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On an overcast day last month when New York State Attorney General Eliot Spitzer quietly announced he was seeking the Democratic Party's endorsement for the state's 2006 gubernatorial race, his long-time mentor and best friend recalls a similar moment six years earlier when the now-famous consumer crusader was a little-known politician who had barely slipped into office after a nasty, protracted recount campaign by his incumbent opponent.

"We only had 17 days before Eliot became attorney general (on Jan. 1, 1999)," says transition-team leader Lloyd Constantine. "But once we got in, it was pure Eliot. He rolled up his sleeves and worked around the clock on everything, from hiring to stapling, whatever it took. He was like a player/coach."

In what often seem like daily pronouncements, Spitzer's office cracked down on everything from"shill bidding" at online auctions, to pharmaceutical behemoth GlaxoSmithKline charged with concealing damaging information about the effect of its Paxil antidepressant drug on children, to his celebrated exposes of wrongdoing among giant Wall Street brokerage firms, mutual fund companies, and now the insurance industry.

But behind the headlines, is Eliot Spitzer the Real McCoy? The aggressive, outspoken attorney general is certainly not without critics. From the time he began his highly publicized investigation of conflicts of interest on Wall Street, Spitzer has been accused of using artfully staged press conferences to further what some see as excessive, ever-present political ambition.

"He's damned if he does, damned if he doesn't," says a veteran New York political strategist. "Since when hasn't it been okay to be ambitious, especially if you're a politician?"

Another rap against Spitzer's largely unblemished reputation with voters is that many of his office's initiatives begin with a highly publicized drum roll of draconian charges, but eventually end with a comparatively light wrist-slapping.

Spitzer, for example, declined to pursue criminal charges after Marsh & McLennan agreed to an investigation into alleged patterns of illegal bid-rigging and steering, agreed to institute a variety of reforms, and agreed to return money to businesses or individuals wronged by these alleged practices.

In what could potentially be most damaging to Spitzer's aspiration for the governor's office, or beyond, are charges that he and key staff members have been involved in sticky fund-raising controversies.

In a well-documented article in Newsweek magazine last summer, for example, senior writer Charles Gasparino told of how hedge-fund manager Stanley Druckenmiller received a telephone call the previous autumn from Spitzer's office.

The caller said, with a chuckle, that the purpose of the call wasn't a regulatory matter, but that Spitzer himself wanted to chat. Later, the magazine reported, Spitzer asked for two separate contributions, about $25,000 each from Druckenmiller and wife Fiona to the "Spitzer 2006" committee for his likely campaign for the New York governor's office.

Campaign-finance records show that Druckenmiller, who usually supports Republican political candidates, and his wife each contributed $25,000. He declined comment, but didn't deny the story, Gasparino reported. Spitzer's office confirmed the call, but noted that Spitzer rarely asks for specific donations.

AG IS NO ELIOT NESS

New York City's popular former mayor Ed Koch disagrees with Spitzer's critics who say that his actions are motivated primarily by showmanship.

"He is not interested in striking a pose as Eliot Ness," Koch tells Risk & Insurance®. "He sees it as doing his job. He has done for the attorney general's office what Teddy Roosevelt did for the presidency: he is a trustbuster who has not been afraid of any special-interest group, no matter how powerful. He has broken up practices that had taken hold over many years and had come to be accepted practice when, in fact, they were blatantly illegal--they were never okay. He is a true hero of the public interest."

Allan Wolper, a New York-based political commentator and "Ethics Corner" columnist for Editor & Publisher magazine, notes: "Spitzer's actions seem to be holding. He is a son of New York. He knows that for the state of New York to prosper, he must serve the middle class and the working-class poor. They want somebody to trust, somebody who belongs to them. And so far Spitzer has convinced many of them that he is the one. He better not be lying."

Adds Sharon Kalin, a powerful New York arbitrageur: "I think he did the right things on Wall Street. He had an impact. He went to the heart of what had to be fixed. But we were preoccupied with recovering from all the harm done during the Gestapo reign of Richard Grasso (ousted New York Stock Exchange), and there was only so much Spitzer could do."

As for Spitzer's prospects in the governorship contest, Kalin, known for her knack in spotting good arbitrage bets, has reservations. "When he speaks in public, he's a little uptight looking," she says. "He doesn't seem to have the touchy, feely warmth it takes to be a successful politician."

When Spitzer's critics have their talons fully extended, they are ever-ready to suggest that the attorney general has a strong streak of know-it-all arrogance--that, honed by his hard-charging, subpoena-waving prosecutorial style, it's his way or the highway.

More than one executive has muttered, in private of course, that Spitzer has spent the better part of 2004 year preparing for his political career by lambasting the insurance industry and bringing to light what was already well known.

Koch disagrees. "I don't think that's the case," he says. "I've known Eliot for many years, and I've always found him to be willing to work with colleagues, and to share the limelight."

Spitzer's profile as a crusading "people's lawyer" began to take shape at the earliest stage of his government career. It was 1982, the summer before Spitzer graduated from Harvard Law School.

He was working as an intern in the New York attorney general's antitrust division, led by fiery, outspoken Lloyd Constantine, and at that time Constantine's small band was practically alone in fighting for the very existence of American antitrust law.

"The Reagan Administration had deliberately abandoned antitrust laws," Constantine says. "They said it was a relic of the nineteenth century." With young Eliot Spitzer as an ardent team member, the New York attorney general's antitrust division tenaciously took on the feds, forging what became the nucleus of a nationwide alliance of state attorneys general.

It also became apparent that there was a deep professional bond between the two combative colleagues. "We both saw the law as an instrument for social change," says Constantine.

Spitzer concurs. In a speech last summer he said, "What I learned was how to use the law to set an agenda, to focus on structural flaws and industries, to understand that market failures required governmental enforcement to permit the marketplace to work, and that it was important that government would step in occasionally when individuals could not do so for themselves."

A 'BIG PICTURE' GUY

Early on, Constantine became convinced that Spitzer was destined to serve in the public sector.

"He was a 'Big Picture' guy," observes Constantine. "He had a different demeanor.He was smart, tough, aggressive, and his integrity was unquestionable. I knew he wouldn't be happy in private practice, and he wasn't, even later as a founding partner of Constantine & Partners."

Spitzer seemed destined to have become a social activist. He was raised in the fashionable Riverdale section of the Bronx, the youngest of three children born to Bernard and Anne Spitzer. Both parents are children of Jewish immigrants. His father parlayed training as an engineer and a reputation for doing top-quality work into a New York real estate development empire that now numbers some of the finest high-rise addresses in the city.

Spitzer attributes his education at the Horace Mann School, where he was captain of the tennis team and lost his first political election, for fundamentally shaping his view of the world.

"It is the notion," he says, "that there are children who have to be taught to be free thinkers ... to be willing to stand up to authority and say, 'That is not necessarily correct.' "

As an undergraduate at Princeton University, where he studied government and public-policy issues, Spitzer was elected student body president as a sophomore and played on the tennis team. At Harvard law school, he was an editor of the prestigious Harvard Law Review. He also was a brilliant, indefatigable researcher and sometimes case maker for Alan Dershowitz, the school's famed criminal law professor and famed defense attorney.

Social activism begins at home for Spitzer and his wife Silda A. Wall, a North Carolina native and also a graduate of Harvard Law where they met. Their three daughters--Elyssa, 14; Sarabeth, 12; and Jenna, 10--attend Horace Mann School, where Silda is a trustee.

Silda stresses that she and Eliot assiduously strive to keep their professional lives separate. But a nonprofit organization the couple established in 1996 before Eliot was elected attorney general reflects their shared social and moral values.

The Children for Children Foundation, of which Silda is president, runs an array of programs that encourage children of all socio-economic backgrounds in New York to reach out and help disadvantaged children (often through schools in underprivileged parts of the city). In turn, the children receiving a helping hand move on chain reaction fashion to assist others.

STEELY BLUE EYES

At home, say close family friends, Eliot Spitzer's steely blue-eyed, lantern-jaw visage as his state's chief law enforcement officer softens easily to that of loving husband and father. "When we're done with our weekly 5:45 morning tennis match," says Constantine, "Eliot always calls the house to make sure everything is okay with the girls as they're getting ready to go to school."

In the midst of growing pressures, the real question is: Can Spitzer relax? Insiders note that Spitzer can flash a fearsome temper with staffers he believes have let down the cause, and he has "a reputation for righteously upbraiding errant corporate executives in meetings at his office. "It's getting harder for him," says Constantine. "But children have a way of humbling you. And he and his family have a farm in upstate Columbia County that gives them a place to get away to at times."

Does Spitzer, Constantine's long-time friend, have a sense of humor? Constantine pauses for a second or two, and then says, "He has a dry, ironic sense of humor. I've never seen him taken in by any sense of self-importance. He loves his job. He loves getting results. But he takes things as a matter of course. He is very comfortable with power, about knowing how not to get carried away by it." In the months ahead, Spitzer increasingly needs to call on this self-effacing understanding of power and its impact to keep his balance as he strides forward into what has now become a national spotlight.

"The echoes of Eliot Spitzer can be heard loud and clear here," says Scott Hodes, senior corporate attorney in the Chicago office of Bryan Cave LLP.

It's still a long and winding road that leads to the governor's mansion in Albany, and a more distant and obstacle-strewn one that could eventually lead him to the White House.

STEVE YAHN is a veteran journalist and a freelance writer for Risk & Insurance®.

January 1, 2005

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