Spitzer and Suspicious Activity Reports and sex stings
How exactly did Eliot Spitzer get caught buying sex from high priced call girls?
According to Newsday, Spitzer aroused the suspicions of his bankers when he wanted to wire a total of $10,000 to QAT Consulting, one of the front groups for the Emperors Club VIP prostitution ring.
Banks have to report transactions over a certain size. Spitzer alleged tried to cover his tracks by breaking the $10,000 down into smaller chunks that were below the reporting threshold. I say "allegedly" because intent matters. Spitzer might have committed an offense known as "structuring" if he deliberately divided up the money in order to skirt the reporting rules. Anyway, for whatever reason, Spitz sent QAT a total of $10,000 using multiple wire transfers.
Newsday says that Spitzer then asked the bank to take his name off the wire transfers. If that's true, Spitzer deserved to get written up for suspicious activity. He was acting really suspicious! According to the article, the bank refused to remove Spitzer's name and informed him that it would be improper to do so. I hope Spitzer didn't ask the bank to do something he knew was against the rules.
If the news account is accurate, the bank was legally required to write Spitzer up. Spitzer met two key criteria: he was making an aggregate transaction of more than $5000, and it sure looked like he was trying to circumvent the reporting provisions of the Bank Secrecy Act.
Just so you know, the Bank Secrecy Act applies not only to banks, but also to casinos, insurance brokers, mutual funds, cash couriers, and various other entities that shepherd people's money. Also, the law forbids the financial institution to inform you that a report has been filed. Be careful out there, folks...
The more interesting question is how a well-deserved suspicious activity report sparked a federal investigation by the Public Integrity section of Bush's Justice Department. We're that told that the path ran through the IRS, the New York Times is reporting that it was the Treasury Department that suspected corruption and alerted the Justice Department:
Last July, suspecting that Mr. Spitzer might be involved in some kind of public corruption, the Treasury Department referred the banks’ reports to a section of the Manhattan federal prosecutor’s office that usually handles cases involving official wrongdoing. The case was not turned over to the criminal unit, which would usually investigate major prostitution rings.
The officials said that no one knew at first the nature of QAT’s business or why Mr. Spitzer seemed to be trying to hide what appeared to be payments to the mysterious company that seemed to have no real business. Investigators at the bank were said to have thought it could have involved organized crime. (Emphasis added.) [NYT]
The DOJ claims that they initially suspected Spitzer of corruption and were shocked, shocked when they learned that he was actually wiring money to pay for sex.
A few months later, another New York bank sent its own reports of suspicious activity to the Treasury. They showed that Mr. Spitzer and others, including people overseas, collectively deposited hundreds of thousands of dollars into an account of a company called QAT International Inc., whose business involved foreign accounts and shell companies and appeared to be vaguely related to pornography Web sites. [NYT]
It's not clear exactly when the corruption investigation began, but it seems like the DOJ knew early on that Spitzer might be mixed up in something sex-related. Investigating vice crimes seems a little outside the purview of Public Integrity Section, as described on its website:
The Public Integrity Section oversees the federal effort to combat corruption through the prosecution of elected and appointed public officials at all levels of government. The Section has exclusive jurisdiction over allegations of criminal misconduct on the part of federal judges and also monitors the investigation and prosecution of election and conflict of interest crimes. Section attorneys prosecute selected cases against federal, state, and local officials, and are available as a source of advice and expertise to other prosecutors and investigators. Since 1978, the Section has supervised the administration of the Independent Counsel provisions of the Ethics in Government Act.
The Public Integrity folks could argue that they had good reason to check up on Spitzer because he was doing the kind of suspicious banking that money launderers sometimes use. If a public official is acting like that, it's fair to wonder whether he's trying to hide bribes or embezzled funds. But it seems unlikely that a few thousand dollars in sneaky transactions would trigger a federal investigation of a private citizen.
If they the feds were really checking up on corruption, why didn't the initial QAT investigation peter out? They've cited no evidence that Spitzer was taking in unexplained QAT-related income, nor that he was spending money that wasn't his to pay QAT. As the aforementioned NYT article delicately phrases it: "Last summer, employees at a large New York bank detected something suspicious: Gov. Eliot Spitzer was moving around thousands of dollars in what they thought was an effort to conceal the fact that the money was his own, federal officials said on Tuesday." (Emphasis added.)
The authorities have given us no reason to believe that Spitzer was exploiting his position as governor for personal gain. Yet it was the Public Integrity section that went to the Attorney General and got permission to bug Spitzer's phone in order to find out what kind of business he was doing with QAT.
The corruption allegations were just a smoke screen. If the feds want to spend federal dollars busting Eliot Spitzer for taking women over state lines for immoral purposes, I guess that's their preogative. There's pretty good evidence that Spitzer broke the (stupid, archaic) law. Spitzer gave them the ammunition. I'm not opposed to "making an example" of high profile offenders, within the the law and the norms of prosecutorial discretion. One legitimate goal of the criminal justice system is deterrence. It's okay to throw the book at someone to send a message, if the message is "don't break the law." It's not okay to direct the justice system capriciously to settle scores.
If the DOJ really thinks that it's important to enforce the Mann Act, and that Spitzer's a good case to drive home that point, fine. But if that's the goal, let them do it openly and then defend their actions as the rational, dispassionate pursuit of justice.