There was still a chance to settle with Marsh & McLennan, announce the problem and the solution at the same time, rather than file charges, but, as Brown saw it, not much. “I’m not seeing any kind of recognition that they have a massive problem,” said Brown. If there was to be a settlement, it seemed, Spitzer would have to wring it out of Marsh, just as he’d forced it on Merrill. “Marsh,” Brown thought, “has no idea what’s about to hit it.”
There was another consideration. So many scandals crowded the business pages. “There has been, unfortunately, this lingering notion that, okay, mid-level people may go to jail, and fines will be paid, but that’s the shareholder money,” says Spitzer. “CEOs continue along.” Spitzer had done his part in permitting that notion to linger—no one in the research-analyst case went to jail; perhaps three mid-level people in the mutual-fund scandal will do time.
“If you believe in accountability,” says Spitzer, “then when you have the factual record to say, ‘Wait a minute, you [the top management] should be held accountable,’ you have to act that way.”
At his October 14 press conference, Spitzer announced the guilty pleas of two AIG execs in the bid-rigging scheme. He also announced he was suing Marsh & McLennan in civil court. Then he brought out the big gun. Spitzer made clear that he was considering a criminal charge against Marsh & McLennan, essentially treating the company as a criminal enterprise, something no business can survive. Unless, that is, Marsh’s top leadership stepped down.
To some, Spitzer seemed to relish a fight all the more once it became personal. “I guess so,” says Spitzer. Considering it, he adds, in his careful language, that as attorney general, “you begin to think of yourself as the public, and hence it becomes a bit more emotionally compelling.” Spitzer had sued Kenneth Langone, a member of the board of the New York Stock Exchange, for his role in approving a $187.5 million pay package for Richard Grasso, former head of the exchange. For six months, Spitzer had tried to settle the case. Still, once the fight turned bitter and personal—“Howard Dean without the charm” was just one of the names Langone’s press person called Spitzer—Spitzer seemed to get a taste for the fight. “I’m not going to be intimidated by the gutter behavior of Ken Langone,” says Spitzer. If that wasn’t enough, Spitzer, according to Newsweek, told a friend to tell Langone he intended “to put a spike through [his] heart.” The trial is pending.
Now he squared off with Marsh & McLennan CEO Jeffrey Greenberg, scion of the country’s most famous insurance family. Initially, Marsh seemed inclined to fight. Soon, though, Marsh’s stock lost 43 percent of its value. In eleven days, Greenberg was gone. Rosoff soon followed. The new CEO was Michael Cherkasky, who headed Kroll, an investigative agency recently purchased by Marsh. He’d never run an insurance agency of any size. But he had at least one appealing credential. He was Spitzer’s old boss at the Manhattan district attorney’s office and a political supporter—he’d contributed to Spitzer’s campaigns.
A few days after Cherkasky was installed, Spitzer indicated that he did not intend to indict Marsh. Soon, Cherkasky abolished the back-end commissions that had been at the center of so much trouble and that had accounted for half the company’s profits.
On Christmas Day, as Spitzer seemed on the verge of reforming yet another industry, the New York Times published a front-page story suggesting that the attorney general had decided to change course. He would, said the Times, “cede” major enforcement actions to federal authorities.
Spitzer was in North Carolina at the time, visiting his in-laws, and read the article online about 6:30 in the morning. Spitzer had acknowledged that, logically, he would rely more on a reinvigorated SEC in the future. But, he insists, “Hands down, we’ve got a better pipeline of cases than at any point in the past six years.” The most damaging part of the Times story, though, was its suggestion that he’d turned on a dime because he now needed campaign contributions from the Wall Street firms he’d terrorized. “That’s insane, that’s crazy,” says Spitzer.
“You’re talking about Spitzer’s legacy,” explained one of his aides. You’re also talking about his future. Critics said that a Governor Spitzer would be bad for business. (Marsh had laid off 3,000 employees.) Spitzer countered that he’d reform the industry, ferreting out the corrupt parts, and leave it more competitive. The Spitzer-as-reformer theme seemed perfectly timed. Reform was in. Albany, it’s widely agreed, is dysfunctional. His Delta Forces were onboard. “What if,” asked one, “state government was a force for good?” Throw in an absent Rudy and a weak Pataki, and the Spitzer candidacy had the feel of inevitability.
Now the Times characterized Spitzer as doing an about-face on reform, and for the basest reason: money. In Spitzer’s view, the article wasn’t merely wrong—in addition to everything else, he didn’t need that much money; Spitzer could put as much as $30 million of his own into the race. But, as Spitzer put it, it was “fundamentally injurious to what we’re doing, an anathema.” Dopp, the communications director, received Spitzer’s first phone call at 7 a.m., and never did sit down to Christmas dinner. Spitzer’s other top people were quickly rallied. Through the day, Dopp talked to the Times. Spitzer got 60 BlackBerry messages by 3 P.M. Eventually, Spitzer too called the Times. The next day, the Times ran an article retracting the story.
The full-court press had worked. Spitzer’s reputation remained unblemished, even before most noticed the taint. And yet Spitzer’s urgency exposed the fact that he had only one horse to ride in this race—his image of rectitude, the bullying do-gooder, the reformer who took on the big guys. Which leads, inevitably, to another question: Does the same skill set that makes a great prosecutor make a great governor? For someone who seems to constantly think about how industries must change, Spitzer seems to have given far less thought to how, to start with, he’d wrangle with an intractable legislature, where every problem starts in Albany. Quizzed, Spitzer sounds slightly off guard. Reflexively, he says he’ll rely on what has worked so far—namely, those dogged facts. “We’re going to need somebody who can say, ‘Wait a minute: Here’s the problem, here are the facts, here are the value judgments, here’s the way we will apportion burdens in getting to answers,” he says. Not exactly a ringing campaign slogan.
Running a state plays to strengths that Spitzer has yet to demonstrate. “Eliot will find new levers,” says Brown. Which, depending on where you sit, is either an ominous thought or a hopeful one.