Well now, isn't this just precious?

Reply Tue 19 Jul, 2005 06:17 am

Loss of Coordination
Spitzer and Federal Officials Pursuing Insurance Probe Separately

By Dean Starkman and Carrie Johnson
Washington Post Staff Writers
Tuesday, July 19, 2005; Page D01

New York Attorney General Eliot L. Spitzer and federal officials have stopped cooperating with each other in parallel probes of the U.S. insurance industry, and each has made separate deals with witnesses that render the witnesses less useful to the other side, according to people familiar with the case and legal experts.

State and federal officials jointly interviewed insurance executive witnesses until late April or early May, but since then cooperation has stopped, and they now conduct interviews separately, said sources familiar with the case. The sources spoke only on the condition of anonymity because of the continuing investigation.

New York Attorney General Eliot L. Spitzer's stock research probe, begun in 2002, was seen as embarrassing to the SEC. (By Richard Drew -- Associated Press)
At one point, a scheduled joint interview was canceled after federal officials learned that Spitzer staffers already had met separately with the witness's lawyer and discussed a deal, one of the people familiar with the matter said.

"Everyone is all smiles when it comes to cooperation between the agencies," says Jacob S. Frenkel, a former Securities and Exchange Commission enforcement lawyer and partner at Shulman, Rogers, Gandal, Pordy and Ecker PA, in Rockville. "But in truth, the competition for convictions and civil settlements is so intense that each regulator is putting its interest ahead of the public good."

Interagency tensions were exacerbated by news leaks from a high-profile interview April 11 with legendary investor Warren E. Buffett, head of Berkshire Hathaway Inc. Buffett's General Re Corp. unit is part of a wide-ranging probe into a product known as a finite reinsurance, which has been used by some buyers to make their earnings look better. Buffett is a longtime director of, and investor in, The Washington Post Co. Investigators have said he is not a target of the investigation.

Accounts of the closed-door session were published by news organizations the same day. Federal officials suspected Spitzer staffers of relaying information about the meeting that ultimately reached news reporters, according to two sources on the federal side.

The three-hour session, held at the Securities and Exchange Commission's offices in New York, included federal prosecutors from the Justice Department and the Eastern District of Virginia, SEC lawyers, and Spitzer's staff.

Michele Hirshman, Spitzer's top deputy, said any suggestion that state officials leaked information from the Buffett meeting is "inaccurate and ridiculous." She described the insurance investigations as separate but complementary and said prosecutors on both sides are experienced in dealing with parallel probes by other agencies. "At the end of the day, the investigations are producing good results in terms of finding the wrongdoing that was hidden from regulators for many years," she said.

Representatives of federal officials leading the probe declined to comment. They are Paul J. McNulty, the U.S. attorney for the Eastern District of Virginia; David N. Kelley, the U.S. attorney for the Southern District of New York; the Justice Department; and the Securities and Exchange Commission.

Evidence of the breach surfaced soon after the Buffett interview. On May 2, in a speech to business writers and editors in Seattle, Spitzer blasted the Bush administration for failing to investigate illegal practices in the insurance industry after Spitzer-led investigations resulted in 10 guilty pleas from insurance executives and industry fines and restitution of more than $1 billion. Spitzer is running for the Democratic nomination for governor of New York.

"Not a word has come out of the White House
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