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Spitzer prostitution scandal has echoes in cases he prosecuted

By SAMANTHA GROSS and DEVLIN BARRETT | Associated Press Writers

March 11, 2008

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NEW YORK - Eliot Spitzer knew how to catch bad guys by following the money.

As attorney general, he once broke up a call-girl ring and locked up 16 people on corruption, money-laundering and prostitution charges. He ruthlessly investigated the pay packages of Wall Street executives and was so familiar with shady financial maneuvers that he was promoted to the top racketeering prosecutor in Manhattan.

But in the end, it appears that Spitzer may be done in by the same behavior that he built a career out of prosecuting. He was facing intense calls to resign and possible impeachment after he was accused of paying thousands of dollars for high-end prostitutes.

The Democratic governor initially drew the attention of federal investigators because of cash payments to an account operated by a call-girl ring, according to a law enforcement official who spoke on condition of anonymity because of the sensitivity of the case.

By the time the scandal broke this week, his financial transactions had been monitored, his phone calls had been caught on tape, and his actions had been scrutinized by prosecutors in the public corruption unit.

It could have been straight out of the Spitzer prosecution playbook.

If Spitzer's downfall indeed began with a suspicious banking activity report, he was tripped up by some of the very financial accounting methods he used so successfully against multibillion-dollar Wall Street firms.

Banks are required to file Suspicious Activity Reports to the government whenever they observe something they fear may be a crime. In court papers, Client 9 _ identified by another law enforcement official as Spitzer _ hurries to get more than $4,000 in cash to pay a call girl at a Washington hotel.

That kind of activity, repeated over time, is just the kind of thing that would ring alarm bells with a bank's compliance officer, who is trained to be on the lookout for what's called structuring _ a pattern of transactions aimed at hiding the nature of the purpose of the money.

Spitzer of all people should have known that, said Miami-based lawyer Gregory Baldwin, credited for coining the term "smurfing" in the 1980s as a federal prosecutor to describe the illegal activity of structuring.

"I think he's done enough cases where he's charged money laundering that he would know exactly what kind of information you get from the banks. It's such a perfect example of what goes around, comes around," he said.

As attorney general, Spitzer was also familiar with how to bust up a prostitution ring.

Spitzer proudly announced on April 8, 2004 that authorities had arrested 18 people on promoting prostitution and related charges in an investigation of escort services in New York.

"This was a sophisticated and lucrative operation with a multitiered management structure," Spitzer said at the time. "It was, however, nothing more than a prostitution ring, and now its owners and operators will be held accountable."

The defendants were charged with enterprise corruption, money laundering, promoting prostitution and falsifying business records. Authorities said the ring operated 24 hours a day, seven days a week, with drivers and prostitutes dispatched all over the city.

Money laundering, false business records and high-end call girls getting shuttled around town _ allegations that bear a striking similarity to those made this week.

In the 2004 probe, investigators used wiretaps and other surveillance to build their case, said Vincent Romano, who defended the man accused of running the ring. Prosecutors also charged some of the defendants with enterprise corruption _ a charge carrying heavier penalties than simple prostitution.

"It was a big splash. They had the perp walk. He caused a lot of embarrassment to a lot of people in the case to his benefit. What he put their families through at the time, he's probably experiencing now: the level of embarrassment and ridicule," Romano said.

"He's got this overzealous, mean-spirited prosecution, but behind closed doors in another state, he's doing the identical thing that he's accusing others of doing," he added. "And the other irony of it is that you've made a career off of a wiretap, and your demise is by the same prosecutorial tool."

The inquiry found that "Client 9" _ said to be Spitzer _ was apparently a repeat customer with the Emperors Club VIP, a lucrative prostitution service where some call girls pulled in $5,500 an hour. The governor has not been charged, and prosecutors would not comment on the case.