Those of us who lean towards conspiracy theories are wondering how Eliot Spitzer came to be the subject of a federal investigation, especially for something that is usually a state crime.
Talking Points Memo is reporting that the investigation started with a bank bringing suspicious transactions to the attention of the IRS.
Banks turning in their own customers is required under federal law, in some circumstances. The fact that it happens at all is a whole other issue for civil libertarians. For the Spitzer case, the problem is, it doesn't usually happen that way. Follow after the break and I'll explain.
The "Spitzer's bank turned him in" story has a ring of plausibility to it, but it's got problems. Suspicious Activity Reports ("SARs") really are required by American law. In particular, banks are supposed to file SARs on their customers under certain circumstances. Banks aren't allowed to tell their customers, or anybody, that they have filed SARs. They just get sent in to a central clearing house. (That's another problem with the Spitzer story. SARs don't go to the IRS like TPM said, they go to FinCen but that's also part of the Department of the Treasury so it could just be a sloppy description).
The problem with the story is that payments even to high priced professional women like are alleged are probably too small to stand out in the financial world. Banks file hundreds of thousands of these things every year. Banks filed 567,080 SARs in 2006. Lots of SARs are filed over transactions that aren't just "suspicious" but are really "well duh" obvious crimes. A customer commits a check kite or writes bad checks leading to five figure losses. The bank files an SAR. Somebody comes in wearing a ski mask and says to a teller "give me all your money". The bank files an SAR.
SARs are supposed to be filed over circumstances that are just "suspicious" even when they aren't obvious crimes but they frequently aren't. Many banks tend not to file SARs unless the bank has suffered a financial loss. I've never heard of a criminal prosecution that actually resulted from a bank filing an SAR on something that was merely suspicious but not a slam dunk crime. From the standpoint of law enforcement, trying to deal with 567,080 SARs in a year is like trying to take a drink out of a fire hose. There is just too much data coming too fast. When you think about how understaffed law enforcement really is, it's hard to imagine that a transaction that was only $4,000, not $400,000, would attract the attention of law enforcement, especially when nobody was complaining about any loss and it led only to prostitution, not terrorism or any of the other high profile issues.
So, an SAR is a plausible explanation in that they really exist, but it doesn't take a lot of imagination to see it as a cover story rather than the real facts. It's just hard to see how a $4,000 wire transfer would prompt anybody to file an SAR when nobody suffered a financial loss, nobody complained, and there were no foreign persons involved. Or, if a bank really did file an SAR on a $4,000 transaction it's hard to imagine how it got any attention from law enforcement. It wouldn't be too paranoid to ask if some enterprising Bush appointee fed the names of significant Democrats into the database that deals with the 600,000 SARs a year so that any reports that mentioned a prominent Democrat would bubble to the top for special attention.