Spitzer to run for N.Y. governor in '06

By David Weidner, CBS.MarketWatch.com
Last Update: 12:24 PM ET Dec. 7, 2004  

NEW YORK (CBS.MW) -- New York state Attorney General Eliot Spitzer will make a run for the state's highest office in 2006, his campaign confirmed Tuesday.

The two-term Democrat, whose investigations have redefined the role of public prosecutor, will seek to succeed Gov. George Pataki, a Republican.

"Right now, New York government is all about partisanship and gridlock," Spitzer said in a statement. "We're not doing the things we need to do to generate good paying jobs, safe neighborhoods and excellent schools. The system is broken. The state is facing a crisis."

Pataki has served three four-year terms, but has yet to say if he will seek a fourth.

Since taking office in 1999, Spitzer has changed what was chiefly a consumer-oriented post and taken on the nation's most powerful industries, including Wall Street.

In 2003, Spitzer agreed to a $1.4 billion settlement with Wall Street's 10 biggest investment banks over tainted analyst research. As part of the reforms in that agreement, the firms agreed to tighten internal controls and to pay hundreds of millions of dollars for independent research for their clients.

Mutual fund firms such as Putnam Investments, a unit of Marsh & McLennan; Janus Capital Group; and Alliance Capital Management Holding agreed to pay as much $600 million in fines, lower fees and restitution.

The companies were also ordered or agreed to make internal reforms designed to create stronger board and company accountability, as well as transparency. Regulators put strict rules on the trading practices that led to the inquiry. What's more, Spitzer forced firms to lower fees.

Spitzer, 44, is promising to bring the same zeal to the office.

"I bring people together whether they like it or not and we tackle complex problems -- not with Band-Aid solutions, but with major reform and real change," he said. "We did it in the financial industry and other sectors and we can do it in government."

Spitzer's crusades have taken him to Capitol Hill, where he has often criticized the federal government as inactive in enforcing regulations. In November, he testified about abuses in the insurance industry.

'Taking on the big players'

"He's certainly making himself a well-known consumer advocate, so he's making progress," said Andy Barile, co-founder of insurance consultant Fairbanks Consulting Group, after hearing the testimony. "He wants to be governor and seems to be making his way there because he's taking on all these big players and winning."

Since his rise to national fame, Spitzer has emerged as a lightning rod for critics who say he's full of naked political ambition. His supporters say he lives up to his self-appointed label "the people's lawyer."

"We'll miss him as attorney general," said Stuart Meissner, a former federal prosecutor for investor protection now in private practice. "As governor, he wouldn't be focusing on the same things he's been focusing on. Hopefully whoever replaces him will follow up."

His prosecutions have also strained relations between the attorney general's office and other regulators especially the Securities and Exchange Commission. SEC Chairman William Donaldson has pledged to work with Spitzer, but has been critical of the settlement with mutual fund companies.

But Spitzer's real enemies lie on Wall Street. His aggressive prosecutions have targeted steadfast New York industries that hold sway in campaign finance and influence.

"They never forget and they have immense resources to work against you," said Scott Harshbarger, former Massachusetts Attorney General and one-time gubernatorial candidate in that state. "Has he made too many enemies? That will be the test."

Spitzer won election in 1998 after serving as assistant district attorney in Manhattan from 1986 to 1992. He was chief of the Labor Racketeering Unit. He also worked at the New York law firm of Skadden, Arps, Slate, Meagher and Flom, and was a partner at Constantine & Partners.

David Weidner covers Wall Street for CBS MarketWatch.com. Alistair Barr in San Francisco and Rob Schroeder in Washington contributed to this report