As the Spitzer Sex Firestorm Cools, It's Time for the Real Questions

By Lindsay Beyerstein, AlterNet. Posted March 26, 2008.

The full story of how Governor Eliot Spitzer got caught on a federal wiretap soliciting sex from an web-based escort service has yet to be told. Close scrutiny of the federal complaint filed against the four ringleaders of the Emperors' Club VIP prostitution ring raises questions about accounts that have been published to date. Allegedly, the Department of Justice got involved with the Spitzer case because banking irregularities raised suspicions that the governor was engaged in some kind of public corruption. Anonymous officials claim that they were shocked when these suspicious wire transfers turned out to be payments for sex.

Investigating prostitution rings has not historically been a high priority for federal law enforcement, unless there are allegations of human trafficking or child abuse. Individual johns are virtually never prosecuted. Initially, it was suggested that Spitzer had violated the Mann Act, which forbids transporting people across state lines for prostitution. Anonymous officials suggested that Spitzer might be criminally charged for attempting to conceal the wire transfers he used to pay for sex. The New York Post reported that federal investigators intend to scrutinize Spitzer's bank and credit card records all the way back to 1999 before they decide what charges he will face, if any. The feds have announced that they are investigating Spitzer's campaign finance records in an attempt to determine whether he spent campaign funds on his trysts with prostitutes.

So, how exactly did Eliot Spitzer get caught? Why was the Justice Department, specifically the Public Integrity Section of the DoJ, which specializes in handling public corruption, trigger an investigation into Spitzer's sex life?

According to some media accounts, Spitzer lead authorities to the Emperors Club prostitution ring because his payments to QAT Consulting, a front company for the Club, triggered a federal corruption probe. But the complaint against the alleged Emperors Club ringleaders reveals that a confidential informant told law enforcement about the Club activities in late 2006, in exchange for immunity.

Yet the FBI didn't get a wiretap for an Emperor's Club phone until more than a year later. The complaint describes a flurry of investigative activity into the principle figures in the Emperor's Club between January and March of 2008. During this time, FBI surveillance teams tracked the suspects from New Jersey to New York. They also tapped several Club phones, and intercepted thousands of text messages.

Client 9 was caught on tape on February 12, arranging for a prostitute to travel from New York to Washington D.C. the next day. The investigators obtained a search warrant and raided premises associated with the Emperors Club. The complaint was unsealed the next day. On March 10th, the New York Times unmasked Governor Eliot Spitzer as Client 9. Shortly after the story went online, Spitzer issued a terse public apology for unspecified transgressions. Two days later, the New York governor announced his resignation.

The web-based prostitution ring itself had been busted with great fanfare in New York the week before; prosecutors had announced on March 6th that they had brought down an international prostitution ring doing business as "The Emperors Club VIP." A 53-page document was unsealed detailing the FBI investigation.

Over the next several days following Spitzer's apology, a quasi-official storyline began to take shape in the form anonymous statements to the Times and other major newspapers by anonymous officials with knowledge of the investigation. Allegedly, Spitzer had sowed the seeds of his downfall in July of 2007. The North Fork Bank relayed a Suspicious Activity Report to the IRS. According to the Times, that report "languished unnoticed in a vast Treasury Department database in Detroit" -- until a separate report from the HSBC Bank in early fall connected two shell companies associated with the Emperors Club.

Spitzer triggered the North Fork Suspicious Activity Report by making three separate payments to a shell company over an unspecified period of time that, together, added up to roughly $10,000. Authorities later alleged that Spitzer might have been illegally structuring his wire transfers to avoid a $10,000 reporting threshold. By law banks must file a Currency Transaction Report for cash transactions larger than $10,000, but this rule does not apply to wire transfers. So, it's a little odd that the feds thought they saw an attempt to circumvent a rule that didn't apply.

See more stories tagged with: corruption, eliot spitzer, department of justice, prostitution, wiretaps

Lindsay Beyerstein is a New York writer blogging at majikthise.typepad.com

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