Probe that snared Spitzer did not need OK from top

WASHINGTON/NEW YORK Tue Mar 11, 2008 10:39pm GMT

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WASHINGTON/NEW YORK (Reuters) - The Republican U.S. attorney general was not asked to sign off on a politically explosive prostitution probe that could place New York's Democratic Gov. Eliot Spitzer in legal jeopardy.

Spitzer, identified by The New York Times as Client 9 in a federal complaint in the prostitution case announced last week, issued an unspecific apology on Monday and is facing widespread pressure to resign.

Experts said Spitzer could conceivably face criminal charges or be asked to testify in any trial involving the Emperors Club suspected prostitution ring. But so far he has not been charged with a crime and federal prosecutions are rare in circumstances such as those reported in the Spitzer case.

A federal official said Justice Department headquarters in Washington had been aware of the prostitution probe, but the U.S. attorney's office in the Southern District of New York, which led the investigation, had not requested approval to go forward.

"The United States attorney was not required to seek, and did not seek, approval of the attorney general or the deputy attorney general with respect to any investigative steps taken in this matter," the official said.

It is common in politically sensitive cases to alert top Justice Department officials, said King & Spalding lawyer Andrew Hruska, a former senior counsel to the deputy attorney general. In that position, "I would expect to get a pretty full briefing on the scope of the case," he said.

Some experts said it would be up to prosecutors to decide whether Spitzer, a former New York state chief prosecutor known as an anti-corruption crusader, could escape any prosecution by resigning.

The prostitution probe was launched in October 2007, when the department was under interim leadership following the resignation of Attorney General Alberto Gonzales. The current attorney general, former New York federal judge Michael Mukasey, was sworn in in November.

The New York Times reported the probe started when the Internal Revenue Service began looking into unusual money transactions involving Spitzer. IRS spokesman Joseph Foy declined to comment on the case's origins.

The accused leader of the Emperors Club, Mark Brener, is an "enrolled agent" of the IRS, a non-employee affiliation that allows him to represent taxpayers before the agency, Foy said. He said he was unaware of any connection between Brener's affiliation and the prostitution case.

CLIENT 9

The federal complaint in the prostitution case includes excerpts from phone conversations last month in which "Client 9" arranged for a prostitute to travel from New York to a Washington hotel.

That travel raises the possibility of prosecution under the Mann Act, which bars facilitating interstate prostitution. However, the federal authorities rarely prosecute customers in such cases, preferring to focus on the operators of prostitution rings.

"It's the same as prosecuting drug dealers and not drug users," said Paul Radvany, Fordham Law professor and a former federal prosecutor for the Southern District of New York, where the prostitution case was brought.

Spitzer's financial trail could also place him in legal danger. The complaint described Client 9 as arranging for a payment of $4,300 (2,143 pounds) to the prostitute in Washington and suggested that he had made similar payments before.

Federal money laundering laws bar "structuring," or breaking up financial transactions with an illegal purpose to avoid reporting requirements above a $10,000 threshold.

The Mann Act is one of the laws that can trigger a transaction law prosecution, Hruska said, but the purpose of the concealment must be to hide a transaction from authorities, rather than from one's family, he said.

"No one knows how deep the money trail is, and that could be very damaging," said Michael Bachner, a former prosecutor with the Manhattan district attorney's office.

Spitzer could also be forced to testify in the prosecution case, possibly under a promise of immunity to avoid legal exposure. "It's quite possible that a customer of a business that's under indictment would be called to testify about it," he said.

(Additional reporting by Edith Honan; editing by Mohammad Zargham and Eric Beech)

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