In this, Brown stood apart. He was a financial insider. (In fact, Brown heard he’d nearly been passed over for head of Investment Protection because he hadn’t been a prosecutor.) Brown acknowledged another difference. “I’m more of an impressionable humanist,” he says. “I can get swayed by people looking into my eye. I want to believe the best.”
When, in that first meeting, Rosoff urged a consideration of the rich history of the insurance business and the complex evolution of certain arrangements, Brown considered the advice. He couldn’t imagine someone of Rosoff’s stature lying. Perhaps, he thought, there was something he didn’t understand. “Maybe,” he reflected, “this is a tempest in a teapot.” Still, he wondered, “Where else does a fiduciary get paid by customers and suppliers?” Fiduciaries are legally supposed to act in the best interests of their clients.
Brown added new lawyers and brought in law students to pore through the boxes of e-mails. Each time a legal intern found a “hot doc,” there was an ecstatic end-zone dance. Despite Rosoff’s assurances, by early summer the e-mails suggested that Marsh’s brokers steered business to particular insurers, not to serve the client who purchased the insurance but to earn bonuses negotiated with the insurers. Which insurer got the business was dictated, as one hot doc revealed, by “who [we] are steering business to and who we are steering business from.” Brown, who seemed to carry with him a sense of good corporate citizenship, was appalled and also deflated. “These guys are so smart and so dumb,” he thought.
Spitzer’s criminal-prosecutor types—Brown kept them in the loop—didn’t experience the same disappointment. But then, they started with a simpler set of assumptions. As one put it, “You can count on human greed.” Yes, the insurance industry employed an unusual vocabulary, but, as was becoming evident, their aim wasn’t very complicated. “This [insurance] case is about betrayal,” said one prosecutor type, “lying to separate people from their money.”
To defense attorneys, there were always nuanced explanations—“I can take every one of those actions and give an impassioned explanation of why they acted in good faith,” protested one attorney. Which was, perhaps, what Rosoff was attempting. Unfortunately, none of his explanations seemed to pan out.
Brown, molded by Spitzer, impatiently turned up the heat.
One attorney responded to a Brown request with a question: “Is this the attorney general’s usual hair-on-fire speed?”
“What choice did I have?” Spitzer asks. “Either I go home, or I say, ‘You think you can intimidate me? Screw you. Choose your weapon.’ ”
“Yes,” responded the office of the former Mr. Extension and Delay.
Defense counsel could resist, or try to. “The downside of not doing it our way is pain,” says Brown. One defense attorney complained that Spitzer’s prosecutors—he referred to the criminal side—threatened to pick up a hesitant client at the Larchmont train station or, better yet, at his office in handcuffs. The more encompassing danger of resistance, though, was that, as one defense attorney explains, “Spitzer’s office assigns people a white hat or a black hat early on.” White hats go to those who are open, honest, and don’t delay. “You do not want to be assigned a black hat,” says the attorney. “They prosecute the black hats.”
Clearly, Marsh & McLennan was fitted for a black hat early on. When Brown asked how Marsh justified those back-end commissions paid by insurers, Marsh claimed it provided a bunch of administrative services to insurers. So Brown summoned insurers. They told a different story. “It was pay-to-play,” one exec told Brown. “If we don’t pay, we don’t get a seat.”
“You never want to tell Spitzer to go fuck himself,” said one close observer, which is, in effect, what Marsh seemed to be doing by not coming clean. As Spitzer would later say, “I don’t know why Marsh reacted the way it did. It will go down as a case study of how not to handle an investigation.”
Spitzer likes to say that his office is called to action by wrongdoing. He dislikes the verbs police and intervene, sometimes used to describe what he does. Spitzer wants to suggest that the attorney general is a referee, observing from the sidelines until a foul forces him to get involved.
It would be silly, though, to think of Spitzer as an impartial sideline arbiter. Few attorneys general have been so willing to affirmatively intervene. Indeed, as one close associate explains, “Eliot thinks it’s a crazy distinction between prosecutor and regulator,” which is not how the game was ever played before. Spitzer, though, is clearly more interested in systemic change than in carting off a few wrongdoers. In fact, Spitzer’s troops have become more than regulators. They’re reformers, even backdoor legislators, and proud of it. “It’s good to reform industries, and we’ve done a good job at it,” says Michele Hirshman, Spitzer’s first deputy. “We’ve filled a vacuum.”
If others shirk their duty, Spitzer’s troops will eagerly step in. “Before Eliot, the position was, ‘We’re lawyers for the state Department of Environmental Conservation.’ That’s no longer enough,” says Dietrich Snell, Spitzer’s No. 3. “Now it’s, ‘Let’s do it.’ If DEC wants to come along, fine. If we think the federal Environmental Protection Agency is not doing its job, we’re prepared to take it on.” After suing, Spitzer’s environmental bureau negotiated a reduction in pollution produced by midwestern power plants.
By midsummer, Brown had started to think of how to change the insurance business. As he explained, “We are investigating the insurance industry, learning about it and reforming it simultaneously.”