Eliot Spitzer's Class of 1977  Page

Eliot Spitzer is the Attorney General of The State of New York and is running for Governor.  He has spent the last several years moving aggressively against Wall Street, the insurance industry, Mutual Fund fees and other financial titans. Read his quotes and see if they portend the role he has played recently.  Scroll down for more details on his record.

Eliot Spitzer Files Suit Against AIG, Accuses Insurance Co. of Using Fraud to Boost Stock Price Attorney General Eliot Spitzer filed the anticipated civil lawsuit against American International Group Inc. and its former chief. The suit accuses AIG, ex-Chief Executive Hank Greenberg  of devising an accounting scheme that made AIG's financial picture appear brighter than it was, misleading both investors and regulators.

STATEMENT BY ATTORNEY GENERAL ELIOT SPITZER REGARDING THE "GLOBAL RESOLUTION" OF WALL STREET INVESTIGATIONS When my office began investigating conflicts of interest at Wall Street investment firms nearly two years ago, there was a prevailing sense that if problems existed they were the result of actions by a few rogue individuals. However, it soon became clear that firms routinely disseminated tainted investment advice that was designed to help investment banking clients but which harmed individual investors. It was also clear that systemic reform was imperative. The settlement finalized today implements far-reaching reforms that will radically change behavior on Wall Street. It is the fulfillment of a promise we made during our probe and subsequent settlement with Merrill Lynch in May of last year, and our agreement in principle with the other investment firms in December. That promise was to restore integrity to the marketplace, and just as important, to restore investor confidence in Wall Street. This global settlement is one of the largest effected by securities regulators to date. Because of the number and size of the brokerage firms included in the settlement and the wide-ranging structural reforms to firms' research operations, the benefits to investors will be widespread. The settlement will empower investors to use securities research in a practical and meaningful way. The reforms include: A clear separation of the research and investment banking divisions at firms  analysts will be insulated, and they will no longer be allowed to solicit business or accompany investment bankers on pitches and roadshows, or identify investment banking prospects. Investment banking will not be allowed input into analyst evaluation and compensation; A new mechanism for providing independent research to investors at no cost to help them make more informed decisions  independent research will guarantee that the retail customer has alternative views, and as important, let the analyst know tht he or she is being judged by comparative independent analysis; Transparency of rating information  certain analyses generated by an investment house will be made public within 90 days after the conclusion of each quarter. Each firm will publish the information on its website in a downloadable format. This will enable investors to compare and evaluate the performance of analysts from different firms and permit the market to generate objective rankings; A ban on IPO spinning  investment firms will no longer be allowed to allocate to officers or directors of public companies preferential access to valuable IPO shares of corporations from which they have sought or obtained investment banking business; Independent monitors for each firm  a monitor will report to regulators on the firm's compliance with the terms of the agreement; Investor education  programs will be established to help investors protect themselves against securities fraud; and The largest overall monetary payments in Wall Street history  $1.4 billion. The alternative to the settlement, which resulted from months of tough negotiations, would have been protracted litigation, which would have delayed industry-wide reform indefinitely and could have resulted in a badly fragmented regulatory approach. Instead, the three national regulators, state securities regulators and 10 leading investment firms were able to come together and agree on a landmark settlement. I am pleased that my office was a catalyst for the agreement. The agreement demonstrates the powerful reforms that can be achieved when government works together. One of the most important results of this process is a reinvigorated regulatory approach. While we all believe firmly in our free market system, we now know that government must act aggressively when the markets need correction. This settlement provides a needed correction for egregious conduct without harming capital formation or damaging companies that are an engine of our economy. Wall Street's senior management must realize, however, that it cannot return to business as usual now that the settlement is done. State and federal regulators are committed to ensuring full compliance with the letter and spirit of this agreement. In addition, there will be further actions against individuals linked to analyst conflicts of interest and other related wrongdoing. My office continues several investigations, as does the SEC and NASD. Of course there may be other problems on Wall Street and there even may be scandals in the future, but this agreement will go a long way toward restoring the fundamental integrity of the markets. People can and should invest in the markets again. They should do so cautiously, with the understanding that there is always risk involved, but also with the confidence that our markets and our economy are the strongest in the world and that regulators are watching out for them.

STATEMENT BY ATTORNEY GENERAL ELIOT SPITZER REGARDING MUTUAL FUND FEE REDUCTION For the past several weeks, my office and the Securities and Exchange Commission (SEC) have been negotiating a settlement with Alliance Capital Management. My office has now reached a settlement that requires Alliance to pay restitution and penalties of $250 million and that also requires Alliance to reduce the fees that it charges by $350 million over the next five years. The total monetary value of our settlement is $600 million. As part of my office's settlement, Alliance will also implement substantial governance changes that will safeguard against future harm to its shareholders. The SEC chose not to accept that portion of the Alliance settlement that includes the fee reduction and imposes an obligation on the Alliance fund directors to publicly establish the propriety of the management fee contracts they approve. That is the SEC's prerogative. However, the SEC's statement that "this is a case about illegal market timing, not fees" reveals a fundamental misunderstanding of the root cause of the harm to investors. As I stated in my testimony to the Senate Banking Committee four weeks ago: "... Improper trading and the exorbitant fees charged are both consequences of a governance structure that permitted managers to enrich themselves at the expense of investors ... As regulators and lawmakers, our duty to investors is to investigate every manifestation of that breach and to return to investors any and all fees that were improper or inappropriate ... The desire for increased fees led managers and directors to abandon their duty to investors and to condone improper and illegal activity. Common sense demands that we at least inquire whether the desire for increased fees also resulted in fee agreements and charges that were improper." Alliance breached its duty to investors in two distinct ways: First, it collected management fees from certain fund shareholders while it was simultaneously undercutting them by permitting illegal market timing in their funds. Our settlement addresses that harm by requiring Alliance to disgorge the management fees it received from those funds for the periods during which market timing was permitted. Second, Alliance breached its duty to investors by charging mutual fund investors significantly more than institutional investors for similar services. Our settlement addresses that harm by requiring Alliance to reduce fees by $350 million over the next five years. The SEC settlement with Alliance sells investors short because it does not provide any compensation to investors for that harm. A $250 million settlement -- which is all the SEC negotiated for -- is simply inadequate to address all of the harms uncovered in our investigation. Our settlement requires Alliance to improve its fee disclosure to investors and to elect truly independent directors. But given the record of this case, the SEC is wrong to believe that such measures alone are sufficient to compensate investors for past fee overcharges. Funds that permitted their investors to be overcharged by affiliated management companies must be held financially accountable for that conduct. Requiring them to pay back those overcharges is not "rate-setting" but merely returning to investors money that they never should have been charged in the first place.

Galvin, Spitzer Announce Joint Inquiry Into Sale of Mutual Funds by Morgan Stanley  Allege Wall Street giant mislead regulators over sales of "house" funds Warn similar probes could be prohibited if controversial House bill becomes law  Boston (July 14, 2003) - Secretary of the Commonwealth William Francis Galvin and New York Attorney General Eliot Spitzer today announced a joint inquiry into whether Morgan Stanley improperly pressured brokers and branch managers to sell proprietary mutual funds to investors who were not made aware that their brokers received additional compensation for pitching in-house funds. Further, Morgan Stanley is alleged to have misled regulators investigating the practice. Galvin and Spitzer intend to find out the extent of the practice at Morgan Stanley and to determine if the practice exists at other Wall Street firms. They also warned that state regulators could be barred from settling this or similar investigations under legislation now before a key committee in the U.S. House of Representatives. The inquiry stems from a complaint Massachusetts regulators filed today against Morgan Stanley that alleges the brokerage firm submitted a false filing to regulators in which the firm denied that brokers and branch managers receive special compensation for selling certain funds and that investors are kept in the dark about this practice. "This is a legitimate and important inquiry, of vital importance to millions of investors who buy mutual funds from their brokers, but unfortunately it's the sort of investigation that could be prohibited if a bill now before the House Financial Services Committee becomes law," Galvin said. Galvin, Spitzer and others at an early afternoon news conference pointed to high-profile actions by state securities regulators in recent years that they said would be impossible if the legislation, H.R. 2179, became law. They listed actions against penny stock and Amicrocap" stock fraud, day trading firms, misleading online brokerage advertising and, most recently, the investigation that lead to the $1.4 billion settlement with 10 major Wall Street firms over analyst conflicts of interest. New York Attorney General Spitzer called the bill a "travesty and a cynical slap in the face for Main Street investors. Think about it: After Enron, WorldCom and the analyst conflict of interest cases the securities industry is saying, 'Trust us. We don't need this regulation.' The arrogance of it simply takes your breath away," Spitzer said. "The most important lesson of the past year is the essential role played by state enforcement entities in protecting investors against investment fraud. It makes no sense to disarm the local cop on the securities beat at a time when we need to strengthen, not weaken, investor protection." The Massachusetts Securities Division began an investigation into Morgan Stanley's mutual fund sales practices in March after receiving an anonymous tip from a Morgan Stanley broker in Boston who said there was pressure from management to sell certain proprietary mutual funds to investors. "While few would be surprised to learn that a used car salesman would put you in a lemon for an extra two hundred buck commission, how many people know their broker might be doing the same thing?" Galvin asked. "You would think that investors should have a right to know this goes on. We sure do. We intend to find out how widespread this practice is," he said. Securities regulators in Massachusetts and New York initially plan to send letters to major Wall Street firms asking them, among other things, if they steer investors to certain funds, to detail commissions and other compensation paid to brokers, branch managers and others, and whether such costs are disclosed to investors. Last Thursday H.R.2179 passed out of the House Capital Markets Subcommittee, chaired by one of the bill's sponsors, Rep. Richard H. Baker (R-Louisiana), on a largely party line vote. Dubbed by its sponsors the "Securities Fraud Deterrence and Investor Restitution Act," the bill would effectively strip state securities regulators of their authority to bring actions against emerging cases of fraud and sales abuse, said Galvin, Spitzer and others at the press conference. The bill language reads, in part: "No law, rule, regulation, judgment, agreement or order, or other action of any State or political subdivision thereof shall establish capital, custody, margin financial responsibility, making and keeping records, bonding or financial or operational reporting, disclosure, or conflict of interest requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to, the requirements in those areas established by the Commission or by a national securities exchange or other self regulatory organization." Rep. Barney Frank (D-Massachusetts), the ranking member of the House Financial Services Committee, told the news conference: "This bill is a blatant attempt by the securities industry to prevent regulators from doing their jobs. It would undermine our complementary system of state, industry and federal regulation that helps make our securities markets the envy of the world. Calling this bill 'Securities Fraud Deterrence' is the equivalent of holding out a Three Stooges movie as high drama. If the securities industry prevails on this, it will only make investors more cynical and more wary and that will not be good for Wall Street or our markets." In its written response to Massachusetts regulators, filed on May 8, Morgan Stanley strongly denied that brokers and branch managers received additional compensation for steering clients to house mutual funds. Yet in late May the Wall Street Journal published an article describing in detail the firm's compensation practices for proprietary mutual funds. Late last week, as part of their investigation, Massachusetts regulators deposed Morgan Stanley's in-house compensation expert. Regulators said that under oath the Morgan Stanley executive admitted that brokers and branch managers have a financial incentive to pitch house mutual funds, something they don't disclose to investors. "What he told us flatly contradicted what the firm said in its earlier filing with my office," said Galvin. In its case against Morgan Stanley, Massachusetts has retained prominent securities law expert Joseph F. Long, a professor emeritus at the University of Oklahoma Law School. Long will serve as a consultant in the investigation and as an expert witness at hearing or trial.

Eliot Spitzer in his own words "When my office began investigating conflicts of interest at Wall Street investment firms nearly two years ago, there was a prevailing sense that if problems existed they were the result of actions by a few rogue individuals. However, it soon became clear that firms routinely disseminated tainted investment advice that was designed to help investment banking clients but which harmed individual investors. It was also clear that systemic reform was imperative. " "For the past several weeks, my office and the Securities and Exchange Commission (SEC) have been negotiating a settlement with Alliance Capital Management. My office has now reached a settlement that requires Alliance to pay restitution and penalties of $250 million and that also requires Alliance to reduce the fees that it charges by $350 million over the next five years. The total monetary value of our settlement is $600 million. As part of my office's settlement, Alliance will also implement substantial governance changes that will safeguard against future harm to its shareholders. "