Monday, March 10, 2008
1. Why would the bank tell the IRS and not Spitzer himself if there was a suspicious transfer? [A] Spitzer is a longtime client, a rich guy and the governor. We're talking thousands of dollars here, not millions. It doesn't make a whole lot of sense that they spotted a "suspicious transfer" made by the governor[B], and that this is how things began. It's possible it was just ordinary paperwork the bank had to file with the government whenever some particular flag was raised[C], but if that's the case, why did the DoJ go to DefCon 3?[D]I inserted the s for ease of reference. Here goes:
[A] Because it is the law that you cannot tell the individual who prompts the report. This law has major penalties for violation, including potential five year terms. Usually BSA violations just lead to massive fines and an order to clean up your act forthwith, but if it is a knowing tip off, an individual could be prosecuted and sent to federal prison. At the very least, such behavior would probably get one banned from banking for life. Banks are required to have BSA audits (checking the in-house personnel), and they are also examined on this topic. Banks are required to conduct training of their employees, and tell them of the criminal penalties. So the bank employees knew the law and knew that an omission might easily be detected. The game is not worth the candle.
[B] Banks are required to screen for suspicious activity, honey. Failing to do so can earn you fines in the millions. It's one of the best ways to lose money in banking. Individuals who are involved in organized crime will generally become rich if not detected, so believe me, being a rich guy is no protection at all from such scrutiny. Quite the reverse.
[C] It was indeed, although suspicions of structuring are not "ordinary".Currency Transaction Reports (CTRs) are ordinary, and the transactions looked like an attempt to evade a CTR. I read the affidavit carefully, and yes, a
SAR would have been triggered.
[D] Okay, this man is the governor of a big state. Depending on who filed, it looked like either he was paying off someone or filtering in cash at levels low enough to evade automatic reporting. Red flags indicating financial improprieties are areas of exaggerated concern for government officials who have the ability to steer massive amounts of money into various desirous pockets. If the government isn't going to investigate reports like this, what is it going to investigate?
Why did they then include this line from that conversation in the complaint?Oh for heaven's sake. Because, dingbat, it establishes that this was indeed a case in which sex and not just companionship was being sold. Believe it or not, one does have to cover that point in order to arrest the individuals who were running the ring or get a search warrant. No sane judge is going to give you a search warrant unless you present reasonable probability that a crime is occurring. It's a feature of the Constitution. You cannot arrest people who run genuine dating services, nor can you break in their houses and seize stuff. Other such conversations involving other clients were also reported in the affidavit for the same reason.This salacious detail does not seem like it's necessary to make their case, and appears to be added for no other purpose than to destroy Spitzer's career.
LEWIS continued that from what she had been told "he" (believed to be a reference to Client-9) "would ask you to do things that, like, you might not think were safe -- you know -- I mean that...very basic things...."Kristen" responded: "I have a way of dealing with that...I'd be like listen dude, you really want the sex?...You know what I mean."
It is something of a danger to the public when any public figure becomes involved in illegal activity. The danger of blackmail, for example, is always there. According to the law, this investigation started with the bank's filing, and the prosecution of the prostitution ring is an offshoot. However, it does mean that with this information now public the governor of NY cannot be blackmailed. Believe it or not, prostitutes are not always the most discreet individuals, and although he was using an assumed name, the man is a public figure and one would guess that at least some of the prostitutes would figure out who he was. It is a short step from there to telling someone who might figure out how to make the knowledge pay.
4. How did Spitzer's name get leaked to the media, and who did it?According to the NY Times, he told his senior staffers. It seems quite clear that it was leaked then, since the NY Times in fact reported that Spitzer had told his senior staffers that he was "involved in a prostitution ring", and that was all they reported. The rest came after the press conference. I suspect that many such Hamsherian allegations of anti-Spitzer conspiracy prompted the disclosures about the bank's SAR. It should not have been revealed.
(I am deeply disappointed by Jane Hamsher's early win here, since I figured that if I continued to blog about financial stuff for one more month in this environment I would be sure to get the coveted Silver Blogging Blockhead to hold for one year, and achieve eternal fame by having my name engraved for posterity on the base of the trophy. The win has slipped through my fingers, but I will not be defeated! Onwards to 2009!)
Googling Eliot Spitzer now brings up a bunch of articles about allegations that he is "involved in a prostitution ring". All I can tell from the articles is that he might have patronized prostitutes, which is not that big a deal. Still, it makes an odd juxtaposition with other headlines like:
- Spitzer involved in securing Ambac aid
- State Assembly To Reject Spitzer's "Crack Tax"
- Groups upset over Spitzer plan to cut juvenile detention aid
OMG. It was structuring! (His last fling cost $4,300 for the "date"; that would add up quickly), his bank filed a SAR, and they've been investigating him thinking he was hiding bribes or something! Or that's the story. But his bank filed a SAR with FinCEN, so he probably will face charges. How much money did this investigation cost?
He must have been withdrawing cash and depositing cash to some account. The charge of structuring comes about when someone is deliberately moving chunks of money under the trigger points for automatic reporting. The assumption is that when you try to evade reporting you are hiding something. So his bank correctly filed a SAR; not to have done so would have been an offense on their part.
Don't ever think your bank records are private, because they aren't. Not in any way. If any law enforcement official wants to find info on you they can file ONE request and get every bank to look up and report your dealings with them over years. They get the info, and then they get the subpoenas.
SARs are supposed to be secret and even their existence is never supposed to be revealed. Nasty trick of the officials blabbing about it.
I guess when his name turned up it would make them look into it. A governor moving a lot of cash around is a genuine red flag.
Maybe he can beat the structuring charge if he is charged, though. The fees, one at a time, were what he was moving, so he has a good argument that he wasn't structuring. On the other hand, he does appear to have been laundering money to conceal illegal activity. It's six of one and half a dozen of another. Still, he could argue that he wasn't doing it to conceal from law enforcement, but from his wife. That's a decent argument.
I hope he resigns and they let him walk. This whole thing is a complete embarrassment for everyone concerned. Except the bank.
Howard has a point:
I guess this is what success looks like to a certain class of people, but for the life of me I cannot understand why we waste so much money and time chasing whores and madams.Hey, once you've got your own jet, I guess conspicuous consumption has to take different forms.
Best explanation, I've heard. Though for once, I'd like to here someone tell the press to blow off about these things. Pretty much no one else in the world worries about leaders getting something on the side.
the man is toast
$5500 economic stimulus package.
Howard, obviously the prostitution ring would be money laundering their proceeds. But according to the ABC report, his bank filed the SAR. And it does seem like he was targeted, so that part of the story makes sense.
A lot of money laundering is done through much more innocuous businesses. You wouldn't pick a prostitution ring to filter in large chunks of cash. You'd want to run under the radar. I bet payments this high looked like he was paying off someone.
It just goes to show that no one should be paying this much for a prostitute. All things in moderation!
"Men don't use their brains when it comes to something like this," he said. "They think with a different part of their body and that part of the body, the level of brains, there are no relationship to the level of brains in the skull, unfortunately. And when people think with that organ of the body, they make these kind of really, really terrible mistakes."
I'm amazed at the implications. We should have some NOW eruptions pretty quickly. Of course this is true, and therefore a man's best defense is not to get near a whole lot of female skin, because once he gets an eyeful he may not even remember his own name for a while.
But of course Spitzer went looking for it.
Still, what amazes me the most about this is when prissy liberal lawyers who did not stand up for Larry Summers when he told the truth now come out with the old "men can't help it" meme.
This should be an awesome entry in the battle of the sexes.
After all, it is reasonably possible for most men to find a woman, but it is not for most men to have a jet.
Spitzer's real liability here are his violation of various money laundering statutes committed to hide a crime. One may argue that prostitution shouldn't be a crime, but it is. He was attempting to hide his payments to prostitutes. The DC incident makes it a felony. Like I say, I hope he is allowed to resign and walk, but this same series of transactions might be used to pursue another individual, which makes it hard to argue that he should have immunity here.
After a certain incident on 9/11/2001, the focus on monitoring and reporting suspicious activity at banks was intensified. Spitzer certainly campaigned as an individual who would bring the high and mighty to justice. That makes it very hard for him now to claim unfair persecution. What's amazing is that he exposed himself to this. He should have known better.
The amounts involved were likely part conspicuous consumption and part payment for discretion. Though the first involves bragging to someone that negates the second.
I'd like him to stay in office if only to push the US away from such a preoccupation with governing folk's sexual preferences. After all the President of France, a conservative, divorced his wife, chased younger women, took unmarried bed mates on official trips and married a model.
Then maybe less electrons and ink would be spilled on such things. And more in how the heck are we going to get out of the mess we are in.
Vader, I think the issue from the public viewpoint here is that Spitzer was exposing himself to blackmail. Also, the potential money laundering charges could be serious.
I don't know that the public really does care about people's sex lives all that much. The press goes bonkers over them, but it seems to me that the public does not. Most politicians survive prostitution/infidelity disclosures all the time. Take Barney Frank. Take any number of them.
It's only if there is some complicating factor that electoral consequences result. In this case, there are two. The first is the potential of money laundering charges. The second is that the public is going to be concerned about a man doing things privately he prosecutes publicly. I forget the man's name, but there was a Rep. critter from FL who had been active on some committee to prevent internet exploitation of children, and he got tossed from his seat when it turned out that he was trying to get real up close and familiar with pages. I think the public does have a workable standard and that it is a reasonable one. The last thing you need are politicians projecting their guilt complexes on the general public. It does not make for good legislation.
Links to this post: