William Holstein, editor of Chief Executive magazine, takes NY gubernatorial candidate Eliot Spitzer to task for abusing his prosecutorial powers. In the attorney general’s insurance industry investigation of ex-AIG chairman Hank Greenberg, Holstein points out that Spitzer “is applying a new set of values to reinsurance practices that had been in place for years.” This is a rather soft criticism. Fraudulent corporate conduct should not be allowed to persist just because it has persisted. What Spitzer has done is re-interpreted state laws and applied his new standards retroactively. Backward-looking penalties are prohibited by the ex-post facto clause of the Constitution as well as longstanding principles of common law. Reinsurance practices that were recognized as fair and appropriate by willing market participants and by the state over many years cannot be considered fraud due to a lone prosecutor’s sudden change of opinion. A legal change of this magnitude at least requires new legislation to give all insurers fair notice that the old practices should be altered.
Another Spitzer abuse of power is to threaten insurance executives with criminal indictment of their companies if they do not resign from their jobs. A criminal indictment would force an insurance company to shut down since most of its customers could not do business with an indicted party. Indictment is appropriate if the prosecutor has evidence of criminal intentions and conduct. However, Spitzer admitted that he simply didnt trust certain executives during settlement negotiations and used the criminal indictment threat to blackmail them into resigning. This is a clear abuse of power. If Spitzer has clear and convincing evidence of fraud, he has a duty to the public to bring the perpetrators to trial where the charges can be assessed following due process of law.
Holstein calls upon Spitzer to resign his post as attorney general in order to set a new, reinterpreted standard of conduct for officials running for public office. Spitzer creates the appearance of impropriety and favoritism by seeking campaign contributions from companies in industries he has investigated or contemplated investigating. Perhaps he should be threatened with indictment if he does not resign “voluntarily.”
