Sunday, July 21, 2013

Spitzer’s reckless leadership

His tenure as attorney general was a demonstration of how not to wield power

Comments (3)

Eliot Spitzer, as everyone knows by now, is back. He has qualified for the upcoming Democratic Party primary for New York City controller — and, at this early stage, is polling solidly ahead of Scott Stringer in the race.

Much commentary to date has focused on the circumstances of the former governor’s resignation from office five years ago. Others can opine on those issues.

But a recurring theme of some Spitzer sympathizers is that, before the sudden fall, he had been a highly successful attorney general. Others even contend that his tenure as governor was off to a successful start.

Actually, Spitzer was a disaster both as governor and as attorney general. His approach in both offices was to use strong-arm tactics to get his way.

Were he to be elected city controller, we’d likely see a return of the same old Eliot, and the impact won’t be good for either the city or the state. We can be sure that, if given a new platform, Spitzer will use it to bully and intimidate those in his path — on the way almost certainly to seeking higher office sometime in the future.

Start with his two terms as AG. While New York’s anti-business left enjoyed the spectacle of his self-appointed role as the “Sheriff of Wall Street,” impartial analysis of his tenure suggests that his actions were harmful to the state and its economy.

Armed with the powers of the Martin Act, a 1920s-era state statute empowering the AG to investigate conduct in the financial services industry, Spitzer abused his office. He routinely intimidated companies with the threat of prosecution if they did not comply with his demands and frequently utilized selective media leaks to stalk his quarry.

Since the Martin Act does not require evidence of criminal intent, its powers, in the hands of a prosecutor driven by ambition instead of facts, are ripe for abuse.

Spitzer, who governed through vendettas, was a chronic abuser of this authority.
Public companies are faced with few alternatives when they’re under the gun of a reckless AG pursuing them under the Martin Act: Usually they agree to a vaguely worded settlement, where they pay a fine but admit to no wrongdoing.

Again and again, Spitzer got the headlines and was onto his next target.
Witness his vicious attack against then-AIG chief Maurice (Hank) Greenberg. Spitzer said, on national TV, he would bring criminal charges — before he offered any evidence in court as to wrongdoing in an alleged accounting fraud.

He also then privately threatened John Whitehead, an esteemed figure in financial and governmental circles, because Whitehead chastised Spitzer’s conduct in a Wall Street Journal opinion article.

Spitzer never criminally charged Greenberg, but the AIG board, under threat of Martin Act prosecution, fired the longtime CEO. The ultimate irony was that without Greenberg’s leadership, AIG subsequently engaged in insurance deals relating to securitized mortgage debt obligations, which brought down the company and almost the entire economy in 2008.
Spitzer reveled in his media-driven tenure as AG — but the fact is that he rarely won any major case when the defendants had the ability and finances to fight back, like businessmen Ken Langone and Dick Grasso.

During his short tenure as governor, he continued with the same style of impetuous “leadership.” Spitzer overspent and overpromised, increasing spending almost 8% in 2007 alone despite clear signs of a slowing economy. This led to calamitous budget cuts and tax increases between 2008 and 2011, from which the state has not yet recovered.

He foolishly gave the plaintiffs in the Campaign for Fiscal Equity school funding case what they were after in new state aid promises despite the fact that the state actually won the case and didn’t have to provide anything. These promises, too, were yanked away when the economy tanked.

Spitzer also proved to be singularly incapable of advancing his agenda in the Legislature without engaging in unnecessary and counterproductive personal battles that hurt the citizens of the state.

The aspiring city controller, an otherwise intelligent man, seems consumed by a need to be in the spotlight. But he does not possess the temperament to be trusted with public office. He does not deserve another chance.

Faso was the Republican candidate for governor, losing to Eliot Spitzer, in 2006 and a former minority leader of the New York State Assembly. He is now a lawyer at Manatt, Phelps & Phillips.

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