No doubt many in the insurance industry are dancing with glee over the demise of New York's wayward governor, Eliot Spitzer, who announced his resignation today in the wake of a prostitution scandal. But no matter how far he has fallen from grace, it doesn't change the fact that as attorney general Mr. Spitzer exposed a seamy side of the business, putting carriers and brokers on notice that misleading clients or investors won't be tolerated. That will be his legacy.

Mr. Spitzer announced today that he would step down on Monday, March 17, and turn the office over to his lieutenant governor, David Paterson. As I said earlier this week, he had no choice but to resign after his criminal behavior was revealed. However, I do not celebrate his downfall. Any cheers you hear come from those in the peanut gallery who mistake arrogance for persecution.

Mr. Spitzer, like most prosecutors, was a bully as attorney general. He didn't have much patience for trials, preferring to tar and feather targets and parade them before the court of public opinion, leveraging the damage that could be done in the stock markets to force companies to jettison top dogs, fork over hefty settlements and alter their operating procedures.

He mounted some major trophies on his walls, including Jeff Greenberg of Marsh and his dad, industry titan Hank Greenberg of AIG. He forced the major brokers to give up lucrative contingency fees after they were exposed abusing a legitimate compensation system by rigging bids and improperly steering accounts. Carriers that played along with this outrageous ruse were also exposed and punished.

He also revealed a scam finite reinsurance transaction between AIG and General Reinsurance to artificially boost AIG's reserves and improperly influence the assessments of stock analysts, further tarnishing the industry's already poor reputation.

In both cases, industry figures have either copped pleas or been convicted in court. It remains to be seen whether Hank Greenberg–an unindicted co-conspirator in the finite re scam–will be prosecuted, or at least put through a civil trial.

That said, Mr. Spitzer resisted the temptation to run roughshod over the industry when he became governor. As I said here the other day, he and his insurance commissioner, Eric Dinallo, were fair and reasonable with insurers and brokers, working together to bolster the market where possible. He was not the industry's worst nightmare, as most expected him to be.

That's the biggest shame about this sorry episode. I had hoped Mr. Spitzer would change New York's foul political culture–that he would add not only a much needed sense of urgency to Albany's glacial pace, but also streamline government operations and bring an overriding sense of integrity to the whole lawmaking process that has been sadly lacking.

Now, it turns out that Mr. Spitzer was no better than any other politician–and what's worse, no different than many of the criminals he prosecuted. He certainly should have known better than to try to scam the system to pay for prostitution services.

Like President Bill Clinton before him, perhaps his biggest “crime” is the wasted opportunity to do great things while in office, and to secure a place in history as an outstanding chief executive who broke the mold.

Instead, Mr. Spitzer turned out to be as despicable as the felons he prosecuted. If there was any justice in this world, he should be forced to share a cell with one of them.

Looking forward, Lt. Gov. David Paterson might turn out to be a better governor. He certainly is more of a conciliator, rather than the “steamroller” Mr. Spitzer bragged about being. He has a good insurance department team in place, and for Mr. Dinallo, it should be business as usual.

However, it is hard to imagine Mr. Paterson having anywhere near the popular mandate that his boss enjoyed–and then squandered–given 70 percent of the vote. I wish him luck.

Special Reports /

Spitzer's Gone, But Hopefully Won't Be Forgotten

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