The NY Sun reported this morning before the NYT bombshell that the prostitution ring case is being handled by the Justice Department’s public corruption section:
Prosecutors specializing in government corruption cases are leading the investigation into what authorities say was a prostitution service that charged up to $5,500 an hour â suggesting that the U.S. attorney’s office in Manhattan may have evidence that a public official hired a prostitute. â¦
During a court hearing in the case, at which the four people were arraigned, it emerged that all three of the assistant U.S. attorneys assigned to the prosecution are part of the U.S. attorney’s public corruption unit. One is the bureau’s chief, Boyd Johnson III. The unit investigates wrongdoing by both elected and nonelected officials and bureaucrats at various levels of government. â¦
“When we first got the case, we were surprised that these were the assistants handling the case,” said a defense attorney, David Gordon, who represents one of two women alleged to have booked engagements for prostitutes.
As I said in the earlier post, there is some good to come of this. One is we get to watch Roger Stone discussing sexual transgressions and hubris …
What got the ball rolling on the investigation that eventually touched Eliot Spitzer?
The NRCC has starting spitting out about an email every three or four minutes with the headline: “Will [Dem Congressman/woman X] Return Spitzer’s Sleazy Money.” I’ll say this for them. They’re efficient.
Matt Cooper Asks: Should prostitution be illegal anyway?
We’ve been trying to piece together the answer to that question this afternoon, and ABC News reports an interesting piece of the puzzle:
The federal investigation of a New York prostitution ring was triggered by Gov. Eliot Spitzer’s suspicious money transfers, initially leading agents to believe Spitzer was hiding bribes, according to federal officials.
It was only months later that the IRS and the FBI determined that Spitzer wasn’t hiding bribes but payments to a company called QAT, what prosecutors say is a prostitution operation operating under the name of the Emperors Club. â¦
The suspicious financial activity was initially reported by a bank to the IRS which, under direction from the Justice Department, brought in the FBI’s Public Corruption Squad.
“We had no interest at all in the prostitution ring until the thing with Spitzer led us to learn about it,” said one Justice Department official.
The ABC report goes on to say that Spitzer will be charged with structuring, according to its source.
If I’m remembering my white collar crime law correctly, structuring is basically trying to avoid triggering the federal reporting requirement for any cash transaction that exceeds $10,000. So a series of $9,000 payments to the same person in a short period of time would raise suspicions, for example.
Typically, structuring is a charge prosecutors put together after the fact, by which I mean they reconstruct a financial transaction or series of financial transactions after they have already begun their investigation and are able then to piece together the elements of a structuring charge.
But banks and other financial institutions (including casinos, I believe) also monitor themselves for signs of money-laundering activity. So it’s certainly possible that a bank could have tipped off the feds, though my sense is that it takes a pretty clear pattern of conduct involving substantial amounts of money before a bank’s compliance staff takes notice. Readers with expertise in the area can correct me if I’m wrong.
The way the Eliot Spitzer story unfolded today initially made it sound as if the feds were going about their business busting a prostitution ring for money laundering when they stumbled across the New York governor, at which point they brought in the Justice Department’s Public Integrity Section.
A couple of things seemed off about that narrative.
First, the feds aren’t usually in the business of busting prostitution — a state crime — unless there’s organized crime ties or forced prostitution or some other more serious underlying federal offense. But even assuming they were involved in that kind of investigation, the time frame didn’t seem plausible.
Spitzer’s alleged call to the prostitution service came less than a month ago, Feb. 13. That would have meant the Public Integrity Section prosecutors were brought in, got up to speed on the case, and filed their complaint in less than a month. That’s lightning fast, especially in a case where literally thousands of electronic communications were intercepted. Changing prosecutors midstream can delay a case by weeks or months.
In that sense, ABC’s report that the investigation was triggered by suspicious money transfers by Spitzer and that it was handled by the Public Integrity Section from the outset is a lot more plausible than some scenario where Spitzer stumbled into a prostitution sting.
If ABC’s account is accurate, the whole case is sort of anti-climactic. The feds start out thinking they have the New York governor on the hook for bribery — and instead discover that he’s just skulking around with high-priced call girls.
The guv goes with the Manhattan firm of Paul, Weiss, Rifkind Wharton & Garrison, whose litigation department is co-chaired by Theodore V. Wells, Jr., lately of Scooter Libby fame.
Late Update: Well-informed TPM Reader WD checks in:
There’s the presence of Ted Wells, which is certainly a factor, but Eliot probably chose Paul, Weiss to represent him in his Client 9 troubles in large part because Michele Hirshman is now a partner there. She was one of his most highly trusted senior attorneys from his AG days. Michele was effectively his right-hand woman on all nonpolitical, AG stuff and supervised all of the high-profile substantive work of the office.
Ted might end up being the face, but Michele will be the behind-the-scenes negotiating counsel with the assistant U.S. attorneys at SDNY running the Emperor Club investigation.
Here’s Hirshman’s bio.