March 13, 2008

Wall Street "Cheers" Spitzer's Fall

I'm finally back after almost four months without posting. Sorry to all you legions of avid readers! I've simply been too busy lately with teaching and writing.

I had to dash off a letter to the WSJ about Wall Street cheering the demise of Eliot Spitzer. Turns out it got published (my third in the WSJ on business ethics within a year). Here it is:

To the Editor:
I was aghast to read the headline: Wall Street Cheers As Its Nemesis Plunges Into Crisis (A1 3/11) on Eliot Spitzer's fall from grace. You report that Spitzer as New York Attorney General "was the single most visible force trying to weed out abuses and bring down wayward chief executives" and that he "pummeled Wall Street kingpins" (Spitzer Engulfed in Sex Scandal, A1 3/11).

It's astonishing to me that the evident majority on Wall Street sees itself as so far above the law that it can publicly cheer at the demise of this man for having the guts and acumen to force high-powered criminals to justice. This attitude is obviously so ingrained that those now cheering seem oblivious to the fact that they really have no right to do so, lest they mean to condone the scandalous actions of so many of their peers, or "kingpins" as this newspaper chose to call them. What this says to readers is that the culture of callous disregard for the law in pursuit of greed is alive and well on Wall Street.

Despite Spitzer's numerous successes in reeling-in corporate crime, the need for business ethics is evidently greater now than ever.

The truth is, were it not for Eliot Spitzer, many more white-collar criminals would still be in business. For example, Spitzer helped build the case against Bernard Ebbers who, thanks to him is now right where he belongs: rotting in jail for the rest of his life for raiding his telecommunications empire Woldcom to smithereens—a swindling in which thousands of employees lost their shirts with nothing left to retire on. And like Enron, it was a scam entirely brokered by the Wall Street minions of back-slapping bankers at J.P. Morgan Chase, Merrill Lynch, Morgan Stanley etc. up to their necks in conflicts of interests. Unfortunately, Spitzer had to make tough decisions in order to build his cases against CEOs, having to let most who should have been caught in the web off the hook with mere wrist slaps. Still, he fined these brokerage firms and investment banks 1.4 billion in 2002 for their part in cooking the books of publicly-traded corporations.

It's clear that all those who merely had to pay fines are still fuming, with no remorse for their crimes. This suggests that for all Spitzer's valiant efforts, many are likely still blithely flouting the law. As it happens,
the Ethics Resource Center in Washington D.C. has just released its yearly survey of corporate ethics across the country, showing a disturbingly marked return to pre-Enron levels of corruption.

I would not be at all surprised if it turns out to be key Wall Street players who got the feds to expose Spitzer's structured prostitution payments. Alan Dershowitz makes a decent case for that theory in today's WSJ. To his argument, I would add that no other high-profile client of the Emperor's Club was exposed besides Spitzer. That's surprising and suggests that the investigation was a hit job by the DOJ against this once powerful rising star of the democratic party. It certainly would not be the first time the Bush administration politicized the administrative branch of government.

Ultimately,
Spitzer may have been overly hostile to his targets, and obviously somewhat of a hypocrite (though at least not a thief), but to the common man he was a hero who dared bring the powerful to answer for their crimes. That's precisely why he was elected governor by a landslide. Now that he's gone, it may be a good day for Wall Street kingpins, but it's a dark day for justice, that is to say, for the rest of us.