Elliot Spitzer’s ego is out of control.
- Mar 18, 2005
- admin
- Investing
POWER IS VERY INTOXICATING.
Just ask Dennis Kozlowski the former CEO of Tyco.
He threw parties not seen since the days of the Roman
Empire – until he overreached and lost it all.
Or Bill Gates of Microsoft.
Rockefeller reincarnate dominated the software industry
so thoroughly that the U.S. government had to come in
and shake him down.
Only then did he started giving billions to charity and
promise to behave.
Or what about Maurice “Hank” Greenberg?
The crusty but brilliant Chairman and CEO of AIG thought
that running the company was a right – not a privilege.
Big mistake.
Now he’s giving up the corner office he fought so hard
to keep.
What about Michael Milken? Tom Delay? Bernie Ebbers? Richard
Schrushy? Ken Lay? Michael Eisner? Sandy Weil?
Even Julius Caesar…
Yes folks the highway of history is littered with them.
People that accumulated too power and then began to believe
what they read in the papers and heard from admirers.
People that pushed one button too many. Believed their own B.S.
Became overzealous.
People that OVERREACHED.
It’s taken down some of the most powerful people in the
world – and mark my words, it’s going to take
down Eliot “Ness” Spitzer.
Maybe not today and maybe not tomorrow – but his latest
actions are going to come back and bite him.
And bite him hard.
Let me explain:
Ness has done a great job of cleaning up both Wall Street and
the insurance industry.
On the insurance brokerage side, Marsh & Mclennen
was rigging bids and charging people more than they knew
about.
That’s just plain wrong – and they were justly punished.
On the Wall Street side, Ness forced the big boys to
cough up $1.4 billion.
Why?
Because analysts at these firms were telling individual
investors to “buy” while AT THE EXACT SAME TIME,
telling their large corporate and institutional
clients to “sell.”
Utterly repulsive. Unbelievable. Disgusting.
As a matter of fact, Ness could have shaken Wall Street
down for $20 BILLION and it still would have been
a drop in the bucket compared to what they really made.
But that’s yesterday’s story.
What I’m talking about is how Spitzer’s overreaching – today.
Here’s what I mean:
Spitzer waited until AFTER AIG’s Year-End Earnings
conference call before sending out subpoenas to AIG execs.
Now a logical person would assume that he did that because
he heard something on the call that was illegal.
But that wasn’t the case.
He sent out subpeonas regarding transactions that weren’t even
discussed on the call.
So why did he do it?
Because it was humiliating to “Hank” Greenberg.
That’s personal, Which means it’s overreaching – period.
But that’s not all.
Spitzer claims that his number one priority is to clean
up the insurance industry.
So what’s he doing about it?
He’s attacking the accounting of “finite-risk reinsurance.”
That’s fine.
But that’s not what’s disturbing to me.
What’s disturbing to me is that he’s suddenly decided to
CRIMINALIZE a practice that has been widely
used in the insurance industry for years.
As a matter of fact, the SEC itself has been debating how
to better define these rules during the past 12 months!
But now he’s criminalizing it.
Becoming judge, jury and executioner.
And it could have far-reaching effects.
For example, If he CHARGES ONE person he’ll have to
CHARGE EVERYBODY in the industry who can’t explain the
deal.
And since the rules are very vague – as I said they were
being debated before Spitzer even arrived – that could
mean a lot of people get indicted.
Because everybody has there hands in this.
That’s why legendary investor Warren Buffett, Chairman
and CEO of Berkshire Hathaway (BRKA) in sitting on pins
and needles.
His company, General Re, is the company that did the
actual deals with AIG that Greenberg was fired for!
And Buffett is on record saying that he is involved
in plenty of large individual deals that happen.
Is that reform or is that overreaching?
I’m not so sure anymore.
In fact, I think the lines are becoming more
blurry by the day.
Sure, I understand that Spitzer is running for
Governor of New York.
And – regardless of the fact that New York
business hates him – he’ll probably win because
most people love him.
That’s because he’s worked very hard to distance
himself from his wealthy upbringing.
Develop the common touch.
Alleviate his obvious guilt of a wealthy heritage.
But I think at this point he’s had one
drink too many.
And now he’s throwing the baby out with the
bathwater.
Becoming Overzealous
OVERREACHING.
And mark my words – one day it’ll come back to
bite him – just when he least expects it.
Remember, you are what you read.