Due Process -- Even For Bigwigs

No one ever accused New York Attorney General Eliot Spitzer of mincing words, and his recent rhetoric slamming the behavior of American International Group Inc. (AIG ) and its former Chairman Maurice R. "Hank" Greenberg is no exception. "We call that fraud," Spitzer bluntly told ABC-TV's George Stephanopoulos last weekend, referring to some of AIG's transactions. "It is deceptive. It is wrong. It is illegal."

So much for innocent until proven guilty. No charges have been filed against AIG. Spitzer had yet even to interrogate Greenberg when he publicly slammed the company's actions before millions of TV viewers. Instead, Spitzer has been busy serving up red meat to a scandal-weary public -- and pressing any corporate director who has ever heard of Sarbanes-Oxley to think about settling. That may be a good way to bring a swift conclusion to the AIG mess, but it's bad for American traditions such as due process and the rule of law.

It doesn't take a Harvard-educated lawyer (which Spitzer is) to recognize that winning a battle in the court of public opinion is easier than winning in a court of law. And Spitzer has had an amazing run using the threat of public vilification. Another weapon is New York's expansive Martin Act, giving him extraordinarily broad subpoena powers in financial fraud investigations, which usually unearth tons of documents that can be used in civil suits. These tools have induced miscreants to settle charges and pay hefty fines. Think Merrill Lynch (MER ), Salomon Smith Barney (C ), and the mutual-fund industry.

We wouldn't find this expedient path to justice so worrying except that Spitzer seems more and more convinced that the end always justifies the means. Indeed, in a speech in Dublin last week to the Law Society of Ireland, he seemed actually to question the right of AIG executives to refuse to answer regulators' questions. As any lawyer knows, simply invoking the Fifth Amendment protection against self-incrimination is not an admission of guilt. It's an option used by many defendants for many reasons -- and a tenet of the of the American legal system.

To be sure, there are some mighty scary things coming out of the AIG investigation: tales of executive compensation slush funds, questionable accounting, and what may well turn out to be a deliberate attempt to smooth earnings. But the Founding Fathers never intended for any AG to be policeman, prosecutor, judge, and jury, all in one. Although at times inconvenient, this separation of powers was an amazingly wise decision and one that separates the U.S. from the Evil Empires of old and the Axis of Evil of today. Indeed, how can we press developing states like China or Iran to embrace equitable legal systems and the rule of law if we treat the due process rights of our own citizens in such a cavalier manner?

The bully pulpit and the Martin Act authority that Spitzer has so deftly used in the past can easily become dangerous weapons. So he would be wise to remember that hunters who carry loaded guns should always take care to walk, not run.

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