What I'm most proud of as attorney general
is that we were wiIIing to waIk into the buzz saw
of some very powerfuI interests and never back down.
Look, I had a simpIe ruIe:
I never asked if a case was popuIar or unpopuIar,
never asked if it was big or smaII,
hard or easy;
I simpIy asked if it was right or wrong.
Man: I wiII never forget that moment.
Woman: I was dumbfounded.
Man: I can't say I was sorry.
♪ Start spreading the news... ♪
Man: It was Iike, "You've gotta be kidding."
♪ I want to be a part of it... ♪
( siren bIares )
♪ New York, New York... ♪
Man: He was going to be our first Jewish president.
♪ These vagabond shoes... ♪
Woman: There was corporate corruption;
greed had seemed to hit its peak;
and he was fighting aII of that.
♪ Right through the very heart of it ♪
♪ New York, New York ♪
♪ I want to wake up in a city ♪
♪ That doesn't sIeep ♪
♪ To find I'm cream of the crop ♪
♪ On top of the heap ♪
♪ These IittIe town bIues ♪
♪ Are meIting away ♪
♪ I'II make a brand-new ♪
♪ Start of it... ♪
Narrator: On the face of it, the faII of Governor Spitzer
was just another sex scandaI.
Was it a private matter?
Or a pubIic reckoning?
♪ Oh New York... ♪
Narrator: And what of the timing?
A few months after his resignation,
the reckIess banks Spitzer had poIiced
brought the economic system close to failure.
♪ I'II make it anywhere ♪
♪ New York... ♪
Everyone agreed on one thing:
no one expected him to go down Iike he did.
♪ New York. ♪
It is to a certain extent a very cIassic taIe, perhaps,
of an individual who from the exterior
appears to have been captured by hubris;
a sense of standing for virtues
and, I think, working very hard
to articuIate and work
towards estabIishing ruIes and boundaries,
but then, himseIf, sIipping and faiIing.
And this goes back to the days of Greek mythoIogy.
This is not-- it's not a new story.
HuIbert WaIdroup: In New York, everyone--
everyone's Iike some sort of an animal, you know?
They're some sort of an animaI.
They're hungry to make more money,
hungry to get more sex,
to date a prettier girI or a richer guy.
Just-- just hungry, just greedy,
just animaIs.
This Chinese phiIosopher said that
human beings are a hybrid
between animaIs and angeIs,
that we're capable of animaIistic behavior.
Consider sex and war.
But we're capable of doing beautifuI things too, Iike art,
music or making Iove, you know?
What-- I was just contempIating that.
l was like, "Wow, I kinda dig that.
We're haIf angeI, haIf animaI."
Good afternoon.
Over the past nine years-- eight years as attorney generaI
and one as governor-- I have tried to uphoId
a vision of progressive politics that would
rebuiId New York and create opportunity for all.
We sought to bring reaI change to New York,
and that wiII continue.
Today, I want to briefIy address a private matter.
I have acted in a way that vioIates my obIigations
to my family, and that vioIates my, or any,
sense of right and wrong.
Narrator: Spitzer's wrong turn surprised everyone,
because he had a reputation as Mr. Right.
As Attorney GeneraI of New York
he was known as the Sheriff of WaII Street,
someone determined to take on powerfuI interests
on behaIf of those who couIdn't afford to.
LIoyd Constantine: This was a guy who understood
that he had been a member of the lucky-sperm club.
He was reaIIy smart. He was weaIthy.
So he had gotten a Iot of breaks in Iife,
and he wanted to-to-- to use that,
you know, to better the worId.
Narrator: Spitzer's father Bernard was a seIf-made reaI-estate tycoon
who sent his son to an eIite prep schooI,
Princeton and Harvard Law SchooI,
where he met his wife-to-be SiIda WaII.
His father had pushed him to succeed.
We debated issues around the dining-room tabIe.
And so I guess it was more of a symposium
than a touchy-feeIy environment.
We were taught not to embrace
a notion, a principIe, a fact
mereIy because somebody had asserted it.
ChaIIenge them, push back--
that was part of the conversation.
Narrator: For a reaI-estate famiIy,
MonopoIy takes on a speciaI edge.
Sure, it's a game.
But it's aIso a way for a father to teach his son
some Iessons about money and power.
Look, I don't want the impression to be that he wasn't--
he was devoid of compassion, but it is true
he forecIosed on me in a MonopoIy game.
Narrator: Bernard Spitzer tricked his son into seIIing
BoardwaIk and Park PIace for cheap,
then wiped him out when he Ianded on a built-up Boardwalk.
The Iesson: don't trust anyone.
But l think really what he was trying to do
was teach me how the market worked.
And MonopoIy's a fun game, but I had overbuiIt
and overextended and he said, "I'm sorry, that's it.
There are consequences and you've Iearned a Iesson."
Interviewer: What was your response at the time?
Oh, I cried. I think I was about 10.
I mean, I was a kid.
It was-- it was-- it was no fun.
I wanted to-- I wanted to be bailed out.
Constantine: Bernie is a guy who judges peopIe.
That's a tough thing for a kid.
I do remember him watching Eliot and me play tennis.
And after one particular serve and voIIey of mine, which I won,
he gave me that victory sign, and he said,
"Yeah, that's exactIy what to do to him."
EIiot's strategy is to stick with his core game:
hard shots, serve and voIIey.
Spitzer: But my refIexes are good.
Yeah!
I Iove to get in to net.
Good shot.
As I say, the game I used to have keeps getting better.
Narrator: EIiot Spitzer's notion
of pubIic service was Iike his tennis game:
attack attack attack.
Good morning, and thank you for coming.
Narrator: As attorney generaI, Spitzer saw an opportunity
to do more than enforce the Iaw.
He wanted to use the Iaw to change the way society worked.
He sued coaI-fire pIants in Ohio
for causing poIIution in New York.
He sued GeneraI EIectric for dumping
poisonous waste into the Hudson River.
He uncovered fraud in the pharmaceuticaI industry,
where pill makers hid the damage done by their drugs,
fought for minimum wage for deIiverymen
and forced upscaIe restaurants to hire more women.
He wouId take them aII on, because no one eIse wouId.
Peter EIkind: There's a reason why EIiot Spitzer
became famous as New York's attorney generaI.
The job had been a second-tier position.
lt had been focused on reguIating crooked car deaIers.
And EIiot Spitzer focused on WaII Street,
on the biggest guys around.
And Spitzer's premise, which was right,
was that Wall Street can't be Ieft to reguIate itseIf
or terribIe things wiII happen.
When l assumed office, which was January of 1999,
we were in a period where Wall Street
and investment bankers were, to use Tom Wolfe's
great phrase, masters of the universe.
Narrator: To protect the average citizen,
Spitzer was wiIIing to prosecute bankers and CEOs
Iike any other Iawbreakers.
Spitzer: In the course of this investigation,
my office deveIoped evidence indicating that analysts
gave misIeading advice
that heIped the brokerage's investment banking cIients,
but harmed individuaI investors.
When we first got into this, everybody said,
"Well, what's the state attorney generaI's office
in New York doing going after this probIem?
ShouIdn't this be the SEC?"
And my response was, "Yes, but they haven't.
And if they haven't,
and there are investors being ripped off, we wiII do it."
Narrator: WaII Street anaIysts advise buyers
on what stocks Iook good or bad.
With the rise of the lnternet, anaIysts became superstars,
because only they seemed to understand
how to value Internet companies.
As stocks soared, so did the vaIue
of anaIysts who knew how to pick them.
The more money they made,
the more potential there was for abuse.
Henry Blodget was a faiIed writer
who stumbIed into being a top research anaIyst
when, as a young stock picker,
he predicted the rise of Amazon.com.
By 2001 he was working for MerriII Lynch,
making $12 miIIion a year.
When one of MerriII's customers sued BIodget for phony research,
Spitzer's team investigated him,
using an arcane law caIIed the Martin Act
to subpoena thousands of documents and emaiIs
in search of fraud.
As Spitzer's team pored through BIodget's emaiIs,
they kept coming across the term POS.
They thought POS was short for "positive,"
for stocks BIodget wanted customers to buy.
But then they stumbIed upon BIodget's keyword chart.
BIodget's emaiIs were honest and brutaIIy downbeat.
MeanwhiIe his officiaI stock ratings were mostIy upbeat,
urging customers to buy buy buy.
Spitzer: Mr. and Mrs. Smith,
whose IRA or 401 (k) is being invested,
they are the sacrificiaI Iambs
and being used to prop up the stock
so that the MerriII Lynches of the worId can then
go to the companies and say, "See what we're doing for you?
Bring us your investment banking business."
It was fundamentaIIy corrupt.
Narrator: It was insider's MonopoIy,
guided by a basic fundamentaI principIe.
You don't go south of 14th Street
except for one reason: to make money.
( R&B music pIaying )
The guys on the fIoor, aII they cared about was makin' money.
That's what-- that's-- that's the American way.
Narrator: Jack Grubman was a highly respected
teIecommunications anaIyst for Salomon Smith Barney.
♪ Close shooting don't kiII no birds... ♪
He became famous for pumping up AT&T's stock
to pIease his boss Sandy WeiII.
Then WeiII heIped Grubman get his twins
into an excIusive preschooI.
Grubman's payday for research?
$20 miIIion a year,
enough to buy a palace on the Upper East Side.
♪ Take food from my famiIy's mouth ♪
♪ Before the money came... ♪
Narrator: Grubman's career ended
when he relentlessly pumped up the stock
of a company caIIed WorIdCom,
just before it went bankrupt.
Do you regret, in hindsight,
staying so buIIish on the company for so Iong?
Nothing-- look, why are you harassing me
- Iike this? - I'm not harassing you.
I'm just asking you questions about the company that you cover.
This caught you compIeteIy by surprise, you say.
Yes.
- Thank you. - Yeah.
♪ Before the money ♪
♪ Started roIIin' in. ♪
There was aIways this--
internally we called it the come-to-Jesus moment,
where we went to whoever it was we were prepared to sue
and/or, you know, go after, you know, for doing something wrong
and we'd say to 'em in no uncertain terms,
"Tell us why, given this fact pattern,
we wouId be wrong to sue your ass."
Spitzer: EarIy on in the investigation,
the MerriII Lynch Iawyers, they came into my office.
They looked at me and they said, "You're right,
but we're not as bad as our competitors."
I was a prosecutor for a lot of years.
I never, you know, heard a defendant
stand up in court and say, "Yeah, I robbed three peopIe,
but somebody over there robbed five, so therefore l'm not bad."
I said to MerriII Lynch-- they wanted to settIe the case and pay some money
and said, "We wiII pay a big sum of money
if you promise to keep the information secret."
And I said no.
Because my job as attorney generaI
is to change the system
so that it's fair and wiII be honest.
And if we seaI the evidence and you pay a check
and we don't change the system, l'm basically being bought off.
My office has reached an agreement that wiII heIp
ensure the integrity of investment advice
on which investors often depend.
Narrator: BIodget and Grubman paid million-dollar fines
and were banned from the securities industry for Iife.
But their firms bought their permanent siIence
with handsome severance packages.
In exchange for Grubman's siIence on the detaiIs
of his firm's behavior, SaIomon Smith Barney
paid Grubman $30 miIIion.
The nation's best and brightest were Iured to WaII Street
in search of fast fortunes.
The money they made fIowed everywhere--
penthouses, yachts, goIf cIubs--
and to the oIdest sector of the global economy
ready for a new cash infusion.
I have rich Iovers.
♪ Love for saIe... ♪
I don't go out with poor men.
I've got no reason to do so.
♪ Appetizing young Iove ♪
♪ For saIe... ♪
I don't caII prostitution
and escorting seIIing your body.
♪ Love for saIe. ♪
You don't seII, you rent.
I Iove my bank account fuII.
It's better than empty.
♪ Sex for sugar, sugar for sex ♪
♪ What you got, girI, it's so unfair ♪
♪ I Iike the way you move so keep it right there ♪
♪ Or you can do what you wanna do ♪
♪ l'm just glad I am in front with you ♪
♪ But I don't mind being butt high ♪
♪ 'Cause I'm-a touch you where the sun don't shine... ♪
WaIdroup: There's a street in SoHo where a lot of artists set up.
l was selling my paintings one day.
And this charismatic feIIow comes along
and he's got a beautifuI girl with him--
this girlfriend at the time, NataIia.
Said, "This is the number-one escort in New York City.
l run New York's number-one escort agency."
I've never seen you naked. You think your body's good enough?
Waldroup: "I want to buy the biggest,
most expensive painting you've ever done."
He gives me his business card.
I stiII have an oId souvenir.
♪ Electricity was definiteIy there ♪
♪ l got shocked when I touched your hair... ♪
"New York ConfidentiaI, rocket fueI for winners."
That's aII it says.
Narrator: ln 2004, New York ConfidentiaI was at its height,
making miIIions by offering cIients "the girIfriend experience,"
a few hours with naughty pIaymates
who looked like coIIege cheerIeaders.
I had $1500 in $100 biIIs in my purse.
- Oh God. - I puIIed it out.
- OnIy 15? - ( Iaughing )
We started hanging out even after I did the painting.
And one day we're in the back of a Town Car,
and he says, "Hey, grab the phone," you know.
"Just talk to the guy, and try to heIp him out.
You know, he's probabIy Iooking for a girI
to spend the night with."
I'm on the ceII phone and...
you know, my adrenaIine is going.
And I'm Iike, okay, you know,
"We have a brunette, a bIonde or do you Iike ethnic girIs?"
You know, I do a deaI for, I don't know, 3,000, 4,000.
He says, "Great, you just made 400 bucks
from a five-minute phone caII.
I'II give you 10%¤.
Why don't you just come to work for me for a IittIe while, you know?"
Man: That CraigsIist ad pulled well, huh?
WaIdroup: That's where it aII began, where I started working for Jason.
How do you know she's a no?
We don't get that many calls for Asians.
One hot Asian is-- is pIenty.
We need more bIondes, hot blondes.
They might Iook good in person,
but they got a shitty photographer, you know?
Hot blondes. She's a definite yes.
WaIdroup: When a businessman spends,
say, $2,000 an hour,
he wants to read the reviews,
just Iike if you were to buy a car.
You want to read the reviews. How much miIeage does it get?
Does it have air conditioning, four-wheel drive?
What-- what's the difference between
paying $1 ,000 an hour for this young lady,
when I can open up the "Village Voice"
or go on CraigsIist and l can pay $200
for another young Iady?
You know.
And I'd say, "WeII, sir, sure, you can--
you can have a cheeseburger or you can have Iobster."
You're gonna have such a good time
with one of New York Confidential's girls
that you're gonna go to work Monday morning
with a smiIe on your face.
You're gonna make more money for you and your family,
and then you're gonna caII me up next week
and you're gonna say, 'Herb, who can you send me out today?"'
Natalia: You can make the assumption
that they're not being sexuaIIy satisfied in their marriage
or there's baggage or whatever's going on there.
And then... you know, what's their option?
Do they get divorced? Do they spIit up their famiIy?
Or do they seek, you know-- do they go see an escort?
WaIdroup: One young Iady was a schoolteacher;
another girI was a--
she was an athlete trying to make it to the OIympics.
Actresses, singers, modeIs.
NataIia: Jason wouId give his business card
to every girI that he met.
And half of them wouId caII and then
a quarter of them wouId start working.
Some girls would offer me cash-- tips.
Some girIs offered me sex.
I don't think I ever got a tip or sex with AshIey, yeah.
Narrator: AshIey was AshIey Youmans,
later Ashley Dupré, who wouId become famous
for having sex with EIiot Spitzer.
As an escort, she got her start at New York ConfidentiaI,
where her working name was Victoria.
lt was through one of those straight pitches
that Jason found AshIey.
WaIdroup: Jason recruited her from the Gansevoort HoteI.
Narrator: At the Gansevoort, AshIey was a bottIe girI
trying to break into the music business.
She was just Iight. She was just happiness.
She was Iike a great bubbIy 19-year-oId girI.
♪ Oh it's something to see ♪
♪ That's so pretty... ♪
Waldroup: She was a good American,
New Jersey ItaIian girI.
NataIia: Guys Ioved her.
She had great pheromones or something, you know?
Waldroup: Within three or four weeks, you know,
her rate was going up there to 2,000 an hour--
with a two-hour minimum.
Natalia: Her reviews were awesome as weII.
l think she got a-- she got something Iike
12 consecutive 10/10 reviews.
After we did our first appointment together,
I toId Jason, I'm Iike, "You gotta book this girI."
First of aII, she's great,
but she also has a perfect coochie.
Narrator: AshIey's reign ended when New York Confidential
was raided by IocaI poIice.
No customers were arrested,
but HuIbert was convicted of promoting prostitution
and sent to jaiI for eight months.
AshIey wouId move on to work for another escort service.
For every New Yorker who's been ignored, Ieft out,
who's been toId "You can't fight City HaII"
so many times they've come to beIieve it,
for every New Yorker without a voice, Iisten:
there's one strong enough for aII of us.
( appIause )
Spitzer: For most of our history
we have turned a bIind eye
to the vioIations of duty
on the part of white-coIIar criminaIs.
We can understand it.
There is something visceraIIy terrifying about street crime.
And untiI you are safe in your home,
you worry a bit Iess about what is often
a bit more amorphous, which is the nature
of white-coIIar crime, which is more subtIe theft.
EIkind: Spitzer broke the moId
of how you prosecute a white-collar case.
He went after it fast and hard,
and he got things done in a period of weeks or months
that wouId take the federaI reguIators years.
He wanted to change the system.
So he'd get the goods on a company or on peopIe
and use it as Ieverage to institute reform,
to force the industry to change the way it did business.
A Iot of peopIe thought that was outrageous.
Narrator: Spitzer hired a team of dedicated lawyers
who were drawn to his mission.
EIiot just wasn't afraid to stand up to corporate bad guys.
And, you know, I think there was some appreciation
for the fact that, you know, he'd punch 'em in the nose
if that's what was appropriate.
The first day l came in, EIiot said, "What's next?"
And l said, "Well, mutuaI funds, I think."
Boy: How much wiII I grow?
How strong wiII I be in five years?
In 10 years?
Where does my future start?
Shh.
Narrator: Mutual funds were supposed to be a safe pIace
for working people to put their money.
But there were rumors that sophisticated investors
were pIaying games with those funds.
Brown: l went off and I started studying them,
trying to figure out how to get at this issue.
WhiIe I was immersed in this, we got a tip.
( phone ringing )
Noreen Harrington: I Ieft very pathetic voicemaiI messages.
( phone beeps )
You know, reporting a crime is hard.
You have to earn your credibility.
You have-- it feeIs Iike you're being interrogated.
Narrator: Noreen Harrington had a strong financiaI background.
After 1 1 years at GoIdman Sachs,
she ran the gIobaI fixed income department at Barclays.
Then she went to work for Eddie Stern,
the son of a weII-known pet-food billionaire.
Eddie Stern's hedge fund, Canary Capital,
was producing spectacuIar resuIts
at a time when the stock market was tanking.
The big profits, said Harrington,
came from manipuIating mutuaI funds.
They were doing something really egregious,
which is Iate trading.
( beII ringing )
Narrator: At the track,
customers bet on horse races before the race starts.
But what if there were a special club
that aIIowed you to bet on races after they were over?
There was a cIub Iike that on Wall Street
for trading mutuaI funds.
Brown: Mutual funds are onIy priced once a day,
- right at 4:00. - ( beII ringing )
So during the day, you caII in and you buy a mutual fund,
they'II say, "Fine, "we're gonna fiII your order at today's 4:00 price."
If you caII in at 4:05, they're supposed to say,
"Fine, we'll fill your order at tomorrow's 4:00 price."
Narrator: But what if something happened at, say, 4:05
to make the fund more vaIuabIe?
Brown: If you couId go in as an investor
and call at 4:1 0, having heard that news,
go back and buy it at the 4:00 price, you could just buy it,
wait for it to go up the next day and seII it
and take some money out of it.
In one case, they went to a bank
and the bank put a computer back-office terminaI
into Canary CapitaI, Eddie Stern's fund.
Eddie might enter 40 trades
prior to 4:00.
Now Iet's say it's 10:00 at night;
they canceI the 30 that lost money
and keep the 1 0 that made money.
And so this was a bank,
compIeteIy, you know, working with one cIient
to destroy the profits
owed to aII the peopIe in those funds.
Narrator: The name of the bank was Bank of America.
We spent a Iot of time saying this-- this can't be happening.
I mean, no one wouId be so, you know, so sIeazy.
Harrington: I remember it was Iike 9:00 at night.
And somebody said,
"Wow, we just picked these peopIe off for 10 miIIion."
I'm thinking, "How do you trade mutuaI funds at 9:00?"
I mean, you know, you're a 20-year veteran,
but aII of a sudden you feeI Iike a rookie.
Narrator: When Stern was confronted with the evidence against him,
he cut a deaI to cooperate with Spitzer's investigation,
which Iaid open the predatory nature of WaII Street.
Brown: You have some expectation as an investor
in the stock market, that there are big big boys
out there who probabIy have better information than you,
and it's preciseIy to get out of that that you wouId go to mutuaI funds.
And the idea that there were some sharks
in the tank with you, with aII these thousands of minnows,
was reaIIy sort of-- just reaIIy surprising.
I sent out the first subpoena at the end of June of '03.
And on September 4th, we announced a settIement.
And what I'd Iike you to do now...
Harrington: Three months after I finished speaking to them,
for EIiot Spitzer and his staff to have indictments,
settlements, was astounding to me.
Today's announcement is mereIy step one.
One of the questions I get asked a Iot was,
"Did you beIieve you wouId never work again?"
And I think about that question a Iot,
because what you're saying by asking that question is:
by doing pubIic service and heIping 95 miIIion peopIe
and stopping a crime, this industry wouIdn't want you?
( siren bIaring )
Narrator: WhiIe Spitzer stirred popuIar rage at WaII Street,
there were a few peopIe who were deIighted
to see the bankers take home big paydays,
as reveaIed in the actuaI ceII phone of one of the bookers
of the escort service caIIed The Emperors CIub.
Woman: "I keep hearing about all the raises on Wall Street.
And usuaIIy that wouId be good for us.
Hmm, maybe things wiII pick up. Take care, hon!"
The Iawyer-banker thing is true.
There are quite a Iot of them.
But there are lots of stereotypes, you know,
that it's this crazy drug-fueIed sort of party scene.
But generaIIy, you know, people are respectful.
They just want to have a nice time with someone.
Many of my cIients are nicer to me
than many many of the dates I've been on.
In fact,
I've stopped dating in the reaI worId, you know?
Partly because it wouId be compIicated
and partly because my standards Iifted.
HonestIy, you know. ( laughs )
NataIia: The pictures of AshIey didn't surface right away.
The EIiot Spitzer story broke, and then aII these media outIets
were caIIing me to do interviews.
And so l did a few interviews without even knowing that AshIey was--
my AshIey was our Victoria was Kristen
was all these-- you know, who she was.
Tonight EIiot Spitzer resigns as Governor of New York.
Where wiII he find comfort in this difficult time?
l was shocked when it aII happened.
But then when I saw AshIey's picture
fIashed on the news,
I was Iike, wait a second, you know?
I was Iike, "Oh my gosh!"
I couIdn't beIieve it.
She fit the biII.
♪ My fist to the sky... ♪
Man: "The New York Times" website identifies
Governor Spitzer's mystery caII girI as Ashley Alexandra Dupré.
Narrator: AII over papers and teIevision
she was caIIed "Spitzer's GirI."
Known as "Kristen" at The Emperors CIub,
AshIey Dupré was determined to take advantage
of her sudden opportunity.
NataIia: CIearIy AshIey was trying to make a name for herself.
Narrator: After the scandaI broke, Ashley's MySpace page,
with one of her songs avaiIabIe for streaming,
got over seven miIIion hits.
To heIp package her career, she brought onboard
two Iawyers, a pubIicist, and a management team.
- ♪ So you better hurry up... ♪ - Narrator: AshIey's manager arranged
for an interview with Diane Sawyer.
Everyone pIayed their part.
AshIey dressed up as the good girI gone wrong,
and Diane Sawyer pIayed the roIe of the scoIding mom.
You say "the work,"
but you haven't said the words.
- The work? - Prostitution.
Escort.
What's the difference?
- Escort. - What's the difference?
She catered to the stereotypes of hookers,
which are, you know, "Poor me. I had a troubIed chiIdhood.
I made a mistake," which is such a Ioad of crap.
It's-- I can't change the past.
l can only try to take what I've Iearned and--
and appIy that to my future.
We are being paid ridicuIous amounts of money.
None of these women are forced to do this and they're not stupid.
Many of the professionaI prostitutes that I know
are very smart women who weren't abused.
You know, don't have a mentaI disorder.
They just happen to beIieve in this kind of work.
Narrator: So do their customers.
The ceII phone of the booker from The Emperors CIub
offered a gIimpse of the cIub's weII-heeIed cIient Iist:
an Oscar winner, CEOs
and high-powered investment bankers.
The club treated them Iike emperors. And why not?
They made more money than kings.
They enjoyed having their way with women and the world.
So it came as no surprise that they resented it
when the New York Attorney GeneraI started to cramp their style.
Reporter: "The Economist" magazine caIIs him
"WaII Street's scourger-in-chief."
Reporter #2: He's gone from compIete anonymity
to what "Fortune" magazine calls "the most feared man on WaII Street."
Spitzer has deputized himseIf as the Sheriff of Wall Street
and is Ieading the posse for retribution,
restitution and reform.
Narrator: Spitzer appealed to Democrats and RepubIicans.
He was a Iaw-and-order IiberaI who wasn't afraid to punch back.
When you go down to WaII Street,
like when you walk into a buiIding on WaII Street,
is it like turning the Iight on in the kitchen
and the roaches just scatter everywhere you go?
- WeII, y'know-- - Are you a beam of Iight--
It is-- there was a day that I had to waIk into a hedge fund...
Ken Langone: What I was intrigued by--
the number of people that were terrified by him.
I mean, they IiteraIIy were terrified
at this guy coming after them.
Spitzer: The issue of CEO comp was something I had been trying
to get peopIe to take a Iook at.
It was off the raiIs.
♪ I'II take what I want ♪
♪ I'm a bad go-getter, yeah ♪
♪ Ha! Yes I am ♪
♪ I'm never a Ioser ♪
♪ And I'm never a quitter, yeah... ♪
Spitzer: The ratio of CEO comp to the average worker's comp
had gone from about 40 to 1 to about 550 to 1 .
CEOs began to just take everything they could
and uItimateIy that was going to destroy our economy.
Because instead of running the companies to create
Iong-term weaIth and Iong-term investment,
aII the games we've seen--
everything from backdating of stock options
to maximizing short-term profits
without sufficient investment for the Iong term--
these are things that are cancers inside the economy.
♪ 'Cause l'll take what I want, yeah, baby. ♪
Narrator: One of the fIashiest executives was head
of the New York Stock Exchange: Dick Grasso,
who boasted owning 10 cars and three homes.
He traveIed on private jets, often fIanked by armed bodyguards.
His job was to reguIate and market the New York Stock Exchange.
Nicknamed "Punky,"
Grasso was a scrappy coIIege dropout
who started on the fIoor and worked his way up.
There's a job opening at the New York Stock Exchange.
Chairman Dick Grasso resigned yesterday
over the fury raised by his massive pay package.
Narrator: Not onIy was Grasso paid an average annual salary
of $20 miIIion,
his retirement package totaIed nearIy $140 miIIion.
After Grasso stepped down, the new head of the Exchange
brought the matter to the attorney generaI.
Spitzer: There's a statute in New York that says the value
of the paycheck that the head of a not-for-profit receives
must be commensurate with the vaIue of the services provided.
l like Dick. He's a decent guy.
He didn't provide services worth $1 39 million.
Perhaps more perverseIy,
the compensation had been determined
by the very people he was supposed to be reguIating.
I had the most respected group of directors
from the corporate and financiaI worId.
They exercised their business judgment.
They paid me what they beIieved to be fair and reasonabIe,
which I-- I agree with.
Narrator: Spitzer decided not to go after
the bIue-chip internationaI board.
Instead, he sued Grasso and the head
of the board's compensation committee,
Ken Langone.
Langone wouId prove to be a formidabIe foe.
l've been rich and I've been poor.
Rich is better, I can teII ya right now.
Narrator: The son of a Long IsIand pIumber,
Ken Langone had cofounded Home Depot
and amassed a fortune of weII over a biIIion doIIars.
A dedicated phiIanthropist, Langone was not shy
about paying peopIe weII.
Langone: At the time we awarded Dick these pay packages,
l truly believed that Dick earned every singIe penny,
and more!
Narrator: Spitzer demanded that Grasso return $100 miIIion.
At the time, Langone toId "Fortune" magazine:
"If Grasso gives back a fucking nickel,
I'II never taIk to him again."
Spitzer: He, as anybody in that position wouId,
took umbrage at it. And he deveIoped
a rather strong animus towards me.
The day that I sat in this room
and he went on teIevision
with that farce press conference he had,
announcing that he was going after Dick Grasso and me
and aII kinds of bad things about me and...
EIiot's theatrics.
You can't pay the head of a not-for-profit
that much money-- cIose to $200 miIIion.
It's simpIy too much. It's not reasonabIe.
It's not right. It vioIates the Iaw.
Langone: It was headIines, it was glorious headlines!
AII these captains of industry!
Hey, this is big game.
This is going after eIephants.
Spitzer: He became a very vociferous critic of mine.
And that's aII fair game.
In my view we were right and he was wrong.
But again it was something he feIt deepIy about.
Narrator: In 2004 at the Democratic NationaI Convention
Spitzer took up the issue with Jack Welch,
the former CEO of GeneraI EIectric.
Langone: Jack and I are very good friends.
Spitzer came up to him with froth
coming out of the sides of his mouth, spitting,
I mean, so exercised, and pointing at Jack:
"You teII your buddy
I'm gonna put a spike through his heart!"
This is not something the Attorney GeneraI
of New York State says.
So when Jack toId me, I said, "Jack, do me a favor."
I said, "If you see him, tell him one thing:
make sure it's steeI, because wood'II break."
Narrator: The case dragged on for years.
In 2008, the New York State Court of Appeals
dismissed the case for a bizarre reason:
since the suit had been brought, the New York Stock Exchange
had abandoned its not-for-profit status.
Dick Grasso kept aII his money.
But EIiot Spitzer had engaged an enemy
with virtuaIIy unIimited resources,
one who was watching and waiting for any misstep.
I'd Iike to think
I'm not a vindictive person.
And a basic tenet of my faith is forgiveness.
The most harm that EIiot Spitzer has done to me
is I am defying my faith.
I can't forgive him
and I shouId, but I can't.
Narrator: In Ken Langone, Spitzer had created a mighty enemy.
And then he added another one when he took on Hank Greenberg,
the head of the worId's Iargest insurance company, AlG.
At the age of 79, Maurice "Hank" Greenberg
was the most powerful businessman on the pIanet.
Under his command AlG had grown
to be worth $157 biIIion
with 92,000 empIoyees.
Admired for his spectacuIar resuIts,
Greenberg ruIed his empire with an iron fist.
I think he was Louis XIV to everybody eIse's,
you know, being a mere baron.
I think Hank Greenberg epitomized
the power of corporate CEOs, and in my view,
he was the most powerfuI person in corporate America.
Narrator: Greenberg's measure of his own worth
was the stock price at AIG.
The normal cycle of business is that sometimes your profits go up
and sometimes your profits go down.
But WaII Street didn't Iike companies to perform that way.
They wanted to see steadiIy rising profits.
If you deIivered steadiIy rising profits,
they'd give you a higher stock price.
So Hank Greenberg came up with a new type of insurance
that wouId create the iIIusion of steadily rising earnings.
Narrator: Greenberg's AlG was fined over $100 miIIion
by federaI authorities
for heIping other companies cook their books.
In 2005 it appeared that AIG might be
using similar tricks to pump up its own stock.
Spitzer: The more we dug into AIG,
the more probIematic
the company itseIf appeared to me to be.
And the disconcerting aspect of it
was that it did appear to come from the very top.
lnterviewer: When did you first hear about
Spitzer's investigation of AIG?
When I got a subpoena.
Narrator: One deaI generated by Greenberg
caught the eye of Spitzer and federaI investigators.
It was a suspicious contract between AlG and Gen Re,
a company owned by biIIionaire Warren Buffett.
One of the most startIing moments in this case
was when tapes emerged
that were dispositive, overwheIming proof
of exactly what these transactions had been.
As this was unfoIding, Dick Beattie called me
one Saturday morning at home and said let's talk about this.
The board wanted me to find out what I couId
about the Gen Re investigation.
EIiot was jogging on a Saturday morning or something.
I met him in the park.
The onIy thing of significance he told me, as l recall,
was that they had Hank--
Hank's name on tapes.
Narrator: To boost his stock price, Hank Greenberg wanted
to make it look like AlG had $500 miIIion more than it did.
The original phone call was to see if we couId get
a Iost portfoIio from Ron Ferguson.
What happened afterwards, l don't know.
I-- I didn't-- I wasn't invoIved in the detaiIs of the transaction.
Narrator: A handwritten deaI memo laid out the terms:
Gen Re would pretend to pay AIG $500 miIIion
in two instaIIments
for a phony insurance poIicy.
There was no risk of paying a cIaim.
For doing the phony deaI, AlG would pay Gen Re
a $5-miIIion fee.
HouIdsworth: No risk. No risk for 5 miIIion bucks.
Narrator: Hank Greenberg's initials, MRG,
were aII over the document.
Monrad: The two peopIe at AIG who are invoIved
are Hank Greenberg and Chris MiIton.
AIG was a big company.
I didn't-- I didn't stay focused
on-on-- on the Gen Re transaction.
Man: Yes. ( Iaughs )
Graham: That sorta gives you somethin'--
Man: Yeah, that teIIs you somethin', doesn't it? Yeah.
Narrator: What was an unfair advantage to Greenberg
was seen as cooking the books to AlG's accountants,
PricewaterhouseCoopers.
The firm refused to accept AlG's financial statements
as Iong as Greenberg was the CEO.
Hank wasn't pushed out by... by EIiot.
What happened was the investigation that foIIowed
and the accountants, at the end of the day,
said, "We're not taking that certification anymore."
So you're sitting here as a board of directors,
saying, "My God, what does that mean?"
That's what drove the board
deciding that Hank had to go. And one other issue.
Narrator: Spitzer demanded
that Hank Greenberg testify under oath.
However Greenberg's lawyers advised him
to plead the Fifth, despite AIG's poIicy
to fire empIoyees who didn't cooperate with reguIators.
That troubIed a Iot of peopIe on the board.
They wanted him to say, you know, "AbsoIuteIy not.
I'm not gonna take the Fifth. I'm gonna testify."
I think Frank Zarb and I called Hank
and toId him that the board had made the decision
that he had to step down.
These are very serious offenses,
over a biIIion doIIars of accounting frauds
that AlG has aIready acknowIedged.
That company was a bIack box run with an iron fist
by a CEO who did not teII the pubIic the truth.
That is the probIem.
So does that mean you're moving toward an indictment?
No, l didn't say that. It depends what we wiII prove,
or can prove that Mr. Greenberg knew at the time.
We have powerfuI evidence. We wiII proceed with it.
lt's too bad that the attorney generaI
doesn't come out from behind his office,
where he's protected against libel.
I wish he'd come out and say these things as a citizen.
Spitzer attacked Greenberg,
and l saw him on teIevision one night
saying that Hank Greenberg was a crook.
Narrator: John Whitehead had been a war hero,
a Deputy Secretary of State
and the chairman of GoIdman Sachs.
And his office continued to leak information
about why he was a crook
without ever any charges being brought against Hank.
So l said this is something I have to do something about.
So that's what caused me to write that first articIe.
"Something has gone seriously awry
when a state attorney generaI can go on teIevision
and charge one of America's best CEOs
and most generous philanthropists
with fraud before any charges have been brought,
before the possibIe defendant has even had a chance
to know what he personaIIy is alleged to have done
and whiIe the investigation is still underway."
That was the thing that set me off.
l had heard of an incident invoIving
former GoIdman Sachs chairman John Whitehead.
Mr. Whitehead had come out pubIicIy
supporting Mr. Greenberg.
After that op-ed was pubIished,
he received a threatening phone caII from EIiot Spitzer.
He asked me a coupIe of questions about my articIe.
And then he came right to the point.
He said, "Mr. Whitehead," he said,
"You and I are now at war."
You know, Iook, he had-- he had written an op.
I don't know if I said those words or not.
If that's the worst I said, you know, okay, that's--
peopIe are at war with me all the time.
Interviewer: "You have fired the first bullet."
"You have fired the first buIIet.
But beIieve me, by the end of this war,
l will fire the last one and you wiII be dead."
WeII, I don't think I said that. l mean, John White--
l wouldn't say-- l-- l-- Iook, I hope I didn't say that.
He was screaming into the phone.
He and I had a heated conversation.
I wiII Ieave it at that. It was a private conversation.
As l've said, I've never denied
that l have heated conversations in private.
lt's... it was me, it is me, so be it.
And I think sometimes it's how you get things done.
He said, "I wiII destroy you."
And those are-- those are strong words.
I had never heard words Iike that before from anybody.
I couIdn't quite beIieve it.
Narrator: Spitzer's outbursts became Iegendary to his staff.
When he exploded, his staff wouId remark
that Spitzer's eviI twin "Irwin"
had dropped in for an unexpected visit.
In fact, a very prominent Iawyer
of a very fine company had a meeting with him.
And this man said to me,
"When l came out of his office, I swore I saw the words E-V-I-L
across his forehead."
I have no doubt if Hank Greenberg were stiII running AIG,
AlG would not be in the fix it's in today.
Today the federaI government announced it has once again
reworked the bailout of insurance giant AIG.
Reporter: Now the baiIout needs a baiIout.
Two months after AIG was given
that first emergency government Ioan,
it's getting another IifeIine.
Narrator: In 2008 AIG was at the center
of a gIobaI economic meItdown.
Before and after Greenberg's faII,
AlG had been selling biIIions of doIIars of insurance
to the worId's biggest banks
to hide their risky gambIes on home mortgages.
When housing prices coIIapsed, AlG couldn't pay the claims,
and US taxpayers paid $183 biIIion
in an effort to save the gIobaI economy from coIIapse.
According to Greenberg, the bIame for AIG's faII
and the global meltdown rested with one reguIator--
EIiot Spitzer.
Spitzer wanted me out.
When poIiticians invoIve themseIves
in who is going to run a company and who is not,
we're on dangerous ground in this country.
Spitzer: It is the big Iie writ Iarge.
The books were being cooked at his company.
Hank Greenberg was removed as CEO by his own board
when they saw the underIying facts
of what was then one of the Iargest financiaI frauds in history.
I didn't do anything improper.
Neither did any of the senior team do anything improper.
Interviewer: You say to peopIe, if Hank Greenberg had
stiII been there, this wouId never have happened?
It wouId not have happened.
Spitzer: The very trading practices that Ied to these
gargantuan obIigations
that taxpayers are now baiIing out
aII began whiIe he was there:
Very significant accounting frauds,
reinsurance contracts which he participated in structuring
that were deemed by a federaI jury
in Connecticut to be iIIegaI.
Four peopIe went to jaiI.
He was caIIed an unindicted co-conspirator
by the prosecutor in that case.
So his maintaining uninvolvement
in the structuraI issues is simply wrong.
Narrator: Spitzer wanted to prosecute Greenberg
for financial manipulation, but was caIIed off the case
by the US Attorney Michael Garcia.
Spitzer: MichaeI Garcia sent me an over-the-top letter
when we were going to incIude
significant aIIegations
reIating to Hank Greenberg in our AlG complaint,
teIIing us to back off.
And it was a moment of--
I don't want to say there was anything improper
about the Ietter that Garcia sent,
but he basically said, "Don't you dare go near this.
We're doing this," reIating to Hank Greenberg.
Narrator: MichaeI Garcia never pursued charges against Greenberg.
Instead he wouId Iead the prosecution
that Ied to Spitzer's downfaII.
Both Greenberg and Langone
hired PR firms to go after Spitzer.
And Langone hired a private investigator
to find out what he couId.
Interviewer: I want to move on to the-- to The Emperors CIub.
When did that start, approximateIy?
- Sometime in '06. - EarIy '06?
Thereabouts, yeah.
You were fIying about as high as you couId possibIy be fIying.
- Mm-hmm. - And this is prior to--
at that point in time, you were pretty certain
you were gonna be Governor of New York,
- wouIdn't you say? - Right. WeII, reaIIy, Iook.
If your point is things were
as good as they couId get,
from a poIiticaI perspective, I suppose that's right.
And the onIy metaphor
I can think of perhaps is Icarus.
Those whom the gods would destroy,
they make aII-powerfuI.
A friend of mine recentIy gave me a T-shirt
that he cIaimed he had had printed
for investment banker friends of his.
But he thought I wouId enjoy it,
and maybe I couId maybe even Iearn from it.
The T-shirt said on its front, "Hubris is terminaI."
♪ If I ruIed the worId ♪
( Iaughing )
♪ I'd Iove aII the girIs ♪
♪ I Iove 'em, Iove 'em, baby. ♪
I'm not a kingmaker.
But I'm gonna caII it-- you're gonna win.
- WeII, thank you. - I'II teII you why.
- l'm glad l came tonight. - WeII, absoIuteIy, it's done.
Narrator: In earIy 2006
Spitzer's approvaI ratings were over 60%.
He had announced his run for governor
and was predicted to win in a landslide.
You couId do anything. You couId punch a toddIer and stiII win.
Narrator: His career was every poIitician's dream.
No, I was the enforcer.
I mean, I was the kid who pIayed Ieft fuIIback,
not because I had reaI taIent, but I took peopIe out.
You pIay hard, you pIay rough and hopefuIIy you don't get caught.
( Iaughs )
Narrator: Right around this time, CeciI SuwaI,
the 22-year-old CEO of The Emperors CIub,
took a phone call from a new customer.
Though he used the name "George Fox,"
it was actuaIIy EIiot Spitzer.
The very first time that he caIIed,
I answered the phone.
And he called and he was whispering.
So I thought it was a prank.
And so the other booker called and said,
"Okay, I'm ready to start answering the phones."
So we transferred the phone to her, and I said,
"Oh, I just spoke with someone.
You know, I'm gonna let you handle that."
And apparentIy, he saw, I think, three peopIe in a row,
just back to back that evening.
So I guess it wasn't a prank.