Spitzer Fights to Avoid Charges After Resignation
Spitzer Fights to Avoid Charges After Resignation (Update6)
By David Glovin and Patricia Hurtado
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March 13 (Bloomberg) -- New York Governor Eliot Spitzer, who resigned yesterday amid allegations that he patronized prostitutes, is now in a legal fight to avoid criminal charges.
Spitzer, 48, stepped down after the New York Times reported he was ``Client 9'' of an international call-girl ring whose operators were charged with crimes last week. Spitzer's lawyers need to persuade the U.S. government not to file related charges against him because he allegedly summoned prostitutes to Washington and paid them secretly, former prosecutors said.
Prosecutors are more likely to consider going after Spitzer, a Democrat, for money laundering or misusing his office than for prostitution because customers of call girls are rarely pursued by federal authorities, the lawyers and ex-prosecutors said.
``Given the rarity of federal prosecutions of this kind of conduct, the motives of the prosecutors might be called into question,'' said Steven Peikin, a former U.S. prosecutor in Manhattan. ``The facts that are not well known are those surrounding the financial transactions. That would be an area of greater concern.''
U.S. Attorney Michael Garcia in New York declined to say after the resignation if he's investigating Spitzer. He said only that ``no agreement'' has been reached with the governor. A call to Garcia's office today for comment on any talks with Spitzer's lawyers was not immediately returned.
The assistant prosecutor handling the case against the prostitution ring is chief of Garcia's public corruption unit, formerly headed by Spitzer's lead lawyer Michele Hirshman.
Defense Team
Spitzer's defense team also includes Theodore Wells, who unsuccessfully defended former vice presidential aide Lewis ``Scooter'' Libby last year for lying about the leak of the identity of a U.S. intelligence agent, and Mark Pomerantz, who won a reversal of an obstruction conviction in 2006 of former Credit Suisse banker Frank Quattrone. All three are lawyers with the New York firm of Paul, Weiss, Rifkind, Wharton & Garrison.
The resignation of Spitzer, who was elected governor in November 2006, followed a criminal investigation of payments made to what prosecutors said was an international prostitution and money-laundering ring called the ``Emperors Club VIP.''
On March 6, prosecutors said they charged four people for operating the business. Client 9, not identified in the criminal complaint, paid $4,300 for sex with a prostitute named ``Kristen'' at a Washington hotel in February. The club accepted payments through front companies, according to the complaint.
Client 9 summoned Kristen from New York to Washington and made secret payments to her, according to an FBI affidavit supporting the complaint.
`Private Matter'
The New York Times identified Client 9 as Spitzer and said investigators suspected he may have wanted to conceal the source and recipients of his money. Spitzer didn't admit the conduct in resigning. He apologized for what he called ``a private matter.''
Kristen was identified by the New York Times as Ashley Dupre, 22, of Manhattan. In 2006, she legally changed her name from Ashley Youmans to Ashley Rae Maika DiPietro, the paper said. On March 10, Ashley Youmans appeared in federal court in New York, where her lawyer, Don Buchwald, said she was subpoenaed as a witness in a grand jury investigation, according to a recording of the proceeding.
Buchwald confirmed she had received a subpoena, declining to say if she is Kristen or if she testified to the grand jury.
Federal investigators got help from Andrea Schwartz, a Brazilian woman who pleaded guilty to New York state drug and prostitution charges after she was accused of running a brothel that catered to corporate clients, the New York Post reported.
Second Prostitute
Schwartz once worked for Emperors Club VIP and provided U.S. authorities with the paper trail that linked Spitzer to the prostitution ring, the Post said. Investigators gained access to her paychecks from QAT Consulting, a company that owned Emperors, the Post said. Client 9 made payments to QAT, the complaint said.
Investigators were already probing thousands of dollars in checks that Spitzer wrote to QAT, the paper reported, citing sources it did not identify. Schwartz was deported to Brazil last night, the Post said.
Authorities also will examine Spitzer's bank, credit-card and other records dating to 1999, an inquiry that could take months, the Post reported, citing a law-enforcement source.
Spitzer may be open to charges that he violated the Mann Act, which makes it a crime to transport someone across state lines for prostitution, lawyers said.
He could also be charged with wire fraud, if he made false statements about the source or destination of his funds; structuring, if he made payments to avoid U.S. requirements on reporting cash transactions of more than $10,000; or money laundering, if he knew the ring was using front companies to move money illegally, the lawyers said.
Selective Prosecution
Spitzer's attorneys, who declined to discuss the case, probably will press numerous arguments to persuade prosecutors not to bring charges, the defense lawyers said.
``I'd approach it by saying to the U.S. Attorney's Office that if you prosecute me, you've got to prosecute'' Clients 1-8, said William Mateja, who formerly helped oversee the Justice Department's Corporate Crime Task Force. ``They don't want to be accused of selective prosecution,'' a potential legal defense.
The other eight clients mentioned in the criminal complaint haven't been identified by prosecutors.
The Mann Act
Bradley Simon, a former federal prosecutor in Brooklyn, said the facts in the complaint could support a charge of violating the Mann Act because Client 9 is ``inducing and persuading a woman to cross state lines for sex.'' That law is normally used in conjunction with other violations and usually when it involves a minor, he said.
The law ``is typically reserved for people who operate prostitution rings,'' said Peikin, who's now at the Sullivan & Cromwell firm in New York. ``I would be arguing that the spirit here is not intended to reach this kind of conduct.''
Prosecutors may have a tough time supporting a structuring charge, said Joshua Hochberg, who once headed the Justice Department's fraud section. ``I'm not clear whether the financial transactions were done in any way to evade a reporting requirement,'' said Hochberg, a lawyer in Washington with McKenna, Long & Aldridge.
Bruce Zagaris, a defense attorney at Berliner, Corcoran & Rowe in Washington, said prosecutors might have a shot at a structuring case because of the way Client 9 arranged the payments in cash in amounts less than the $10,000 threshold required for currency reports.
Money Laundering
Money laundering isn't a common charge in prostitution cases, said Mark Arnold, a former bank secrecy auditor at Wells Fargo & Co. ``If you go out and do money laundering, usually it's for tax evasion,'' he said.
A fraud charge, based on the notion that Spitzer lied about the source or recipient of his payments, also may be flawed. ``Who's he trying to defraud?'' Mateja said. ``It sounds like it's money that was his money.''
Based on the likely charges, ``it seems unlikely'' Spitzer will spend time in prison, Douglas Muzzio, a Baruch College political science professor, said in an interview today with Bloomberg Radio.
