Is Spitzer Unethical?

I took a lot of heat from readers the past couple of weeks aboutmy Dec. 20 column, in which I noted the cozy relationship betweenNew York Attorney General Eliot Spitzer and the new top dog atMarsh & McLennan Companies, Michael Cherkasky. The twowhoseminions are working on a settlement of civil charges stemming fromalleged bid-rigging and contingency fee abuseare far fromstrangers. They worked together for Manhattan District AttorneyRobert Morgenthauindeed, Mr. Cherkasky was Mr. Spitzers boss!

The two went their separate ways but remain on friendly terms.New York Newsday reported they still play tennis together,and that since 1998, MMCs CEO has given $18,500 to help theattorney general fund his campaigns. Mr. Spitzerwho is running forgovernoreven wrote a glowing blurb for Mr. Cherkaskys book onterrorism, “Forewarned.”

Readers were disappointed that I passed up the opportunity tohammer the attorney general for failing to practice what hes beenpreaching as he challenges the ethics of insurance brokers.

“I find it less than balanced that you haven't taken a strongstance against Eliot Spitzer's conflict of interest in working withMarsh over any type of settlement,” wrote a broker from St. Louis.“I find any comments from him to be quite hypocritical due to hisunwillingness to totally recuse himself from anything to do withMarsh. He criticizes the insurance industry for what he callsconflicts of interest, and yet he is directly in the midst of asimilar conflict of interest.”

An insurance agent from Canton, S.D. e-mailed a similarcomplaint “under the heading, Don't throw stones when you live in aglass house.”

“If Mr. Spitzer discovered that certain heads of a majorindustry were regularly meeting and maintaining a relationship,would he start an investigation to see if there is any collusion orantitrust activity?” the agent wrote. “And then the campaignfunds?!? Does anybody really think there will be full disclosure ofthe negotiations between the New York AG's office and Marsh? Oh,sure, there will be the formal papers and press releases, butthat's not full disclosure.”

This reader hastened to add, “please don't assume for a minutethat I approve of the activities Marsh is accused of committing. Iffactual, they should be condemned. However, based onyour editorialand the race for New York governor, it is hard for an outsider todistinguish between actions for the public good and those thatresult in personal gainpolitical or otherwise. Conflicts ofinterest abound.”

These two readers and the dozen or so others who filed similarcomplaints are right on the money! I dont recall Mr. Spitzer sayinganything about distancing himself from the settlement negotiationswith Marsh, even though his close ties to Mr. Cherkasky certainlycould call into question the legitimacy of any deal he strikes withMarsh.

Mr. Spitzer bullied MMC into dumping their former chairman andCEO, Jeffrey Greenberg, because the two had a history after probesof mutual fund transgressions, including MMCs Putnam unit. But healso has a history with Mr. Cherkasky, and even the appearance of apossible conflict should preclude Mr. Spitzer from negotiating orsigning off on any MMC settlement.

But dont count on it. Mr. Spitzer has done a lot of good inexposing wrongdoing in the financial services industry, but likeany politician, he is a media hound. He is unlikely to surrenderthe limelight to a subordinate on what could be the biggest catchin his latest crusade.

Sam Friedman

Editor-In-Chief

Reproduced from National Underwriter Edition, January 6, 2005.Copyright 2005 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.