Based on publicly reported information about New York Gov. Eliot Spitzer's involvement in a call-girl ring, former prosecutors and white-collar defense specialists said Tuesday they are skeptical he could be charged with structuring -- the breaking down of payments into smaller increments to avoid the $10,000 threshold for reporting cash transactions.
"The crime of structuring requires that you act to keep the cash transaction under the $10,000 reporting threshold and it doesn't look like he needed [to break down] $10,000," said Kathryn Keneally, a Fulbright & Jaworski partner who specializes in white-collar criminal defense. "And it doesn't appear from what has been reported that it was cash -- they look like wire transfers."
Also Tuesday, several lawyers who specialize in discipline cases said Spitzer will certainly face scrutiny from the Appellate Division, 1st Department's lawyer discipline committee if he participated in the prostitution ring, though they said the severity of possible punishments are in doubt.
Spitzer reportedly was "Client 9" in a complaint filed by Southern District of New York prosecutors against the operators of the Emperors Club VIP. Client 9 allegedly participated in a $4,300 rendezvous with a prostitute last month in a Washington, D.C., hotel.
The decision on whether to go to a grand jury and seek a criminal indictment against the governor is up to Southern District U.S. Attorney Michael Garcia and his team in the office's public corruption unit.
In addition to the potential wire transfer problem identified by Keneally, there is another reason why a structuring indictment might not be brought, said Andrew C. Hruska, a litigation partner at King & Spalding who was senior counsel to former Deputy Attorney General Larry Thompson.
"To use it in a situation where you are not dealing with the profits of criminal activity would be an unusual use of the statute even if it might fit the bare language," Hruska said. "As in any white-collar case where there is not strict liability, the government has to prove intent -- the hurdle is to show there was the intent to avoid the currency reporting requirements."
While prosecutors may also be examining a potential crime of money laundering, one of the charges brought against participants in the alleged prostitution ring on Friday, Keneally said there might be problems in bringing such a charge against the governor.
"Money laundering requires the use of money that is already dirty -- the statute starts out with the funds having to be the proceeds of specific unlawful activity and this appears to be clean money," she said. "As one of my late mentors said, 'He didn't clean the money, he made it dirty.'"
Hruska was skeptical about a prosecution under the Mann Act, which makes it a crime to transport someone across state lines for immoral purposes.
"The Mann Act technically applies but generally is reserved for cases involving force -- sex transactions or illegal labor trafficking," he said. "It's the force that's the material part."
Hruska said he would be surprised if Garcia is not consulting with Attorney General Michael B. Mukasey or his top deputy on the matter.
"I would expect that on a significant public integrity matter that the criminal division would be consulted and, frankly, in a public integrity matter involving a senior public official, that the deputy and the attorney general would be consulted," he said. "That's consulted, but not necessarily making the decision."
Even on the chance that prosecutors may not have the strongest of cases to bring, the mere possibility of a grand jury weighing charges against Spitzer adds enormous force to the already overwhelming political pressure the governor is under.
"Where there is a violation of the law uncovered in the course of a grand jury investigation, prosecutors make that decision to present the violation to the grand jury -- that's the essence of prosecutorial discretion and lawyers in the government and lawyers defending the targets of an investigation understand that," Hruska said. "Any time you talk about a grand jury, that's a very serious matter, even just being called. That should not be used as leverage, but it's an act of concern for all lawyers involved in the process."
For the 1st Department disciplinary committee, the operative question is what sort of sanction should be imposed on a lawyer who has patronized a prostitute, given a false name and used cash to conceal criminal conduct, according to the disciplinary experts. Those are the chief allegations about Client 9's activities.
The alleged criminal conduct, patronizing a prostitute, is punishable by a maximum of one year in prison under New York law and 90 days in jail under Washington, D.C.'s statute. The fact that Spitzer was apparently aware the prostitute traveled from New York to Washington could bring his conduct within the federal Mann Act.
The lawyers said, however, that it is doubtful violations of the Mann Act would be classified as felonies under New York law. New York's Judiciary Law §90 provides for the automatic disbarment of a lawyer who is either convicted of a felony under state law or a federal statute that has an analogue in New York classified as a felony.
Lawyers convicted of misdemeanors also face sanctions at the discretion of the disciplinary committee. Lawyers who are not prosecuted for clearly criminal activity could still be subject to disciplinary action as could those who commit non-criminal ethical violations.
The known facts about Spitzer's actions, without more negative information emerging, would place his case "on the borderline between a private admonition and a public censure," said Barry Kamins, of Flamhaft, Levy, Kamins, Hirsch & Rendeiro.
Richard Maltz, a former deputy chief counsel at the 1st Department disciplinary committee, agreed that in cases involving facts similar to those being attributed to Spitzer, involving a first offense and no apparent aggravating circumstances, the committee is "very likely" to issue a non-public letter of admonition. But, he added, because of Spitzer's position and the huge amount of publicity surrounding his actions, the committee might well issue a public censure.
A letter of admonition is issued by the committee and is not available to the public. A censure, by contrast, is available to the public and is issued by the Appellate Division only after the committee has filed formal charges and a finding is entered against a lawyer.
The lawyers disagreed as to whether Spitzer's position as governor and the state's best-known lawyer would likely subject him to harsher treatment.
Richard Godoski, of Godosky & Gentile, said that if Spitzer did not resign from the bar, he would be disbarred. The disciplinary committees are likely to view misdeeds by lawyers who are public figures as "reflecting more seriously on the legal profession," he said.
Michael S. Ross, a former state and federal prosecutor, said Spitzer would face "at least a public censure" but that it is "very possible" that he will not be more severely sanctioned.
The 1st Department will not look to the politics, Ross said, but sift through Spitzer's "frailties and accomplishments."
Should Spitzer resign as governor, Ross added, that would be an "acknowledgement of contrition and remorse which would be a very significant factor in evaluating the proper punishment."
Additional reporting by Joel Stashenko.
Editor's note: See a related story from The American Lawyer, Paul Weiss Pro to Defend Spitzer.