Is Spitzer Unethical?

Is Spitzer Unethical?

I took a lot of heat from readers the past couple of weeks about my Dec. 20 column, in which I noted the cozy relationship between New York Attorney General Eliot Spitzer and the new top dog at Marsh & McLennan Companies, Michael Cherkasky. The twowhose minions are working on a settlement of civil charges stemming from alleged bid-rigging and contingency fee abuseare far from strangers. They worked together for Manhattan District Attorney Robert 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 the attorney general fund his campaigns. Mr. Spitzerwho is running for governoreven wrote a glowing blurb for Mr. Cherkaskys book on terrorism, “Forewarned.”

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

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

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

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

This reader hastened to add, “please don't assume for a minute that I approve of the activities Marsh is accused of committing. If factual, they should be condemned. However, based onyour editorial and the race for New York governor, it is hard for an outsider to distinguish between actions for the public good and those that result in personal gainpolitical or otherwise. Conflicts of interest abound.”

These two readers and the dozen or so others who filed similar complaints are right on the money! I dont recall Mr. Spitzer saying anything about distancing himself from the settlement negotiations with Marsh, even though his close ties to Mr. Cherkasky certainly could call into question the legitimacy of any deal he strikes with Marsh.

Mr. Spitzer bullied MMC into dumping their former chairman and CEO, Jeffrey Greenberg, because the two had a history after probes of mutual fund transgressions, including MMCs Putnam unit. But he also has a history with Mr. Cherkasky, and even the appearance of a possible conflict should preclude Mr. Spitzer from negotiating or signing off on any MMC settlement.

But dont count on it. Mr. Spitzer has done a lot of good in exposing wrongdoing in the financial services industry, but like any politician, he is a media hound. He is unlikely to surrender the limelight to a subordinate on what could be the biggest catch in 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.