Spitzer, Eliot (1959–)

Crap and Junk

Spitzer's investigation turned up e-mails from Merrill Lynch stock analysts indicating that the company routinely published favorable stock ratings for certain companies that they privately thought were of dubious value. One of Merrill's most famous analysts, Henry Blodget, was found to have called stocks “crap” and “junk” that had been given a strong recommendation to investors.

All told, Spitzer's office subpoenaed about 30,000 e-mails from which investigators pulled a number of similarly incriminating messages. To force Merrill Lynch to the bargaining table, Spitzer released the e-mails, outraging investors who had relied on Merrill Lynch investment reports, and causing the company's stock to drop by 12 percent over the next week.

Merrill's chief executive officer, David Kamensky, apologized to shareholders for the situation and several weeks later settled with Spitzer's office for $100 million. More significantly perhaps for investors,[Page 759] Spitzer forced Merrill Lynch to agree to stop the practice of paying analysts for the number of companies they attracted to Merrill's investment banking arm.

Spitzer's interest in advocacy first took shape in college, when he lobbied the Princeton University administration to raise salaries for custodial and other service employees on campus. Upon earning his law degree from Harvard University in 1984, Spitzer bounced between public and private practice for several years, working as a clerk for a U.S. District Court judge, as an assistant district attorney in Manhattan, and, ironically, as a defense attorney for white-collar criminals at a prestigious private firm in New York.

In 1994, Spitzer, finding private practice uninteresting, ran for the New York state attorney general's office, using money borrowed from his wealthy father. Despite spending an estimated $10 million, Spitzer lost in the primary. Four years later, however, after spending a considerable amount of time campaigning, Spitzer narrowly won the next election for the office by fewer than 25,000 votes.

One of Spitzer's first triumphs in office was bringing to conclusion a lengthy 30-year case between General Electric (GE) and the state over pollutants in the Hudson River. GE had allegedly used the river to dump PCBs (a chemical pollutant), creating a potential health risk for humans and wildlife. Spitzer's prosecution of GE led to the Environmental Protection Agency's ruling that GE was required to clean up the PCB pollution from the river.

Spitzer also brought environmental cases against sewage treatment plants and against several midwestern and southern power plants whose pollution drift, Spitzer alleged, created smog and acid rain in New York. He used the Clean Air Act to force those companies to improve their emission standards. Several of the companies settled and agreed to reduce emissions. Many New Yorkers see Spitzer as a champion of the common person over the corporate giant, a particularly compelling image in the wake of the corporate scandals of Enron Corporation, Global Crossing, and others.

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