Spitzer? I Hardly Knew Her!

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In many ways, it’s difficult to feel sorry for Eliot Spitzer, who built his career on ruining the lives of innocent people who were guilty of crimes against the State — much as the State has now ruined Spitzer’s career, and possibly his life, for his crimes against the State.

In a free society, there should be two standards for criminal or civil action:

  1. Someone’s body or property has been violated.
  2. There’s a victim, or the victim’s beneficiaries in the case of a murder, filing a complaint.

Private Courts

With a system of competing, private courts, this would almost certainly be the system that would emerge.

Yes, there will always be people who think that peaceful, consensual behavior should be outlawed according to their arbitrary personal beliefs; some of these people would undoubtedly end up owning private courts, and would gladly host cases dealing with non-violent vices.

But, with such a system, these people would have to spend their own money going after people who had never harmed them — and, in many cases, whom they had never even met.

For example, a Jerry Falwell-type would have to spend many thousands of dollars of his own money randomly going after a homosexual here or there who had never laid a finger on him or his property. And, even if he was successful in getting a conviction from a court that took such cases, he would’ve only punished one out of many millions of homosexuals.

How likely is it that he would even bother, especially when he could spend the same money reaching thousands or millions of homosexuals through various advertising methods, trying to convince them to voluntarily renounce their homosexuality? Not very.

Libertarian is not synonymous with libertine, but libertarianism is only a political philosophy. The proper libertarian view is that the legal system should concern itself only with defending property rights; that religions and philosophies only have value when they’re followed voluntarily, out of genuine conviction; and, for religious libertarians, that sins are between the sinner and God; and, if even if there’s a victim, it’s no business of the State’s unless the victim files a complaint, seeking restitution.

State Courts

Compare that system to our statist one, where opportunistic, sociopathic politicians, lawyers and bureaucrats can use other people’s own money against them (through collecting taxes and then using them and inflation to fund prosecutions), even if those people have hurt no one, in order to enrich themselves.

Most of the State’s "law enforcement" consists of futile attempts to stop peaceful, consensual behavior, while much of the real crime that occurs in society is due to the perverse incentives the State creates by fostering black markets.

This is, at best, a giant make-work scam for people too inept or lazy to do honest work, serving people on a voluntary basis on the market; the more acts that are illegal and the stiffer the punishments, the more police, lawyers, judges, court employees, prison guards, parole and probation officers, social workers, etc., are needed. And the more money people can make selling police supplies and weapons, building prisons, etc.

This has nothing to do with compensating someone whose property rights were violated and everything to do with enriching those who work for, or with, the State.

Eliot Spitzer

Few exploited this evil system for their own benefit better than Eliot Spitzer. His moral posturing and anti-business crusades earned him the nickname "Mr. Clean" with some — and the nickname "Mr. Evil" with many libertarians.

Here’s a list of some of Spitzer’s accomplishments during two terms as NY Attorney General:

  • He shook down Samsung Electronics Co., Elpida Memory Inc., Infineon Technologies AG and Hynix Semiconductor Inc. for $730 million in fines for "price fixing"; the fifth company he was investigating, Micron Technology, Inc., was granted immunity for cooperating.
  • He shook down 10 firms, Bear Stearns, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, Morgan Stanley, Salomon Smith Barney, and UBS Warburg for $1.4 billion in fines for allegedly using affiliated brokerage firms to give biased investment advice to artificially inflate their stock prices. Under the settlement, the firms were required to transfer millions of dollars to nominally "independent" competitors.

To their credit, many Wall Street analysts accused Spitzer of inventing non-existent fraud, and sensationalizing minor violations, in order to further his political ambitions.

Fraud is a real concern, but the market punishes it, and would more so without various distortions in the economy produced by government. The market doesn’t need a self-righteous politician like Spitzer opportunistically exploiting investor ignorance and blaming the dot-com bust, which was brought about by the Fed’s boom-and-bust cycle, on business in order to further his career.

Government regulation has always been about certain businesses using their money and political connections to crush their competitors and obtain advantages and profit levels they wouldn’t be able to obtain on the market, through voluntary exchange, and Spitzer’s crony capitalism crusades were no exceptions.

And no business has ever wrought the fraud and destruction that the government does through inflation and fiat money, so who are they to criticize? What was the fraud of Enron, for example, compared to the fraud of Social Security? And again, the market punishes fraud; Enron went bankrupt.

As it pertains to this scandal, as attorney general, Spitzer also prosecuted at least two prostitution rings as head of the state’s Organized Crime Task Force.

In one such case in 2004, Spitzer was reported to speak with revulsion and anger after announcing the arrest of 16 people for operating a high-end prostitution ring out of Staten Island. "This was a sophisticated and lucrative operation with a multitiered management structure," Spitzer said then. "It was, however, nothing more than a prostitution ring."

Spitzer’s political posturing paid off for him: he was elected Governor of New York in 2006; he was likely a candidate to be Obama’s or Clinton’s running-mate this year, or his or her attorney general; and he undoubtedly had eyes on running for president at some point.

What Goes Around . . .

Then, barely a year into his governorship, it all came crashing down.

Supposedly, the federal government’s investigation into Spitzer began when Spitzer’s bank, the North Fork Bank, contacted the IRS about "suspicious transactions," as required by the Orwellian-named Bank Secrecy Act.

Spitzer’s "suspicious transactions" involved removing $5,000 from his bank account on three separate occasions, and the IRS notification was due to part of the Bank Secrecy Act that requires banks to notify the IRS anytime an account holder withdraws or transfers more than $10,000, or a total of more than $10,000 in smaller increments in order to avoid detection, which itself is an illegal activity known as "structuring"

Once contacted, the IRS referred the case to its Criminal Investigations Division, supposedly because they feared that Spitzer was the victim of extortion or identity theft.

Then the IRS notified the FBI, which began its own investigation into political corruption; the investigation eventually linked the bank transfers to an escort service called The Emperor’s Club, and the four owners of the business were arrested a week before the revelations of Spitzer’s involvement, under the Mann Act, which made interstate transport of females for "immoral purposes" illegal.

Further investigation revealed that Spitzer paid a 22-year-old escort $4,300 in cash to travel from New York City to meet him at a Washington, D.C. hotel on Feb. 13. In addition to prostitution and the various banking violations, the interstate transport also implicated Spitzer under the Mann Act.

The New York Times broke the scandal on March 10, which prompted Spitzer to announce on March 12, amid threats of impeachment, that he was resigning, effective March 17.

The State’s raison d’tre

This chain of events reveals the State’s disgusting web of victimless crime law after victimless crime law.

As an aside, let’s look at the major laws that the State — probably Spitzer’s enemies — used to ruin his career.

The Mann Act of 1910

Congress exploited its authority to regulate interstate commerce to make it a federal crime to transport females across state lines for "immoral purposes," and to prevent "white slavery," which meant prostitution. Note that this law pertains to voluntary movement across state lines, not to kidnapping. In 1917, the Act was expanded to include non-commercial "immoral" acts.

Congressman James Mann, for whom the Act was named, was also responsible for the Pure Food and Drug Act of 1906.

The Bank Secrecy Act of 1970

This Orwellian-named set of laws removed any secrecy or privacy citizens had about their bank accounts from the prying eyes of the State. Originally enacted to combat the non-crime of "money laundering," which is an attempt to evade taxes — which wouldn’t occur if the federal government didn’t have the power to tax income, or an attempt to conceal the source of funds earned on the black market — which wouldn’t occur if the federal government hadn’t made such otherwise peaceful, consensual acts illegal, driving them underground.

Essentially, the Act requires financial institutions to file a report to the IRS the name, address and Social Security Number of anyone making any cash transaction of more than $10,000, or anyone making any other "suspicious" transaction that indicates illegal activity, like money laundering or tax evasion. Financial institutions are barred from notifying customers that such a report has been filed on them, and such information was specifically exempted from the Freedom of Information Act.

"Structuring" and "Money Laundering"

Whenever you forcibly change people’s circumstances, they don’t continue acting as they did before. So it didn’t take too much imagination for those engaged in illegal activities to figure out to break their transactions of more than $10,000, which were reportable, into smaller amounts, which weren’t.

So that gave rise to the Money Laundering Control Act of 1986, which enhanced the Bank Secrecy Act to make "money laundering" itself a federal crime, and also to make "structuring" of transactions of more than $10,000 in smaller increments a federal crime. In other words, trying to keep one’s financial affairs private was itself made illegal, even if the funds weren’t being used for anything illegal.

The penalty for "money laundering," failure to file the required reports, or "structuring," is forfeiture of the involved funds or a fine of up to $500,000 — whichever is greater, and up to 20 years in federal prison.

The PATRIOT Act

The monstrous, also Orwellian-named PATRIOT Act further enhanced the Bank Secrecy Act and the Money Laundering Control Act. Among its provisions, it increased the reporting requirements of financial institutions to attempt to expand the $10,000 reporting laws, anti-"structuring" laws, and anti-"money laundering" laws worldwide.

Naturally, another way people adapted to the previous Acts was to avoid financial institutions altogether and deal in cash. So the PATRIOT Act also made it illegal to carry more than $10,000 in cash; the penalty is forfeiture of the cash and up to five years in federal prison.

As Harry Browne wrote in Why Government Doesn’t Work, all government programs or laws carry within them the seeds of future programs or laws that will be "needed" to fix the problems the earlier program or law caused or exacerbated.

Of course, the PATRIOT Act is only used against "terrorists," just like the previous Acts would only be used against organized crime and drug kingpins; the Pure Food and Drug Act would never ban anything, but would only require labels showing ingredients, which set the precedent for the FDA, Prohibition, the DEA, and the Drug War; the Income Tax would only apply to the richest 1% of the population and their maximum tax rate would never rise above 6%; the Social Security tax would only be 2% and the funds would always be invested . . .

As a Start, Repeal Every Federal Law Since 1910

Which of these Acts consist of protecting property rights? Not one.

Which of them is authorized by the constitution? Not one.

But, as bad as they are — and the fact that agencies like the IRS and FBI not only shouldn’t have the type of power they used against Spitzer, but that these agencies shouldn’t even exist, are a spit in the ocean in relation to the incomprehensible labyrinth of laws, regulations and agencies of the federal government. The Federal Register increases, on average, 200—600 pages per DAY, or 6.75% per year.

In 2006, Susan E. Dudley, Director of the Regulatory Studies Program at the Mercatus Center at George Mason University, wrote, “The Code of Federal Regulations now occupies over 20 feet of shelf space. And it is growing. In 2004, the federal government printed 78,851 pages of new rules and announcements in the daily Federal Register. At 4 minutes per page that would require 2.5 people reading 8 hours per day for a year, just to keep up with the new rules and pronouncements (to say nothing of actually complying with them).”

What’s Going on Here?

Now let’s get back to the current target of these laws, Eliot Spitzer:

Virtually all crimes are selectively and arbitrarily prosecuted, but prostitution especially is something that is generally tolerated, except when it’s done flagrantly, in the open, like with street-walkers.

The government’s explanation of how it found out about Spitzer’s involvement in the prostitution ring, even if it’s true, doesn’t explain the scandal: after the original suspicions of embezzlement or identity fraud had been proven incorrect, and it was proven to be prostitution instead, the investigation could’ve been stopped; someone made the call to continue the investigation, blow up the scandal in the media, and bring Spitzer down.

Writing on the LRC Blog, Lew Rockwell speculated that the government is lying (which is always a safe bet): that it wasn’t an investigation of a prostitution ring that just happened to implicate Spitzer, or an investigation of Spitzer on the honest fear that he was the victim of embezzlement or identity fraud; but that Spitzer was target for destruction by someone in the Bush administration, and the investigation finally revealed something with which to ruin Spitzer’s career.

But why now? The media reported that Spitzer had been patronizing the Emperor’s Club for about six months. But, oddly, it seemed that few addressed the question of whether Spitzer had seen prostitutes prior to this, although ABC reported that a different escort claimed to have seen Spitzer two years ago, when he was attorney general. That’s easy to believe, because it’s unlikely that someone suddenly decides to start seeing prostitutes for the first time in his late-40s. Given this scandal, there were probably other scandals to be found in Spitzer’s past, so why did someone either just start looking now or just decide to reveal something damning now?

Writing to Lew Rockwell, Bill Sardi pointed out that Spitzer was a possible running-mate for either Hillary or Obama this year — and a near-certain presidential candidate sometime in the future, and he speculated that someone in the Bush administration decided to remove Spitzer before Spitzer gained any more power.

That’s possible, but Spitzer has always been politically ambitious. So why now? Spitzer has undoubtedly made enemies; maybe some of them are now in the federal government, and decided to destroy him out of spite or — more likely — out of fear over what he might do to them if he ever became president.

But Spitzer wouldn’t have been president for at least eight years, unless he was chosen for vice-president, where he wouldn’t have much power, and then Obama or Hillary resigned or died before the end of his or her tenure. And even if McCain wins, which seems unlikely now, Spitzer still wouldn’t have a shot at being president for four more years.

So why now? What was the hurry to bring Spitzer down?

My guess is people in the Bush administration had good reason to believe that Spitzer might be tapped for U.S. Attorney General in the Clinton or Obama administration, and he was removed for fear of whom he might go after from the Bush administration. This could be considered The Golden Rule of Politics: Do unto others before they can do unto you.

The Old Media

It was somewhat surprising how forcefully the statist media pounced on Spitzer’s blatant hypocrisy.

But most of the coverage took the morally-backward view:

The overall tone of the coverage was not that Spitzer was evil for ruining innocent people’s lives over peaceful, voluntary behavior, and that he was even more evil for doing so while hypocritically engaging in the same behavior himself; and that, regardless of how evil or hypocritical Spitzer is, the federal government has no constitutional authority to be involved in things like this; and that, while what Spitzer did was immoral according to the presumed vows of his marriage, it was a private matter between him and his family that had nothing to do with his job.

Instead, they took the view that of course the government has the right to ban peaceful, consensual behavior like prostitution; it’s just that Spitzer was wrong for not following the State’s laws and was a hypocrite for breaking laws himself, not for prosecuting others for the same.

The media was also quick to inform us that the FBI and U.S. Attorneys don’t do political prosecutions. But, as Lew also commented, they not only do political prosecutions; that’s virtually all they do.

And the incessant coverage of a politician’s promiscuity provided another way for the mainstream media to distract people from issues that actually affect their lives, like the unending Iraq debacle, the government’s continuing assault on civil liberties, or the Fed tanking the dollar.

So Many Victims

While it’s hard to feel sorry for Spitzer, it’s not hard to feel sorry for his family, although his wife chose to marry him.

The escort wronged Spitzer’s wife if the wife didn’t know about, and condone, his behavior. But that’s between them; the escort still didn’t deserve to be outed in the media. But that was a risk she should’ve known she was taking by seeing such a famous, powerful client; it was the risk that went with the financial reward.

This scandal has claimed many other victims who have violated no one’s property rights; for another, the lady who handled the Emperor Club’s money was arrested, is out on bail and presumably facing prison time, and is being shaken down for $50,000 by the feds.

Conclusion

Predictably, in tendering his resignation, Spitzer tried to cut a deal with the State to try and avoid prosecution. In other words, he’s fighting for the mercy for himself that he denied to so many others when he was on the other side of the table.

It’s unclear whether Spitzer’s pleas will work; if the media’s coverage is accurate, a conviction for at least violating the Mann Act and the prohibition of "structuring" under the Money Laundering Control Act should be a slam-dunk. If he’s not prosecuted, it probably means he was targeted just for political destruction for some reason, and not due to someone’s personal vendetta against him.

Of course, none of the "crimes" Spitzer committed should even be illegal, and he shouldn’t be prosecuted — regardless of the fact that he did exactly that to so many others.

Like many prosecutors, Spitzer is probably a sociopath and narcissist who is, at best, oblivious to the suffering he causes others — or, at worst, is someone who gets off on it. It wouldn’t surprise me in the slightest if he’s oblivious to the fact that what’s happening to him is still far less than the suffering he caused others; I’m sure any of the innocent people he prosecuted would’ve been thrilled to only lose their jobs.

And, given the fact that Spitzer had $80,000 to blow on hookers, destroying people’s lives and damaging business for not having the right political connections was obviously very lucrative for him (although he did come from a wealthy family); despite losing his job, I doubt he’ll be losing any sleep over where his next meal is coming from.

And, unlike his victims — but like many others who would’ve been universally regarded as criminals had they committed acts similar to Spitzer’s prosecutorial abuses on their own, rather than using the power of the State, Spitzer is likely to make millions more in the future, writing books, giving speeches, and working in the media.

A great way for Spitzer to show that this experience had given him empathy, and for him to atone for his sins and hypocrisy, would’ve been for him, as his last act as governor, to pardon everyone convicted on local or state prostitution charges in New York. Good thing I didn’t hold my breath.

Johnny Kramer [send him mail] holds a BA in journalism from Wichita State University and is available for hire as a writer and copyeditor. See his website.

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