Spitzer's rough justice does as much harm as good

Eliot Spitzer, governor of New York and former scourge of Wall Street, is fond of quoting the aphorism of Louis Brandeis, a former Supreme Court judge and social campaigner: "Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants."

Spitzer arrived in Albany, the state capital, this year promising to bring the same reforming zeal to his new post as he did to the job of New York attorney general. He had scared the life out of Wall Street banks by holding press conferences at which he quoted damning e-mails, and pressured enterprises like Marsh & McLennan and the New York Stock Exchange to ditch their chief executives.

But sunlight is now shining on the methods used by Spitzer's team and it is not a pretty sight. An inquiry by Andrew Cuomo, his successor as attorney general, found that two Spitzer aides had the state police collect information about an Albany politician, planted it in a newspaper and then lied about it.

One, his public relations director, has been suspended, the other reassigned.

Spitzer has apologised, but has insisted that he did not know what they were doing. In an article in the New York Timeslast week, he admitted that "we made mistakes", but insisted that "on my first day in office, I brought my staff together and told them what our guiding principles must be: 'First, we're going to fight for what we believe in. And, second, we're going to maintain the highest ethical standards while doing it.'"

Pull the other one, governor. Like a general commanding troops, he may not have planned this skirmish, but he devised the strategy and set the take no prisoners fighting style. Given all that we know about how he took down business leaders who stood in his way using press leaks, he clearly has some questions to answer.

The fact that his team's unsavoury methods are being exposed is welcome because of the collateral damage he did to Wall Street's workings as a financial centre. Until recently, it seemed as though he might eventually be able to parlay his period as a crusading attorney general into a run at the presidency. That would have been an undeserved reward because, although he did Wall Street some good, his brand of rough justice equally did much harm.

The Spitzer problem was not that he aimed at the wrong targets, but that he fought dirty. Rather than proving his case in court, he bludgeoned his enemies (as he appeared to regard them) into settling by holding open the possibility that he would issue criminal indictments against companies, a step that destroyed investor confidence in Arthur Andersen and Drexel Burnham Lambert.

That has been the pattern in Albany since Spitzer arrived.

He found what is tactfully called a dysfunctional culture there: a place where special interests rule and bills get bogged down by financial and political horse trading. On top of the morass sits Joe Bruno, the Republican state Senate leader, a veteran in-fighter whose business dealings are under federal investigation.

So when Spitzer's aides got the state police to collect information on Bruno's use of New York state aircraft to fly to private fundraising events, they were not ambushing a political innocent.

It transpired that Bruno had been meticulous: each trip included a political appointment that justified the outlay. Instead of Bruno being disgraced, Spitzer's aides were the ones who ended up with their reputations tattered.

The lesson that many have drawn from this is that Spitzer is a better lawyer than politician. As attorney general, he could get away with issuing threats such as his overheard boast to a lawmaker in Albany that "I'm a [expletive deleted] steamroller and I'll roll over you and anybody else". As governor, they say, his power is not absolute and he must learn to work with others.

But his weakness is the same: a spicy cocktail of ambition, aggression, self-righteousness and willingness to push the law as far as it will go. He defends his conduct by saying it is like playing hard on the sports field, but shaking hands with an opponent when the final whistle blows. As attorney general, however, he hustled others off the field by wielding newspaper headlines and the 1921 Martin Act, a vaguely-written New York securities law.

Spitzer has shown signs of recognising the problem he helped to create. He has set up a commission to examine how his state can streamline regulation and ensure that Wall Street retains its strength as a global financial centre. More predictability and consolidation of regulation would help institutions, both domestic and foreign, that are caught among competing supervisors.

But justice also depends on the fairness and sense of balance of those doing the job.

Spitzer says he has learnt his lesson and recognises that his efforts "will succeed only if our means for changing the status quo are as honourable as our ends". It is a shame that it took until now for him to take this principle seriously.

- (Financial Times service)

Lucy Kellaway is on leave.