AP Gives Aid and Comfort to Spitzer's Fiction-Based 'I Told You So' on AIG

Disgraced former New York Governor Eliot Spitzer clearly sees the current AIG bonus controversy as an opportunity to redeem his reputation.

The Associated Press's Michael Hill provided rehabilitation assistance in his Friday report.

Spitzer is best remembered for resigning as the Empire State's chief executive after being caught patronizing high-priced prostitutes over a period of several years, and for having a reputation as an attorney general on a self-aggrandizing crusade against against corporate corruption prior to that.

Spitzer is attempting to capitalize on the public's incomplete knowledge of his sorry saga to get back in its good graces.

The AP's Hill gave Spitzer the print equivalent of a soapbox to do just that:

With AIG, Spitzer is Sheriff of Wall Street redux

Eliot Spitzer has a few words to say about the AIG bonus brouhaha: I told you so.

The former New York governor battered American International Group with charges of corruption long before his own dizzying downfall in a prostitution scandal. He has used this latest financial scandal to strike his old populist, Sheriff of Wall Street themes and, just maybe, mend his reputation — though critics contend that he bears a share of the blame for the insurance giant's historic near-collapse.

..... As for all those politicians piling on AIG this week? Been there. Done that.

"We pursued AIG and Wall Street's structural failures in a way that others shied away from because it was politically unpalatable for them to address those issues," Spitzer told host Brian Lehrer Wednesday on WNYC Radio in New York City. "Now it is the flavor of the month. Everybody is jumping up and down serving subpoenas, beating their chests trying to be tougher than the next person."

On CNN Thursday, Spitzer said his initial probes came from AIG's "effort from the very top to gin up returns whenever, wherever possible and to push the boundaries in a way that would garner returns almost regardless of risk.

"Back then I said to people, AIG is the center of the web," he told CNN's Fareed Zakaria.

Spitzer pursued AIG for years when he was New York's attorney general. The company eventually announced in 2006 that it would pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies. AIG's veteran chief executive officer, Maurice "Hank" Greenberg, was forced to resign in 2005 after a long and contentious, sometimes ugly battle with Spitzer.

"He obviously believes history has vindicated him," said John Coffee, a professor of securities law at Columbia University, "and wants to remind America that he was there first."

..... Coffee suspects Spitzer is more concerned about reclaiming a legacy than mounting a comeback. Jeffrey Stonecash of Syracuse University's Maxwell School said the recent comments fit Spitzer, a natural crusader zealous about rooting out financial crimes.

Hill waited until his 19th paragraph to come back to the contrarian take on Spitzer's legal legacy, noting that "Critics, mostly on the political right, claim that by forcing out Greenberg and creating turmoil at AIG, Spitzer laid the groundwork for the debacle roiling the country today."

A year ago, in the wake of Spitzer's resignation, the Wall Street Journal reminded us that the self-styled, media-assisted Spitzer was much more of a legal tyrant than crusader:

Mr. Spitzer's recklessness with the state's highest elected office, though, is of a piece with his consistent excesses as Attorney General from 1999 to 2006.

He routinely used the extraordinary threat of indicting entire firms, a financial death sentence, to force the dismissal of executives, such as AIG's Maurice "Hank" Greenberg. He routinely leaked to the press emails obtained with subpoena power to build public animosity against companies and executives. In the case of Mr. Greenberg, he went on national television to accuse the AIG founder of "illegal" behavior. Within the confines of the law itself, though, he never indicted Mr. Greenberg. Nor did he apologize.

In perhaps the incident most suggestive of Mr. Spitzer's lack of self-restraint, the then-Attorney General personally threatened John Whitehead after the former Goldman Sachs chief published an article on this page defending Mr. Greenberg. "I will be coming after you," Mr. Spitzer said, according to Mr. Whitehead's account. "You will pay the price. This is only the beginning, and you will pay dearly for what you have done."

Jack Welch, the former head of GE, said he was told to tell Ken Langone -- embroiled in Mr. Spitzer's investigation of former NYSE chairman Dick Grasso -- that the AG would "put a spike through Langone's heart." New York Congresswoman Sue Kelly, who clashed with Mr. Spitzer in 2003, had her office put out a statement that "the attorney general acted like a thug."

These are not merely acts of routine political rough-and-tumble. They were threats -- some rhetorical, some acted upon -- by one man with virtually unchecked legal powers.

Eliot Spitzer's self-destructive inability to recognize any limit on his compulsions was never more evident than his staff's enlistment of the New York State Police in a campaign to discredit the state's Senate Majority Leader, Joseph Bruno. On any level, it was nuts. Somehow, Team Spitzer thought they could get by with it. In the wake of that abusive fiasco, his public approval rating plunged.

Spitzer's campaign of public intimidation by press conference was rarely challenged. Firms that believed they were innocent mostly paid up and forced out key executives like AIG's Greenberg to make him go away.

As AIG was publicly crumbling last September, I recalled that WSJ editorial, and added this:

Left unsaid, but obvious, is that Greenberg wasn’t indicted because he would have kicked Spitzer’s butt in court — which is why Spitzer avoided the inside of courtrooms like a plague. In the one case I’m aware of where someone stood up to Spitzer all the way through a jury verdict, the New York Attorney General was trounced.

..... Greenberg had at least three successors in the past 3-1/2 years (Frank Zarb (a caretaker), Martin Sullivan, and now-deposed Robert Willumstad.

Now there’s Edward Liddy. If he could get past the bitterness, and if regulators could admit that Spitzer’s publicity-driven ouster of him was wrong, Greenberg, even in his 80s, might have been a better choice.

Who’s at the top matters. So does drift at the top, even for a few months, especially at such a large and complex entity.

Note from taxpayers to Spitzer: Thanks for nothing.

It's more like "Thanks for $170 billion or more less than nothing." While AIG's board of course deserves the lion's share of the blame for the firm's debacle, a strong case can be made that the biggest corporate crackup in history might not have occurred, or might have been much less severe, if Spitzer hadn't chosen to make Hank Greenberg his personal piñata.

That Spitzer is getting unchallenged opportunities to appear on CNN and elsewhere to peddle his fantasies, along with barely concealed hosannas from an AP reporter, is disgraceful -- and, sadly, typical.

Cross-posted at BizzyBlog.com.