Mar 12, 2008 12:15 am US/Eastern
Spitzer's Financial Transactions Led To Red Flags
NEW YORK (CBS) ―
The Eliot Spitzer sex scandal may put an end to the governor's once promising political career, but it didn't start as an investigation into soliciting prostitutes. It started with a look into questionable financial transactions.
Tax investigators working in a Hauppauge office building discovered the governor's alleged illegal activities by following the money. Just where the thousands of dollars Spitzer allegedly paid prostitutes came from for their trysts is not yet clear.
The man under whose name Spitzer was registered, "George Fox," a friend and campaign contributor, says he knew nothing about it.
But while investigating companies connected to the escort service, federal agents made an interesting discovery.
IRS officials were looking into the transfers of large sums of monies that had been reported to them by various banks as being suspicious. When Spitzer's name came up in the course of the investigation, they reportedly thought it might have something to do with corruption or bribery, not payment for sex.
Joe King is a former Customs official.
"And then to find out that it was a prostitution ring, I would imagine that was a shock to most people involved with the investigation," said Joseph King, a former Customs official and current Associate Prof. at the John Jay School of Criminology.
According to court documents, officials tracked a number of cash transfers from Spitzer's account to three shell companies.
And then a former prostitute-turned-informant, and federal officials, now including FBI agents, got a wiretap warrant, allowing them to ultimately intercept thousands of calls and messages, some of which allegedly came from Spitzer.
Four employees of Emperor's Club VIP have been indicted, but Spitzer has not.
Yet.
"The fact that they haven't indicted anyone else right now, that's probably typical government operations. You take who you can get, and from there, we'll move again to our next indictment down the road," said King.
It's the potential federal money laundering charge that carries penalties of up to 20 years in prison. Simple prostitution is usually a misdemeanor, but under a law called "The Mann Act," transporting person across state lines for the purpose of prostitution is punishable by up to five years.
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