Legal News

Beyond the Court of Public Opinion, Is Spitzer Legally Vulnerable?

By Dan Slater

Today’s conversation with NYU’s legal ethics guru, Stephen Gillers (pictured), was targeted at figuring out what may lie ahead for Spitzer’s prospects as a practicing lawyer. But Gillers, who also teaches evidence, had some interesting input regarding potential legal charges in SpitzerGate. Spitzer hasn’t been charged with anything, but news reports have tossed around words like structuring and money laundering. Here’s his take.

Structuring or a Fee for Service? Structuring, says Gillers, entails parceling out payments in amounts below $10,000 in order to avoid the requirement that cash payments above $10,000 be reported to the federal government. “Let’s say a client comes to a lawyer, and the lawyer charges $50,000,” says Gillers, by way of illustration. “If the client pays in cash, then it has to be reported. So the client might say, I’ll pay you $5,000 a week for 10 weeks. That’s structuring.” Gillers said he sees nothing in the news reports that suggests payments were made to stay under the $10,000 cap. Otherwise, the payments are merely retail payment — or, what Gillers calls “a fee for service on a situation-by-situation basis.”

Mann Act: The Mann Act, enacted in 1910, was meant to prevent the movement of prostitutes – or women intended to participate in “immoral” acts – between states or from the U.S. to a foreign country. “I don’t think they’d indict him for a Mann Act violation because that would be disproportionate to the typical use of the Mann Act, which is used to go after large commercial transactions,” said Gillers. “Besides, how could they do that and then ignore clients 1 through 8, and client10?”

Money Laundering: Gillers thinks that if Spitzer faces any criminal liability, it might be for facilitating or assisting a money laundering scheme, which is a federal felony and a felony under New York State law. The prostitution-ring charges brought last week also alleged money laundering. “When he wired cash to these shell corporations,” explains Gillers, “the government’s position may be that he knew that this was money that wasn’t going to be declared and that the corporation’s intent was to avoid tax liability and convert illegal proceeds into the appearance of legitimate income, which is laundering.”

How might Spitzer argue in this entirely hypothetical scenario? “His position is going to be, I thought they created the shell organizations simply to protect the privacy of the clients,” says Gillers. “But obviously Spitzer’s involvement in law enforcement will go a long way toward helping convince the jury that he knew the money laundering implications of this set up.”

Full post as published by Law Blog - WSJ.com on March 11, 2008 (boomark / email).