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Eliot Spitzer Learns The Disadvantages Of Not Being The Government

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Although you know that Eliot Spitzer was slightly preoccupied during his time as New York's Attorney General, maybe you can understand why William Gilman and Edward McNenney might have thought that he was devoted full-time to bullying them. Gilman and McNenney, formerly executives at insurance broker Marsh & McLennan, have not exactly had positive interactions with the Spitz these past seven years. Let's go down the list:

* Spitzer accused Marsh Mac of bid-rigging and fraud.

* Spitzer charged Gilman and McNenney with an assortment of crimes including fraud and larceny.

* They were convicted on one count of restraint of trade and sentenced to 16 weekends in jail.

* Turns out Spitzer's office got those convictions (after he moved on to be governor) in part by hiding 700,000 pages of documents from the defense - when the judge found out, the convictions were overturned.

* Finally, Spitzer wrote a column in Slate in which he defended his record against a Wall Street Journal editorial critical of him.

If you had to pick the worst indignity on this list, you might pick the criminal conviction and prospect of weekends in jail. But Gilman and McNenney are really bothered about the Slate column, which mentioned their former employer in passing:

Unfortunately for the credibility of the Journal, the editorial fails to note the many employees of Marsh who have been convicted and sentenced to jail terms, or that Marsh's behavior was a blatant abuse of law and market power: price-fixing, bid-rigging, and kickbacks all designed to harm their customers and the market while Marsh and its employees pocketed the increased fees and kickbacks. Marsh as a company paid an $850 million fine to resolve the claims and brought in new leadership.

Which turned out not to be strictly speaking true, what with “many employees of Marsh who have been convicted and sentenced to jail terms” really meaning more like “no employees of Marsh were convicted and sentenced to jail terms." Still, that’s about all Spitzer said about Gilman and McNenney in Slate. In particular, you’ll notice that he didn’t mention their names.

But Gilman and McNenney have been waiting for years for this opportunity and so, a year after the Slate column, they sued Spitzer for libel on Friday, asking for $90 million.

This seems like a stretch. Nonetheless it’s an interesting precedent. There are a lot of people on and around Wall Street who are no fans of Eliot Spitzer and would use terms like "overreaching" and "bullying" to describe his pre-prostie incarnation. The trouble is that there’s not much you can do about that: Spitzer’s actions as AG were more or less immune from lawsuits. So when he said things like:

defendants and other Marsh employees told their excess casualty clients that they obtained bids for their business from insurance companies in an open and competitive bidding process. In fact, defendants had rigged the process .... By misleading customers into believing that the customers' interests came first, the conspirators fraudulently obtained millions of dollars in commissions and fees for Marsh and millions of dollars in premiums for the insurance companies.

Gilman and McNenney couldn't do much but lawyer up and hope for the best.

The Slate column, on the other hand, is at least subject to libel laws, though proving libel isn't easy. So even though it’s pretty much the same thing as he said when he indicted them, without the addition of “and now I’m going to throw them in prison for it,” he no longer has the power of the New York government behind him. And so now they get a chance to go after the aggressive prosecutor who came within inches of ruining their whole summer by sending them to Rikers for the weekends.

It's one more reason why Spitzer might want to get back into public office as soon as possible. As a prosecutor, he could pretty much throw bombs at people without worrying too much about whether they were guilty or not. As a private citizen, he runs the risk that they'll fight back.

Spitzer sued for libel over his Slate column [Reuters]