Satan or Savior?
Wall Street hates him. Democrats love him. Eliot Spitzer's next crusade.

(FORTUNE Magazine) – "Hi, Governor!" someone calls out to the New York State attorney general after his state-issued Crown Victoria rolls to a stop.

"Not yet!" Eliot Spitzer says with a grin.

He's just arrived at the Pearl River Hilton in New York's Rockland County, where he is to speak at an evening fundraiser for a local Democrat. It has already been a long day. Spitzer was on the street at 6:30 this morning, pressing the flesh at a subway stop in Queens on behalf of Fernando Ferrer, the Democrat who later got clobbered by Michael Bloomberg in New York City's mayoral election. A waiting political aide asks Spitzer if he'd like a "ginger ale"--code among Spitzer's staff for Scotch and water. Spitzer passes, and soon sets about working the ballroom--slapping backs, squeezing shoulders, giving hugs, beaming all the while. He has come a long way from the days when the New York Times wrote that "instead of kissing a baby's cheek, he was more inclined to hand the infant a campaign flier."

When Spitzer gives a speech, his rhetoric tends to soar far above the local concerns of his constituents. Tonight is no exception. He blasts the federal response to Hurricane Katrina, then links it to what he calls Republican disdain for government itself. "What we are seeing out of Washington is the destruction of the social fabric. When you see a government so inept, so destructive, you have to stand back and ask, 'Why?' We have been living through an era where the leadership of the other party has denigrated the very notion of government."

In his office a few days later, Spitzer's attack is even sharper: "The Republicans have no shame in putting these political hacks into positions that matter. It's almost as though the CEO of a company has been denigrating the product for 30 years. They've been banging at the notion that government doesn't matter and the positions in it are for losers." Federal agencies, he says, have "basically disappeared from the world of law enforcement--by design."

So Spitzer "stepped into that void," as he says--shaming federal regulators, transforming industries, and making CEOs quake. Doing so has made him a national political force (an irony that doesn't escape him). Now 46, he has arguably become the single most powerful public official outside Washington, and he has done it in the span of just seven years, while holding a second-tier office in a single state. In the process Spitzer has created a new model for attorneys general across the country and become one of the few true hopes of the Democratic Party.

His political handlers like to talk about the "Spitzer Grand Unified Field Theory," which posits that their man is unlike every other nationally known Democrat in one key respect: Voters think he is tough--a Giuliani-style leader in Democrat's clothes, an alpha male willing and able to rattle the biggest, toughest CEOs. Bank of America chief Ken Lewis visited Spitzer just as his institution was getting embroiled in the recent mutual fund scandals. "It was one of the most unpleasant meetings I've ever been through," Lewis said later. "It was a tongue-lashing, a total whipping."

Spitzer's public attacks on hype-peddling Wall Street analysts, shady mutual fund late-traders, and bid-rigging insurance brokers have led to a chorus of accusation that he is anti-business--an extrajudicial meddler who is damaging the free-market system. Not that you'll hear anyone on Wall Street attack him publicly--they're afraid to. But the Wall Street Journal editorial page, which calls him the "Lord High New York executioner," has published dozens of editorials about Spitzer in the past three years, most casting him as a grave threat to capitalism. In a much-quoted remark, Thomas Donohue, president of the U.S. Chamber of Commerce, complained that Spitzer acts as "judge, jury, and executioner," rarely taking cases to trial but instead forcing companies to settle because they can't stand the bad publicity and the havoc his lawsuits wreak on their stock price. Donohue called this the "most egregious and unacceptable form of intimidation that we have seen in this country in a long time."

Such criticism actually helps Spitzer more than it hurts him: it inoculates him against the fatal Democratic flaw of being "too soft." Unlike most Democrats, he is more popular with men than women. His approval ratings (above 60%) are almost as high among Republicans as Democrats, and he polls almost as well in conservative upstate as in liberal New York City. Spitzer has never been an ideologue. He supports the death penalty and adult sentences for juvenile offenders, but he also favors gun control, abortion rights, and gay marriage. "He's a Manhattan Upper East Side Jewish guy who commands fabulous numbers upstate," says Jef Pollock, Spitzer's pollster. "That in itself makes him incredibly unusual. Voters believe Eliot has been on their side."

For his next act, Spitzer wants to do as New York governor what he did as New York attorney general: attack big problems that seem beyond the reach of the office. At the very least, his ambition is to transform the moribund government of New York, the world's 11th-largest economy. But he's thinking beyond that. He wants to make the state a showcase for the virtues of activist government--a stark alternative to the prevailing ideology in Washington. This would place him at the very fault line of American politics, a point man in his party's crusade to reclaim power.

Of course, he still has to win the election, which is a year away. And he is gearing up now to do so, hoping to succeed retiring three-term Republican George Pataki. Spitzer dispensed with a formal announcement of his candidacy--instead phoning up reporters late last year and telling them what they already knew--and plans to roll out his campaign starting now, announcing endorsements, solidifying his political base, working to build an overwhelming mandate. "I'll feel good tomorrow morning," he said the day Bloomberg beat Ferrer. "I'll go from the on-deck circle to the batter's box."

The early polls, which can be misleading, show Spitzer thrashing all prospective Republican opponents. He leads former Massachusetts governor William Weld--the choice of Republican leaders, but facing a bitter primary fight--by 44 percentage points, according to the most recent Quinnipiac University poll (see sidebar, page 102). And he is busy amassing a massive campaign war chest, with a goal of $20 million by year-end. The situation is so promising that Spitzer allows himself to wax enthusiastic about New York Democrats' prospects for 2006. "Hillary should win big next year," he says as his car heads back to New York City after the appearance at the Hilton. "As should our gubernatorial candidate--unless I screw it up."

Winning the election may be the easy part. The transition from prosecutor to governor will require Spitzer to make far tougher choices and employ far subtler skills than issuing subpoenas and filing lawsuits. The New York governor's job has buried gifted politicians before--think Mario Cuomo. But if Spitzer succeeds? A few years ago Bernard Spitzer, Eliot's father, admitted to musing about spending the night in the Lincoln Bedroom. Asked if Eliot would like to be President, he replied: "It's his very nature."


If ever a man had that lean and hungry look, it is Spitzer. At six feet and 180 pounds, he is taut, with angular features and that famously jutting jaw. (Not to mention notoriously sharp elbows.) His clothes are straight out of the prosecutor's handbook: starched white shirt, dark suit, conservative tie, black wingtips. He rises at 5 A.M. most days to run three miles around the Central Park Reservoir and lifts weights several days a week. At his family's modest weekend home in upstate New York, he sometimes grills dinner for his wife and three daughters: steak, of course. He even has a thing for NASCAR. "There's an adrenaline to it," he says. "On one level, it's as close to the Roman Colosseum as we get these days. You never know when mayhem will break out." (Also, his brother-in-law designs engines for Hendrick Motorsports.)

Looking back, many of those around Spitzer view his entire life as one unbroken preparation for elective office. He attended--and excelled at--elite private schools: prep school at New York's Horace Mann, college at Princeton, Harvard Law. He was absorbed in public issues from an early age: He subscribed to Foreign Affairs at 14 and served as treasurer of a Bronx political club as a college freshman. He was incredibly disciplined: marveling at his ability to sit motionless in a study carrel for hours, friends at Princeton nicknamed him "Ironbutt."

Spitzer's extraordinary seriousness of purpose comes from his parents, who both grew up in poor immigrant families on Manhattan's Lower East Side. His mother, Anne, has two master's degrees and still teaches at Marymount College; his father, Bernard, is a developer of upscale apartment buildings whose net worth is an estimated $500 million. Contemptuous of what Bernard calls "idle chitchat," they transformed their Bronx home into a running class in critical thinking. During family dinners, each of the three Spitzer children--Eliot's older sister is now a lawyer, his older brother a neurosurgeon--would take a turn leading the discussion on a single topic. Subjects ranged from the war in Vietnam to how a steam engine works to the economic implications of double-digit inflation. Carl Mayer, one of Eliot's closest Princeton friends and now an attorney, likens it to eating with The McLaughlin Group. "It was not the typical American household. You'd sit down, and the father would lob some grenade, and Eliot would start screaming." In the Spitzer household, even Monopoly games were blood sport. "I play to kill," says Bernard drily.

After Harvard Law, Eliot had little to do with politics: He clerked for a judge, worked in private practice, and spent six years as a criminal prosecutor in the Manhattan district attorney's office. So when Spitzer first began talking about jumping into the 1994 race for state attorney general--at the age of 34, with no political organization or base of support--his wife, Silda Wall, was among the skeptics. "My immediate reaction was, 'I'll think about it, but are you nuts?'" For one thing, she was then pregnant with their third child. She was also uncertain that her husband would make a good politician. "I didn't know if he had the temperament for it--the retail politics side of it." Spitzer was never a natural glad-hander. He lacked the conspicuous empathy and personal warmth of, say, a Bill Clinton.

But Silda gave her blessing ("If I said 'No, don't run,' I don't know if that would have made a difference"), and Spitzer announced his candidacy for attorney general five days before their daughter was born. He placed fourth in a four-person Democratic primary field, despite tapping his family's wealth to spend several times as much as his opponents--$4.7 million, or about $33 a vote.

Almost from the moment he lost in 1994, Spitzer started running again--for the same job, but this time doing everything differently. In his first race, he'd impressed everyone with his smarts but was stiff and awkward on the trail and ran his campaign almost entirely through the media. "You'd take off from La Guardia and look down and think, No amount of one-on-one conversation matters; it's just too vast," he says. But he decided that was dead wrong. So in his second run, realizing that personal contact "really does add up," he traveled the far reaches of New York in his Dodge minivan, attending countless county fairs and rubber-chicken dinners and learning how to glad-hand. In the 1994 campaign he'd voiced contempt for the political establishment. By 1998 he had assiduously courted party leaders with his time and his checkbook, making fat donations to local candidates and organizations--$50,000 in Buffalo alone. "Spitzer doesn't make the same mistake twice," says veteran New York media consultant Hank Sheinkopf, who did Spitzer's ads for his first two campaigns. "The guy you met in 1994 was kind of callow." But in the 1998 race, says Sheinkopf, "Spitzer became a pol." That November, Spitzer beat the Republican incumbent, Dennis Vacco, in a squeaker.


From his first day in office, the newly minted attorney general worked to extend his reach, finding creative ways to tackle problems that would typically fall under the purview of federal agencies. One prominent early example: Smokestack emissions from other states were producing acid rain and smog in New York; Spitzer sued Midwestern power plants under an obscure provision of the Clean Air Act. He also waged a campaign to pressure firearms companies to make safer guns (he lost that one), went after Sony for handing out payola to get radio play for its artists, and sued GlaxoSmithKline for allegedly concealing data concerning the effects of the antidepressant Paxil on teenagers (see "Trouble In Prozac Nation," page 154). He sued to force ex-New York Stock Exchange chairman Dick Grasso to give back much of his $139.5 million pay package, casting it as an attack on excessive executive pay. Always, he made sure that the public was aware of his activities: His office churns out 200 press releases a year.

Despite his image as an enemy of the wicked, Spitzer is really more policymaker than prosecutor. He's more interested in changing how things work--"structural change," as he puts it--than throwing bad guys behind bars. It's reform through prosecution. "He doesn't care whether he's found a mountain or a molehill," says Lloyd Constantine, a New York lawyer and longtime Spitzer mentor. "If he's uncovered five grams of venality and that gives him the hook to change things, fine. He uses that as an opportunity to clean house."

That structural-change approach is what drove the three business cases that made him famous. In each, Spitzer followed a three-step strategy. Citing New York's long-ignored Martin Act, a law that gives the attorney general broad powers to police securities fraud, he would begin investigating a questionable--but accepted--industry practice. He would then uncover an example so grotesque that it rendered the accepted practice indefensible. Finally he would use the grotesque example as leverage to force the entire industry to clean up its act. In each case, the headline-grabbing evidence came from subpoenaed e-mail.

Conflicts of interest on Wall Street came first. Spitzer exposed how analysts protected their firms' investment-banking relationships by hyping stocks. This was the open secret. Spitzer's investigation cranked up after a newspaper story appeared about a $400,000 Merrill Lynch settlement with a customer who blamed his losses on cheery research reports by Internet analyst Henry Blodget. The AG subpoenaed boxes of Merrill e-mail, which revealed that Blodget, while publicly touting stocks to investors, was privately calling them a "dog" and a "piece of shit."

Spitzer unveiled the Merrill investigation in April 2002, and did it in a way calculated to maximize public outrage: He ignored Merrill's pleadings and revealed the damning e-mails. Merrill quickly settled, agreeing to pay a $100 million fine and issuing a public apology. But Spitzer, establishing his template, also demanded sweeping changes in how the industry operated. By year-end, working with the SEC and other regulators, Spitzer had reached a $1.4 billion "global settlement" with the ten biggest Wall Street firms. They agreed to separate research from banking, buy outside research for five years, and stop "spinning" hot IPO shares to CEOs to get their underwriting business.

Mutual funds came next. The open secret here was "market timing"--special deals the funds had cut with big investors, usually hedge funds, allowing them to move millions in and out rapidly. Such frequent trading damages investor returns. The grotesque abuse was late trading--allowing timers to buy fund shares at the closing price after the 4 P.M. deadline, a practice Spitzer likened to "betting on a horserace after the horses have crossed the finish line." Tipped by a hedge fund employee, Spitzer uncovered timing or late-trading at many of the biggest names in the mutual fund business, including Janus, Strong, Alliance, Invesco, and Bank of America's Nations Funds. Once again, he released scores of smoking-gun e-mails.

Within weeks, Spitzer was filing cases and reaching settlements, usually in tandem with the SEC. The settlements (some are still being negotiated) barred timing and late-trading, required independent chairmen for fund boards, and provided fines and restitution payments. But Spitzer demanded more: lower annual fees for fund investors. More than any other remedy he has crafted, the fee reductions have prompted criticism that Spitzer had overreached; after all, his investigations had focused on trading abuses, not excessive fees. (The SEC refused to participate in this part of the settlements.) As UCLA securities law professor Stephen Bainbridge says, "It's as though you got busted for pot possession and the DA said you had to give up snowboarding."

"It was a stretch," Spitzer acknowledges, "but it was an appropriate use of our remedial authority." His justification is that small investors have been overcharged because fund directors violated their fiduciary duty, a betrayal that is also at the core of the trading abuses. Of course, his remedy was also sure to be popular with small investors. By Spitzer's calculation, the fund investigation, in addition to nine guilty pleas to criminal charges, has produced fines ($821 million), restitution ($1.2 billion), and fee reductions ($925 million) totaling almost $3 billion.

Finally, there's the still-roiling insurance scandal. Sleazy industry practice: in return for steering business to particular insurers, brokers were getting "bonuses" that amounted to kickbacks. Scandalous behavior: The brokers were rigging bids. In October 2004, Spitzer filed suit against Marsh & McLennan, the nation's biggest insurance broker, accusing it of bid rigging and taking kickbacks. And, of course, there were shocking e-mails. Marsh settled just four months later, agreeing to apologize for "shameful" conduct, pay customers $850 million in restitution, and ban the "bonuses" and bid rigging; Aon and Willis, the two next biggest brokers, followed suit; 17 executives have already pleaded guilty to criminal charges.

The insurance investigation underlined the speed and violence of Spitzer's power. He believed that Marsh, under CEO Jeffrey Greenberg, had misled the AG's office during the investigation. And so, immediately after suing Marsh--a move which knocked $6 billion off the company's market cap in one day--Spitzer pointedly announced at a press conference that "the leadership of [Marsh] is not a leadership I will talk to and not a leadership I will negotiate with." Greenberg was gone within days. His replacement: a Marsh executive with ties to the attorney general.

Spitzer also toppled Jeffrey's 80-year-old father, the legendary AIG chief Maurice "Hank" Greenberg, one of America's most powerful businessmen. Greenberg had come under investigation for an allegedly fraudulent insurance transaction that he had arranged, and had drawn Spitzer's ire for suggesting that regulators were focusing on mere "foot faults." He resigned while facing a tight deadline Spitzer had set for his sworn testimony; ultimately Greenberg took the Fifth, after Spitzer sued him and AIG.


One of the things that drives Eliot Spitzer's enemies absolutely nuts is how gleefully he goes about his business. He is a happy warrior, speaking often about how much "fun" he is having. "The way he practices law is a kind of physical sport," says Lloyd Constantine. "He enjoys the power, and he likes to win. This is not Solomon exercising his judgment with a heavy heart. This is a young, strong, jubilant male in triumph."

Anti-Spitzerites believe that every move he's made is in service of his unquenchable political ambition. Indeed, Spitzer--or at least his friends--have had big plans for years, and they're not just thinking about Albany. In April 2002, Constantine hosted a reelection campaign fundraiser for Spitzer at his Manhattan apartment. With the beaming attorney general looking on, Constantine tapped a glass to quiet his 70 guests, chattering over sushi prepared by Rupert Murdoch's personal chef. "I know what you're thinking," Constantine began. "'What are we doing here? Why does Eliot need our money?' What Eliot will tell you is that he's in the fight of his life. That's total bullshit!" Chuckles rippled through the room. (Spitzer was facing only token opposition and would go on to win by 1.5 million votes.) Constantine continued: "I will tell you the truth. We're in it for ... the long haul." He let the words hang in the air. "And if you don't know what the long haul is, we will refund your money, and we will validate your parking." Constantine today says flatly, "I think Eliot is going to be President someday." (Spitzer insists he never entertains such grandiose thoughts.)

But it's hard to argue that he pursued his big cases purely to boost his career. "These are cases where people said I was going to have my head handed to me," says Spitzer. No one would have suggested that going after powerful Wall Street firms, New York's biggest employers, would be a political plus. "There was a real risk for him. And that took real courage," says Harvey Goldschmid, a Columbia Law School professor and former SEC commissioner.

Is Spitzer anti-business? On the contrary, few public officials are more personally intimate with the business world. He grew up rich, his social circle is crawling with Wall Street types, and he has invested in hedge funds in the past. One of his pet phrases is "capital formation." In an economic manifesto he wrote last year for The New Republic, Spitzer said, "We did not investigate Wall Street because we were troubled by large institutions making a lot of money; we took action to stop a blatant fraud that was ripping off small investors." It's also true that Spitzer has been a staunch critic of the decision--by a Republican U.S. Justice Department--to indict Arthur Andersen during the Enron scandal. Despite occasional saber-rattling, he has always stopped short of filing criminal charges against a corporation. "You have to think about it very carefully," he says, "because the collateral consequences are enormous, in terms of shareholders and employees."

Spitzer has often had a stormy relationship with federal regulators, particularly at the SEC, where many view him as a reckless headline grabber who races to file juicy cases that poach on their turf. But it's hard to deny his impact: There's no question he's exposed fraud and generally improved corporate behavior by giving pause to those who would cross the line. And he's done it all with a tiny staff and with remarkable speed, pulling off reforms in a few months that would have taken the SEC years. Ted Levine, a prominent New York defense attorney who has tangled with the AG, says that while the SEC may have gotten more bad publicity than it deserved, "when one looks back in history, we're going to say these were important matters, and credit will go to Eliot Spitzer's office for seizing the moment and taking decisive action."


As Spitzer is well aware, the question now is whether he can make the leap from prosecutor to chief executive; that's what will determine his future. "If I'm elected governor," he notes, "I start with a clean slate. And after three years as governor, no one will care about whether I was good, bad, or mediocre as attorney general."

Making that leap won't be easy. The job will force Spitzer to operate differently. He will trade the black-and-white world he now inhabits, where he acts unilaterally based on his own assessment of right and wrong, for a world of compromise and triage, where competing interests battle for limited resources and no one leaves the table completely happy. "Being the scourge or the scold is not the same as addressing the questions of employment, taxation, regulation, and spending," says putative rival William Weld, who's a former prosecutor himself.

Spitzer has set the bar high, pledging new ethics and campaign-finance rules; an economic-development program for New York's depressed upstate; an improved budget process; massive restructuring of the state's costly health-care system; and improved education funding. He will bring considerable skills to the job: intelligence, creativity, engagement (he has publicly pledged to work 18-hour days), and a knack for attracting top talent. He says he would recruit skilled executives from private industry--even Wall Street. "The number of people who would love to do service in government for a period of time is enormous, and the talent you can draw on is spectacular."

Whether all that is enough depends on his ability to evolve into the ultimate insider, even after riding into office on a crusading image. He's eager to rack up an overwhelming victory next November to give himself a political mandate, in part by making his case that the state faces dire times. "Crisis is a terrible thing to waste," he says. "You take a crisis and use it to galvanize public sentiment."

He'll need that galvanized sentiment. Although New York governors have plenty of formal power, the state government is among the nation's most dysfunctional. The legislative branch is ruled by powerful chieftains: senate majority leader Joe Bruno, a Republican, and Democratic house speaker Sheldon Silver. Each clings to his power and patronage, which includes the unilateral right to dole out office space, staff, and hefty stipends--known in Albany as "lulus"--to favored lawmakers. "You have a very stubborn and somewhat stagnant legislature that resolves things by splitting things down the middle," says Alan Ehrenhalt, executive editor of Governing magazine and an expert on state governments. "That's not a very fertile field for innovation. It's a state where the political elements have conspired to make life difficult for governors." Beyond the legislature, there is a byzantine network of more than 600 authorities, boards, and commissions--a powerful, hidden government that operates with little public scrutiny. "Could Eliot Spitzer change all that?" Ehrenhalt asks. "There's every reason to consider New York a quagmire, and there's every reason to think Eliot Spitzer is someone who knows how to work his way around problems. Which one of those will be the stronger force, we can't tell yet. It'll be very interesting to watch."


One morning in September, a carefully coordinated operation is underway: the arrest of eight former Marsh & McLennan executives on criminal charges for their alleged role in the bid-rigging scandal. Teams of investigators and lawyers are reporting in to the attorney general's top deputies. Though he does not stage showy "perp walks" for the cameras, Spitzer has called a press conference, scheduled to start once all the targets have been hauled in for arraignment. "How're we doing in court?" he asks.

Told that all is going as planned, Spitzer settles behind the big desk in his 25th-floor corner office in lower Manhattan, with its view of ground zero, where he watched a jet plow into the World Trade Center's south tower. The space is filled with political keepsakes--a picture of Teddy Roosevelt, a former New York governor with a tough-guy reputation, hangs conspicuously--as well as photos of friends and family. Spitzer's canny chief of staff, a low-key former county legislator named Richard Baum ("I lurk in corners," he says), sits across from the attorney general. Spitzer's press secretary, Darren Dopp, is on the speakerphone from Albany. They've gathered for a quick prep session for the press conference that is about to begin.

"Let's do a quick Q&A," Spitzer says.

Dopp explains that Ian McDonald, a Wall Street Journal reporter, appears suspicious that Spitzer is handling these cases differently, because he's brought indictments instead of reaching settlements. He's likely to ask if defendants have been emboldened by a recent Spitzer setback: In a rare criminal case that his office took to trial, former Banc of America Securities broker Theodore Sihpol, charged with aiding illegal late-trading in mutual funds, had won acquittal on most counts and a hung jury on the others. (Spitzer would eventually abandon plans to re-try Sihpol.) Dopp shifts into mock reporter mode and begins the rehearsal: "Why aren't you settling?"

Spitzer practices his answer: He always tries to settle a case, but will prosecute if necessary. Nothing at all has changed.

Dopp: "Are you calling these guys 'ringleaders'?"

Spitzer: "I was thinking of calling them 'mean nasty hoodlums.'"

They consider possible wild-card questions. "Do you think Bloomberg's been a good mayor?" Baum asks.

"I'm supporting Freddie Ferrer," Spitzer--who does think Bloomberg's been a good mayor--says with a barely perceptible smile.

"I've seen you do that before! You're doing a Cheshire Cat grin!" says Baum. "I think it's better to cut off the political questions." Everyone agrees.

Showtime at hand, Spitzer stands, then pauses after putting on his suit jacket: "I don't look like a slob?"

Inside the pressroom down the hall, all goes as planned. With ten reporters and a handful of cameras present, Spitzer, standing ramrod straight behind a podium with the attorney general's seal, offers his opening statement. As always, he casts the issue in moral terms, spelling out the damage the wrongdoers have done. And as always, he casts his actions as removing impediments to the proper functioning of the capitalist system. "Not only was this wrong, it was harmful to the economy," Spitzer declares. "It subverted the fundamental purpose of our economy, which is full, free, and fair competition.... There simply is no responsible argument for a system that rigs bids, stifles competition, and cheats customers." The implication hangs in the air: Just try painting me as an enemy of capitalism.

When Spitzer opens the floor for questions, the Journal's McDonald pipes up right on cue, asking why Spitzer hadn't settled with the criminal defendants. Was this a change in strategy?

Not at all, Spitzer says. "Identical process."

But McDonald wasn't done. "What would be your response to critics who say you've overstepped, been too aggressive?"

Spitzer loves this one. He takes the opportunity to spell out the legal and moral justification for how he does business--and to suggest how he will bash in the brains of anyone who publicly tries to make this argument against him.

"Let me be very clear about this point," he says. "There will always be apologists for the powerful and politically connected who commit a crime." Wall Street research. Mutual funds. Insurance. The behavior he has uncovered--and corrected--Spitzer declares, was "costing real investors billions of dollars. Folks who were saving 50 bucks a week, putting it into the market into savings.... Is that overreaching? No way!

"We don't believe in covering up for those who commit a crime. So if there is a disagreement there, I'm happy to engage."

And then, one last question: How has he been getting along with federal prosecutors, who were also investigating the insurance business?

Spitzer's pause is pregnant. "I'll pass on that," he finally says, before thanking everyone and walking out of the room.

Later, in his office, he is asked about his final answer. Was he caught off guard? Spitzer shakes his head. "I wanted there to be ambiguity," he says. "It keeps them on their toes."