Spitzer, Client No. 9: Our Monumental Loss
Yeah, this Spitzer cat was arrogant, abrasive, brilliant and self-destructive. Brought down by a tawdry affair, New York's former governor has only himself to blame, and to his wife, his daughters and his shrink much to explain.
But for buyers of commercial insurance, the "luv guv," as the New York Post nicknamed him, was a friend who did more than anyone in New York, more than anyone ever perhaps, to fight for the interests of risk managers.
His aggressive prosecution three years ago of white-collar crimes and the unmasking of the disgraceful behavior of the nation's largest insurance brokerage companies should be a staple of the Harvard Law curriculum if it isn't already.
Future generations of white-collar-crime lawyers and coming generations of risk managers will forever be in debt to Spitzer. The former attorney general, referred to in a federal affidavit simply as Client No. 9, was one tough prosecutor who wasn't afraid to take on billion-dollar insurance carriers.
Even as governor, with no direct involvement in prosecuting white-collar crime since his landslide election in late 2006, the 48-year-old Spitzer remained effective. His appointment of the capable and intelligent New York Insurance Commissioner Eric Dinallo, the state's top regulator, has been instrumental in pushing through workers' comp reform.
With so much interest in the workings of how commercial insurance is bought and sold, and pushing for changes to an industry that often operates under laws that date back 50 years or more, it's clear Spitzer was lending a sympathetic ear to insurance regulators, who often have trouble competing for attention within the inner circle.
Risk managers had everything to gain and nothing to lose with Spitzer running New York state, home of the nation's financial capital, where more insurance contracts are bought and sold than anywhere else, with the exception of Hamilton and London.
Spitzer was worth every penny of his attorney general's salary. With crusading zeal, he managed to force Marsh, Aon and Willis into out-of-court settlements, and then had the firms set aside tens of millions of dollars in restitution.
He spent a few greenbacks on a $1,000-an-hour hooker called Ashley Alexandra Dupre, and he's on the hook for breaking the law for paying for her to cross state lines?a sordid and illegal affair, to be sure. The wealthy john moved $80,000 from one account to another, so he's in violation of money-laundering laws, a serious crime. But, hey, at least it was his own money, and he may be prosecuted under a statute called the Mann Act.
For his man act, he ought to be punished, and will be. He faces between 10 to 18 months in prison, the derision of his peers and the ridicule of the Wall Street titans he helped bring down; and he must now deal with brutal wounds inflicted on his family.
But before chuckling with the national comics at Spitzer's expense, or siding with his many enemies who derided him as "a sanctimonious bully" in the words of one news report, just remember that the governor forced financial industry giants to cough up hundreds of millions of dollars in restitution.
He exposed conflicts of interest between brokers and analysts at the big Wall Street firms, and in 2002, announced a $1.4 billion settlement with 10 top investment companies over conflict of interest disputes. Three years later, he got Marsh to agree to settle for $850 million. With that, Spitzer became the public's $2.25 billion man, and that's not even counting the lesser settlments with other brokerages.
Were I in the business of buying commercial insurance, I'd say "this guv done good." Insurance buyers and a few Ashley Alexandra Durpres sure got their money's worth out of Client No. 9.
CYRIL TUOHY is managing editor of Risk & Insurance®.
April 15, 2008
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