business was, and they started digging into the account — is it drugs, money laundering?” said one of the people briefed on the inquiry. “They then start to see money from Spitzer.”
These accounts of the origins of the investigation offer a more detailed chronology of the events that led to the wiretapped conversations of “Client 9” arranging to meet a prostitute at the Mayflower Hotel in Washington, and ultimately to Mr. Spitzer’s resignation on Wednesday.
Mr. Spitzer’s suspicious financial transactions at North Fork might never have been discovered were it not for a Suspicious Activity Report filed by HSBC about the shell companies linked to Emperor’s Club V.I.P. in October, according to several people with knowledge of the inquiry, who spoke about the investigation on condition of anonymity.
As it turned out, both the North Fork Bank and HSBC had faced inquiries into their lending practices led by Mr. Spitzer when he was New York attorney general. In the case of North Fork, Mr. Spitzer announced a settlement in 2003 requiring it to refund more than $20,000 to dozens of homeowners and cease what he said was its practice of charging homeowners illegal fees.
Experts who advise banks and individuals on anti-money laundering regulations, said that the two banks were just following the law when they reported the suspicious financial transactions to federal authorities.
These officials said that banks are likely to more closely monitor the transactions of politicians like Mr. Spitzer than those of average customers. In part, that is because of legislation passed after the 2001 terrorist attacks.
As part of the “know your customer” requirements, banks must assess their clients’ financial patterns and set guidelines to ensure that an alarm is sounded if there are unusual transactions, said Bob Serino, a former deputy chief counsel at the Office of the Comptroller of the Currency who now advises banks and individuals on anti-money laundering regulations.
“The idea is that if somehow a customer who usually deposits $3,000 a week starts depositing $300,000 into his account daily, that would be kicked out and looked at” Mr. Serino said. “Banks could certainly decide that a politician’s risk rate is higher and thus have a higher level of due diligence set for someone like Spitzer.”
In addition, banks must exercise an extra level of due diligence for a “politically exposed person.” While the law defines such people as “current or former foreign political figures, their immediate family and their close associates” several banking officials at major institutions said that as a matter of practice, they extend extra scrutiny to American political figures.
The LAT wrote as well about how the investigation into Spitzer’s activities got started.
Amusing. The mediots and many liberal Democrats have whined since day one about how the Bush administration supposedly finds itself “above the law,” but when it comes to actual lawbreakers in their own party like Spitzer and Rep. William “Fridge” Jefferson, they turn them into “victims.”
I guess we can’t expect much better from a party where mass victimhood is both celebrated and encouraged.