AG Watch

William J. Holstein’s article “After Kozlowski” (Wall Street Journal, June 27, 2005) serves notice that the political winds have begun to blow against New York Attorney General Eliot Spitzer. Mr. Holstein makes four points-none revelatory, but all profound-that unsettle Mr. Spitzer’s national regulatory scheme, as well as his plans for the New York Governor’s Mansion.

First, the legal system works! The Dennis Kozlowski verdict and the sentencing of the Rigas boys make clear that Mr. Spitzer’s allege-and-punish, “government by indictment” style is unnecessary and perhaps unjust, as the Richard Scrushy verdict implies. Mr. Holstein drives home that in the courts, the innocent, even CEOs, are not punished until proven guilty.

Second, Mr. Spitzer cannot work the legal system! The threat behind Mr. Spitzer’s allegations may have little bite in court: in the first case Mr. Spitzer brought to trial, he failed to win a conviction against Theodore Siphol. Just as importantly, Judge Sidney Stein has blocked Spitzer’s ultimate weapon, the shotgun subpoena. Mr. Holstein deems that the subpoena bar “strikes at the very heart of the attorney general’s modus operandi.”

Third, we already have a national regulatory agency! Holstein suggests that, with Christopher Cox taking the reins, the SEC “is more likely to insist that Mr. Spitzer conduct himself as precisely what he is-a state attorney general, not a national watchdog.” Furthermore, Mr. Holstein writes that the ripples of Sarbanes-Oxley have wakened many, even politicians, to the “economic cost to overly aggressive regulation.”

Finally, the first three points culminate in a “shift in zeitgeist,” not only in the political backwaters of judicial and regulatory wonkery, but in the public opinion polls that heretofore sustained Mr. Spitzer. The nation is rejecting Mr. Spitzer’s one-man governance; more acutely for Mr. Spitzer, the nation includes New York.