NEW YORK -- He's New York state's 63rd attorney general, and there's talk in Democratic political circles that Eliot Spitzer may run for governor when George Pataki's term is up in 2006. His investigations of Wall Street have won him national attention. Indeed, Time magazine in 2002 called him 'crusader of the year.' The other day, General Wesley Clark, who's campaigning for the Democratic nomination for president, said he would consider making Spitzer his vice presidential running mate to protect investors and for other roles. The attorney general, a former assistant DA in Manhattan, is a committed environmentalist. Among his concerns, acid rain, exploitation of low-wage workers and Internet spam.

Announcer: From Studio 6B in Rockefeller Center, this is a presentation from News Channel 4, Gabe Pressman's NEWS FORUM. Now your host, senior correspondent Gabe Pressman.

PRESSMAN: And Attorney General Eliot Spitzer is our guest on NEWS FORUM today.

Welcome, Mr. Spitzer. Good morning.

Mr. ELIOT SPITZER (New York Attorney General): Gabe, great to be here. Thank you.

PRESSMAN: The other day, General Wesley Clark, one of the candidates for the Democratic nomination for president, said if he won the nomination, he would consider asking you to run with him for vice president. Are you interested?

Mr. SPITZER: Well, let me just say this, and then I don't want to say anything more than I'm flattered by his comment, but I have one job to do and the only--the only job I've got right now is to be attorney general, to focus on that and not be distracted by what is inevitably a lot of chatter in political circles on many issues. The one job I have is to be attorney general, and that's all I'm going to think about.

PRESSMAN: Right now.

Mr. SPITZER: You're not--look, I'm trying not to fall into your clever questions that will--will lead me in different directions. The only thing I will do right now is focus on being attorney general. We have so many issues we're trying to deal with that are important to the residents of New York state who elected me, re-elected me last year--about a year ago now. I'm thankful for that, and so I've got to focus on my job and not--not be distracted by anything else.

PRESSMAN: You're a lawyer. On penalty of journalistic perjury, do you swear that you have no interest whatever in the future or now?

Mr. SPITZER: You know, I've learned--I've cross-examined many witnesses, Gabe, and the smartest witnesses keep repeating the same thing. Even with good questions like that, I'm flattered. I'm going to keep doing the job I've got. It's the only thing that--that I owe the public, and I will do that because I love it.

PRESSMAN: It doesn't seem likely that another scenario would occur. I mean, this is not the likely scenario, but a more likely one would be if Governor Pataki retires in 2006 from his job after three terms, the Democrats and the Republicans put up candidates, that you could be come a leading contender, if not the nominee, of the Democratic Party. Is that--is that a possibility?

Mr. SPITZER: I--I already said that I'm thinking about running for governor. It is a position of enormous import, obviously, to the state in terms of what happens, in terms of our educational system, infrastructure, energy. They're the critical, strategic choices that have to be made to keep New York what it has always been, which is the most booming economy, the port of entry for opportunity. We have some tough decisions ahead of us, and anybody who loves New York, who loves and believes that our state government can contribute, obviously, would be intrigued by those issues and how we confront them. So I've said I'm thinking about that. I'll make up my mind in about a year. But again, until then, we--we've got so much to do just in terms of the AG's office, and so I will continue focusing on--on that job.

PRESSMAN: But in the meantime, you're raising money for a campaign.

Mr. SPITZER: That is correct.

PRESSMAN: You're having a fund-raiser this coming Thursday.

Mr. SPITZER: That is correct.

PRESSMAN: And John McEnroe, the great tennis player, is the emcee. Can you explain why?

Mr. SPITZER: Well, I've always thought he had the best volley in the game, and hands-down, if--if you watch him, he was a ballet dancer on the tennis court, spectacular athlete, very bright guy. And he's also a great commentator, and if you've watched him commenting on the--the US Open or on USA, any of the networks he does it on, he's spectacular. He's somebody who's a contemporary of mine and he was the number-one player, not surprisingly, at Trinity High School when I was the captain number-two, number-three player at Horace Mann. And true story; I went home one night and we had just played Trinity, lost, and I'd seen John play, and I said to my parents, `You know, I just saw the fellow who's going to be the number-one player in the world.' And my parents looked at me, and they said, `Just 'cause he beat your team doesn't mean he's going to be the number-one player in the world.' And I said, `No, no. He really is. This--he's a phenomenon,' and I recei--he--he--it'll be loads of fun.

PRESSMAN: Recently at the Neighborhood Watch Conference, you spoke of the work of community building. Is this, in your view, a major challenge for the future--that is, building neighborhoods?

Mr. SPITZER: Absolutely. You know, even before I was AG, I was involved in not-for-profits, where the focus was community building in many different ways, whether it's rehabilitating housing, whether it is getting community watch block associations involved. It's really--people talk about grassroots politics. The analog in community building is grassroots law enforcement. You get block associations, citizens to work together to build a coherent fabric to a community so that when they see things happening that are not positive, they act. That is what makes our communities come back to life.

When you look at the Bronx, Brooklyn, Queens, parts of Manhattan, the more residential areas and see how they have thrived, it is because of that sort of community activism. And we--we had a--the first Neighborhood Watch Conference, I guess, four years ago now--five years ago, perhaps. Did not know what kind of response we would get. Every year we have had it subsequently. Hundreds of block associations, neighborhood groups come, they trade information, stories, ideas about how they can build. It is a virtually cost-free way of reinforcing our communities.

PRESSMAN: Is there--is there a danger that this can turn into vigilantism in neighborhoods?

Mr. SPITZER: There is always, I suppose, with any sort of law enforcement, any sort of activity of that sort, that remote risk. But it hasn't happened here in New York. What we have seen instead is good folks who get together and say, `Here's the type of behavior that we support, that we approve of.' It has been almost unambiguously in every case a pure upside in helping our communities come back.

PRESSMAN: Wall Street has been your number-one target, the Time magazine cover story at the end of last year calling you the crusader of the year. What about your next target?

Mr. SPITZER: Well, we--we have moved from last year's issue, which was research at the investment banks, which really, we believe, misled millions of American investors, and we got, we believe, a very, very significant settlement, not only $1.4 billion, but more important than the money, we restructured the way the investment banks operate. Now we're working on the mutual fund issues, which I think for the 95 million Americans who have invested in mutual funds is perhaps a more important issue. Some illegal types of behavior--late trading, timing--that were taking money out of the pocket of investors illegally, and we have charged criminal cases, civil cases against mutual fund companies, individuals and are continuing in that direction. The--the bigger issue, perhaps, is fees. The fees that people pay to the mutual fund companies, they don't even know what the magnitude of these fees are.

PRESSMAN: They're invisible.

Mr. SPITZER: They're invisible because they're hidden, they're taken out of your account really without your being given adequate notice. We are talking about $70 billion a year--70 billion a year--enormous money.

PRESSMAN: Is that something that state legislation could tame?

Mr. SPITZER: I'm not sure we need state legislation. What I think we need is a better structure within the mutual fund industry, probably driven, if there's going to be legislative or--or regulatory effort, from--it will have to come from Washington or the SEC. But in the cases that my office is bringing against the mutual fund companies, I have made it very clear that I will not settle with the companies unless and until we get real reform with respect to fees. So we can drive this through our--through our enforcement efforts, and that's what we will continue to do.

PRESSMAN: Are you planning any new enforcement efforts to make fees more in line with what people should pay?

Mr. SPITZER: We--we have been not only pursuing the--the criminal conduct that we have been unearthing--the late trading and the timing--but also inquiring of the fund companies: How much do you pay or are you paid for managing mutual fund money? How much are you paid for managing institutional money? And if there is a differential between the two, why? Have you been more protective of your institutional investors or more aggressive in obtaining ...(unintelligible)...

PRESSMAN: In other words, big investors.

Mr. SPITZER: ...better deal. That's right. And, therefore, is there something that needs to be done?

PRESSMAN: So do you--do you see a new deal coming for the small investor?

Mr. SPITZER: We hope so because, frankly, they have been taken advantage of. They have been harmed by a failure of fiduciary duty by the fi--the--the mutual fund force.

PRESSMAN: So you're going to put the heat on the mutual fund managers.

Mr. SPITZER: I would say we've been turning up the Bunsen burner to the point where they're coming in and they're saying, `We want to settle.' But we are still pursuing criminal and civil cases. We are going to be relentless in this.

PRESSMAN: Let's talk about what this is going to mean to the small investor and some other issues, after this.

(Announcements)

PRESSMAN: And we're back here with Eliot Spitzer, the attorney general of New York state.

What will it mean to the small investors? What are you aiming for for them?

Mr. SPITZER: Basically, a fair deal. One--one of the things that has happened over the past 20 years is that we have invited 90 million Americans into the capital markets, which is a great thing not only for the capital markets but for the investors, and primarily folks have invested through mutual funds, which are a perfect vehicle. They were deemed to be safe, honest. But what we are finding is that by investing in mutual funds, you are leaving yourself open to being charged fees that really have an enormous impact on your overall return: 1 percent per year that you're paying in fees. And if you were to reduce that 1 percent by, let's say, 50 basis points or reduce it halfway to half a percent, then over the number of years that the money sits there, the compounding effect would be enormous.

Now one of the--the reasons fees are so high is that the boards that are supposed to be looking out for the small investor are chosen by the management company that makes money on the fees. This is a completely inconsistent way to run...

PRESSMAN: Conflict of interest.

Mr. SPITZER: Conflict of interest that they have simply been unwilling to address.

PRESSMAN: And you expect that voluntarily they're going to get rid of this?

Mr. SPITZER: No. Volunt--I have absolutely no confidence that they'll--they'll do it voluntarily. They will do it because we've subpoenaed them, because we are bringing civil and criminal cases against them. And in the context of settlement, we are forcing them to change. It is one of the most egregious violations of trust I've ever seen.

PRESSMAN: Ultimately, you have--what will it mean in the pockets of small investors?

Mr. SPITZER: Billions of dollars. I'll give you one example. There--we have been litigating with Putnam, which is a significant fund company up in Boston. If they were to reduce their fees by 15 basis points--and I won't explain to you why 15--but that would bring it into parity with what institutional investors are charged.

PRESSMAN: What are basis points?

Mr. SPITZER: Basis points are basically hundredths of percentage points.

PRESSMAN: I see.

Mr. SPITZER: If they were to reduce it the 15 basis points, investors in Putnam alone would save $290 million every year. So you're talking about enormous money.

PRESSMAN: So you're--so you're looking for a new deal for the investors up in New York state.

Mr. SPITZER: Absolutely--and the nation. And the nation, the 95 million Americans who have invested in mutual funds because they deserve it, because it's the only fair and equitable thing.

PRESSMAN: How much will it mean to New York investors?

Mr. SPITZER: Billions. Billions and billions of dollars per year, and that--that's why we need it back.

PRESSMAN: And how--and how long will it be before this unfolds?

Mr. SPITZER: We are beginning to see movement. We have brought cases that charge the underlying criminal conduct. We are beginning to see negotiations with some of these companies where they're demonstrating willingness to talk to us.

PRESSMAN: You said recently, every rock in this industry you turn over, you find vermin.

Mr. SPITZER: Right.

PRESSMAN: The SEC, you said, has not turned over a pebble.

Mr. SPITZER: Right.

PRESSMAN: Why not?

Mr. SPITZER: Well...

PRESSMAN: Securities and Exchange Commission was created to--to scrutinize the industries, wasn't it?

Mr. SPITZER: Absolutely. Let me say this. I am working with the SEC. We are trying successfully, virtually all the time, to work together. The SEC and I are colleagues in this effort. There have been moments where I've been somewhat dissatisfied with their aggressiveness, and I have not hesitated to articulate that dissatisfaction, nor will I in the future when--when it occurs.

PRESSMAN: Are you at war with the SEC?

Mr. SPITZER: No, not at all. Be--we're colleagues and--and friends, and--and we need to work at this issue together. There are times with any partnership where you--you could push your partner a little bit to get them to be more aggressive, and there have been moments like that in the course of the last two years that we've been working on securities issues.

PRESSMAN: This statement doesn't sound conciliatory: `The Bush administration has sent the clearest message that it values corporate interests over the interests of average Americans.'

Mr. SPITZER: Right. Right. I want to...

PRESSMAN: Is--isn't that a condemnation of the SEC?

Mr. SPITZER: I would--I would say that was a harsh comment, and I stand by it. Obviously, I said it; I'm not going to retract it. It was said--I--I made that comment in--in an Op-Ed piece that I--I had published, and it was a reflection on my dissatisfaction with the deal that they cut with Putnam that did not seek to address the fee issue. And it seemed to me that by being willing to settle just with respect to the small subsidiary issues but not confronting the fee issue, they were leaving the small investor still exposed, and I'm not willing to do that.

PRESSMAN: On another front...

Mr. SPITZER: Sure.

PRESSMAN: ...you've attacked the federal administration--the Clean Air Act and the enforcement of that act for environmental reasons. Are you saying that when EPA announced it was closing pending investigations against, I believe, 50 power plants, that it was violating its own act?

Mr. SPITZER: One of the most distressing decisions that I've seen come out of the--the Bush administration was their decision to say to companies with respect to whom their own EPA--the Bush administration EPA--had said, `We believe you have violated the law.' They had referred those cases to the Department of Justice for enforcement. They then sent the--the word to these companies, `Never mind. We're not going to enforce the law against you.' They're--they're trying to change the law down the road; I hope we defeat them in that effort. It would be a devastating thing for the quality of the air that we breathe--everybody up and down the East Coast breathes--violate a law that has been agreed to and agreed upon since the days of President Nixon. But they said--even worse than that, `Even though we think you broke the law, we're not going to enforce it.' And I just don't think a law enforcement agency should do that, can do that. So I was very distressed. There were 13 particular cases where they did that. I hope we can get them either to reverse that decision, or we will enforce the law.

PRESSMAN: You're a Democrat, and this smells like a vendetta against a Republican administration in Washington.

Mr. SPITZER: No, this--this--this is an ideological divide, where...

PRESSMAN: Did Bill Clinton's EPA act toughly enough, or did his SEC...

Mr. SPITZER: We--we worked with them more effectively than we have with others, but even there, I pushed them very hard. We--we began our--our environmental cases in September of '99, went to the Clinton administration EPA; they joined us as partners, and they were certainly better than the Bush administration has been, but this is not a partisan issue. This is an issue of, in fact, Christie Whitman, when she was the governor of New Jersey, obviously, a Republican, before she went down to the Bush administration, she joined us in the effort to--she directed her attorney general to join us. So this has nothing to do--Geor--and George Pataki, parenthetically--George Pataki agrees with me on this issue.

PRESSMAN: OK. Let's come back and discuss a few other matters of relevance to the attorney general and to the people, after this.

(Announcements)

PRESSMAN: And we're here again with Attorney General Spitzer.

Mr. Spitzer, a Swiss cement company wants to build a massive coal-burning plant for concrete, manufacturer of concrete, in rural Columbia County. That's estimated that the buildings alone would occupy 40 acres, and there's very strong opposition from environmental groups who say that the toxins that'll be generated would pollute the air from New York City to Maine and possibly lead to increases in asthma or lung cancer. So far, the state is still considering the permits. As an environmentalist and attorney general, how do you feel about building this concrete plant?

Mr. SPITZER: Well, Gabe, let--let me explain the structure of my decision-making process on this. As the attorney general, I am obligated to represent DEC, which is the state agency that will determine whether or not it will grant the permit to permit this--plans to go forward. It has generated enormous controversy. I've--I've been up there, I've heard first-hand there are very strong passions, perhaps very legitimate arguments, against construction of the facility. I cannot publicly take a position now because it would prejudice my capacity to represent the state down the road depending upon what DEC, an independent agency--for me it goes back to the governor--does in terms of the...

PRESSMAN: Department of Environmental Conservation.

Mr. SPITZER: Precisely. And so I cannot...

PRESSMAN: You sound a little bit like the character in "The Mikado" by Gilbert and Sullivan...

Mr. SPITZER: Right. Right.

PRESSMAN: ...who, as--as attorney general, I feel this way, as an environmentalist...

Mr. SPITZER: Well, that--that...

PRESSMAN: ...I feel this way.

Mr. SPITZER: ...that's a fair characterization of where I am, but I need to be meticulous. I have always said my office has two sides to it, one side where I get to determine what we do. We represent the public in affirmative litigation. On the defensive side, we have to represent the state agencies. The governor and DEC will make that determination. I have to represent them, so I can't prejudice that relationship by specifically saying what I would do. But I--let me just merely say I've, obviously, heard the very powerful arguments against the plant and the passions that it evokes, and DEC is looking at this issue right now, and I hope they make the right decision.

PRESSMAN: But can't you--there are precedents for attorney--attorneys general just recusing themselves, saying, `I feel very strongly about this issue, and I can't represent you, Governor.'

Mr. SPITZER: It has happened only in the most rare of circumstances, and it's, frankly, a very bad precedent. And the reason it's a very bad precedent is because if I were to say, `I disagree with something the state agency did, therefore, I won't represent you, the AG's office won't represent you,' first I feel as though I'd be violating my constitutional oath. Second, the state would then have to hire an outside law firm and pay that law firm a very significant sum of money to represent the state. My job has those two components. I get to determine what we want to do on the affirmative cases. When the state is sued, as the state might be over this permitting, I have to represent them.

PRESSMAN: That happened recently in connection with the education maps...

Mr. SPITZER: Absolutely.

PRESSMAN: ...where the REBEL and that coalition won a 10-year lawsuit...

Mr. SPITZER: Correct.

PRESSMAN: ...and you were on the governor's side.

Mr. SPITZER: I had to be. My obligation--and the Constitution is very clear about this, and if you were to speak to my predecessors, they--they would agree with me whether Dennis Vacco, a Republican, or--or--or Bob Abrams, close friend--the Democrat, we would all agree and say the same thing. Our constitutional duty is to represent the state.

PRESSMAN: Now you were born in the Bronx.

Mr. SPITZER: That's correct.

PRESSMAN: You went to Horace Mann. Your father was an engineer who became a real estate...

Mr. SPITZER: Right.

PRESSMAN: ...magnate. And I guess your mother became a teacher.

Mr. SPITZER: Correct.

PRESSMAN: Do you credit either one of these parents for the inspiration to become a tough attorney general?

Mr. SPITZER: Well, both. I--I--I think--I would hope any child would say the same thing. Both my parents were critically important in how I emerged, the values they taught me. They--they both had very modest beginnings. All my grandparents were immigrants, and I think my parents did well, but did well by virtue of hard work and--and good education that they got in the public schools here, and they passed on those values to their kids. My--I have a brother who's a neurosurgeon and a sister who's the first lawyer in the family. And so I think they tried to teach all of us you work hard and you do well, but you give back.

PRESSMAN: Now you lost in your first race for attorney general.

Mr. SPITZER: I did.

PRESSMAN: Did that teach you some lessons?

Mr. SPITZER: Absolutely. Los--losing is never fun, but is almost always educational. You learn--I've always believed you actually learn more from losing than from winning. Winning, you feel great, you feel proud of what you did, and it's easy--easy to congratulate yourself. When you lose, you--you look deeper into yourself and say, `Do I really want it?' Am I willing to give it another shot? What did I do that--that I could have done differently? And I lost in '94 and spent the next couple years not only practicing law, but working very hard because I believed that I could do something useful as attorney general. And it was a long, grueling process, and because I had to work so hard over those years to win this office, I think I am that much more emotionally dedicated to--to making sure I use it for something important.

PRESSMAN: You have three daughters. Is that correct?

Mr. SPITZER: I do, indeed.

PRESSMAN: Do they have prosecutorial tendencies at times?

Mr. SPITZER: Well, when they talk to each other, I see prosecutorial emotions in them. Yeah, they're--they're wonderful. They're--they're nine, 11 and 13, and they--I see--I see some good cross-examination skills in--in each of them when they are arguing over whose turn it is to feed the dogs or who took a shirt out of a different drawer. They--they--they have a few (unintelligible).

PRESSMAN: Now we all live vicariously to some extent through our children, I think.

Mr. SPITZER: Right.

PRESSMAN: Have they taught you anything?

Mr. SPITZER: They've--many things. Most recently my 13-year-old taught me that I'm getting older, I'm not as fast as I used to be. We go out and we run. She's on the--she's in eighth grade on the cross country team, and a few months ago I would be able to keep up with her, and--and we'd sprint at the end of a few-mile jog, and I could--I could hold my own. And now when it's time to sprint, she--she leaves me in--in the dust; and it's--it's great.

PRESSMAN: When you were captain of the high school tennis team, did you ever meet McEnroe on the court?

Mr. SPITZER: I actually met him on--on the soccer field. He was on the Trinity soccer team, and I was on the Horace Mann soccer team. He played right wing; I played left fullback. So I covered him, and he was fast. He--he had--he had good feet and good hands, and it was--he's--he's a great athlete.

PRESSMAN: The only other public official I can remember who was very keen on tennis, of course, was David Dinkins...

Mr. SPITZER: Right.

PRESSMAN: ...the mayor. Earlier this year, you said you were in favor of repealing the--Section 52 of the civil rights law which prevents us from--from filming or taping proceedings in courts.

Mr. SPITZER: Right.

PRESSMAN: Would you advance a change in the law to that effect?

Mr. SPITZER: Oh, absolutely. I--I think--a--again, here's an interesting situation. I have to defend the constitutionality of the statute in court as the attorney general, but as a policy matter, I think we should permit cameras in the courtroom. I think that the more the public sees about how our courts function, the better. TV is a wonderful medium to permit that understanding. I--I believe cameras in the courtroom would be a wonderful step forward.

PRESSMAN: Thank you very much, Eliot Spitzer, for being our guest today.

I'm Gabe Pressman. Have a good day.