New York AG threatens to try stock analysts

ALBANY, N.Y. -- Eliot Spitzer remembers a summer job stacking insulation in Atlanta during his college years, and how he sweated and itched.

"It felt like it was 150 degrees at the top of that warehouse," he says. "The feeling of having that fiberglass wear into your skin is something you don't forget too quickly."

Today, as New York's attorney general, Spitzer is responsible for a similar feeling of discomfort spreading across Wall Street, where he is using the threat of prosecution against stock analysts he accuses of fraud.

He says the analysts gave investors bum advice, encouraging them to buy stocks of companies that the analysts' firms were wooing for investment banking business. In private e-mails, the analysts were calling these same stocks dogs, disasters and unprintable profanities.

Spitzer calls it "a shocking betrayal of trust."

His campaign makes the liberal Democrat a crusader to consumer groups and hard-hit investors. On Wall Street, he is seen as a political opportunist.

Spitzer is a 42-year-old fast talker who previously took on Midwestern states over acid rain spawned by power plants, and pressured drugstore chains in New York City to pay back nickel deposits on soda bottles.

Embarrassed SEC

Earlier this month, he embarrassed Merrill Lynch & Co. by releasing the damaging e-mails his office had obtained through subpoenas. On Friday, Merrill chief executive David Komansky apologized to shareholders and employees and pledged to work with Spitzer, even as his firm hired former Mayor Rudolph Giuliani as an adviser and negotiator.

Spitzer, who is in his first term, also embarrassed Wall Street's regulators, who had been less aggressive. The Securities and Exchange Commission, the New York Stock Exchange and the National Association of Securities Dealers announced on April 25 that they, too, were investigating the allegations.

"The SEC had to get aboard this ship, otherwise they would look like they were lagging behind the parade," said Columbia Law School professor John Coffee. "I think they see him as an ogre."

If he is an ogre, his rampage seems aimed at the well-heeled circles in which he was raised. His family could have easily bought that Atlanta warehouse where a younger Spitzer labored for three days, and his background as the son of a Manhattan developer would appear to align him more with the moneyed class of Wall Street instead of small investors.

Maurice Carroll, director of the Quinnipiac University Polling Institute in Hamden, Conn., covered Spitzer as a reporter for Newsday during the Democrat's first, losing run for attorney general in 1994.

"The guy obviously wants to be governor, no question about it," Carroll said.