Eliot Spitzer’s Last Pay-to-Play Scandal?

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The revelation that New York Governor Eliot Spitzer, the Social Justice League's caped crusader, has been involved in a prostitution ring will no doubt come as a shock to all those progressives who have faithfully –often fanatically– boosted him over the years. For years the boy wonder has prattled on about market abuses, both real and imagined, especially during his media-saturated tenure as New York’s attorney general from 1999 to 2006. For years journalists and pundits have hailed Spitzer as the protector of all things good. In a 2005 Time “Heroes & Icons” profile subtitled, “The Tireless Crusader,” John Bogle said Spitzer served with “energy, savvy and distinction” as state attorney general. In 2002 Time hailed him as “Crusader of the Year,” an event Spitzer notes in the bio of his gubernatorial website. The New York Times called him the “Sheriff of Wall Street” in 2006. The Atlantic (admiringly) called him “the scourge of Wall Street” in 2003.  

In 2004 PBS's David Brancaccio called him “a crusader who's taken on investment banks, the mutual fund industry, insurance, pharmaceutical and energy companies on behalf of the little guy.” In a 2004 profile entitled "The Govercutor," New York magazine's Chris Smith called Spitzer the “hottest stock in New York’s Democratic Party.”

The New York Times’s Paul Krugman hailed Spitzer in 2002 as one of the “good guys.” In the same piece, Krugman quotes Alan Dershowitz, a Harvard Law School professor who hired then-law student Spitzer in the 1980s to help with research in the Claus von Bulow defense. "He's the real deal," said Dershowitz, who in his day was himself a wunderkind. "He has a creative and innovative mind, and he always wants to do what's right." Not surprisingly, as Tim Graham noted earlier today, Dershowitz went to bat for Spitzer today, vigorously downplaying the prostitution allegations and lashing out at reporters.

Perhaps all the effusive praise heaped on Spitzer has blinded commentators to his ethical shortcomings in the world of philanthropy.

Never one to overlook the well being of his fellow lawyers, Spitzer insisted (PDF) that Philip Anschutz, former chairman of Qwest, pay $200,000 to six law schools favored by Spitzer, as part of a settlement. Now that’s chutzpah. Spitzer had sued Anschutz alleging that Salomon Smith Barney provided him insider information in return for his business. Anschutz admitted no wrongdoing, but paid out a total of $4.4 million to various charities (without taking tax deductions). Magnanimously, Spitzer allowed Anschutz to choose most of the charities receiving the “donations.”

There are other inglorious philanthropy-related moments in Spitzer’s career. As attorney general Spitzer policed the Empire State’s 60,000 charities and nonprofits, including his family’s philanthropy, the Bernard and Anne Spitzer Charitable Trust. That trust invested almost all of its nearly $26 million in assets in hedge funds and equity funds whose executives made generous donations in the hundreds of thousands of dollars to Spitzer’s gubernatorial campaign. (A related New York Times story may be found here.) Marcy Murninghan, a consultant to foundations and a former ethics professor at Harvard Divinity School, said the actions raised red flags. “It raises ethical questions — and suggests a level of self-dealing — when financial investments are placed with investors who happen to be his biggest contributors.”

Spitzer helped (PDF) Princeton in its posterior-covering launch of a scholarship program to distract from the school’s flagrant violation of donor intent. He was on hand for the press conference when the $10 million Woodrow Wilson School fellowship for the “Charles and Marie Robertson Scholars in the Nation’s Service” was unveiled. The Robertson heirs have been involved in a lawsuit for years, Robertson v. Princeton, in which they’ve been trying to force the school to honor the donor intent of their late parents.Spitzer did, however, defend (PDF) donor intent at least once, but it was regarding a cause many more people had heard about. When American Red Cross president Dr. Bernadine Healy wanted to spend funds donated to the group in the wake of the September 11 terrorist attacks on programs unrelated to 9-11 victims, Spitzer said the proposal was ”anathema” for the Red Cross. He vowed litigation to deprive the charity of its state and federal tax deduction if it failed to hand over the “reserve” to victims: “We will not be satisfied until every penny of that $564 million goes to the victims of the September 11 attack. That was clearly the intent of those who gave so generously.” In the end the Red Cross relented and Healy resigned.

(Acknowledgement: Capital Research Center staffer James Dellinger came up with the phrase “Social Justice League” a few months ago. Another version of this post appears on the CRC website. -Matthew Vadum)

(Note: Pay-to-play, which I used in the headline, is a term used in politics and in the world of public finance. Sorry: I was a financial reporter for so long I just assumed everybody would get it. -MV)