October 23, 2012

The Power of Electronic Evidence: A New Player in an Age-Old Tale

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June 2008 Issue | Volume 34 Number 4 | Page 27

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The Power of Electronic Evidence: A New Player in an Age-Old Tale

When the mighty fall, it’s never pretty—and it’s always hopelessly public as well, especially today with the viral power of the Internet and its capacity to spread news instantly around the world. Take the tale of Eliot Spitzer earlier this year. But Spitzer provides more than an example of the mighty disgraced—his downfall also offers a compelling illustration of electronic evidence usage.

When you consider the age-old tale contained within the debacle that unraveled Eliot Spitzer’s life at the top of his career, it’s hard not to shake your head and simply ask, “What was he thinking?” As this morality play aired night after night on the news, a series of salacious details were revealed. Few people we’ve talked to, however, seem to understand exactly how Spitzer really got nailed.

Truth be told, electronic evidence gunned down “The Sheriff of Wall Street”—so much so that, at certain points, the man seemed to be plagued by an electronic evidence posse.

Ultimately, electronic bank records, wiretaps, MySpace pages and, of course, all that Internet news contributed to the grand scale of Spitzer’s demise. But to get the full scope of how events unfolded, let’s begin our story with highlights from his earlier life.


A Background of Snowballing Renown

He is brilliant, no one disputes that. Born to the silver spoon in 1959, son of a real estate tycoon and an English professor, Spitzer graduated from Harvard Law School. After a stint in a private law firm, he joined the Manhattan District Attorney’s office, determined to tackle organized crime. And tackle it he did, most notably launching an investigation that finally brought down the infamous Gambino family. He returned to private practice for a time and then, in 1998, became New York’s attorney general.

Once there, Spitzer was a bulldog as attorney general. He prosecuted cases relating to corporate white-collar crime, securities fraud, environmental protection and Internet fraud. He brought cases against companies involved in computer chip price fixing, investment bank stock price inflation and the 2003 mutual fund scandal. He also successfully prosecuted cases against prostitution rings, roundly denouncing the world’s oldest profession. (Ironic music is playing in the background here.)

In a move that shocked many, he even sued Richard Grasso, the former chairman of the New York Stock Exchange, claiming that he had failed to fully inform the board of directors of his deferred compensation package, which exceeded $140 million. The charges may or may not have been valid, but no matter. Spitzer’s fame snowballed in the press, which cheerfully dubbed him “Eliot Ness” and forged his reputation as a crusading reformer, a law-and-order man who knew how to put criminals behind bars. Time magazine even named him “Crusader of the Year” during his two terms as New York’s attorney general.

In the bargain, Spitzer’s arrogance became the stuff of legend, and increasingly, that arrogance seemed to blind him to his actions, particularly after he became the governor of New York in January 2007. Accusations that he had used “official” resources to spy on political rivals surfaced long before the prostitute scandal broke. It was said that his temper was fearsome and that no one dared to naysay the governor. As is so often the case, it appeared that power had corrupted and “near-absolute” power had corrupted “near-absolutely.”

This moves us to March when the story broke that Spitzer had been involved with a prostitution ring named the Emperors Club. He confessed, the press had a field day, his family suffered greatly, and he ultimately resigned. Now to the meat of what struck us most at the time: how electronic evidence brought Spitzer to be a “person of interest,” how it was then used to mount a case, and how it finally sealed his humiliating downfall.


The Nuts and Bolts of SARs

To the surprise of many, Spitzer’s undoing came about through (improbably enough) the USA Patriot Act. The act’s fine print contains provisions giving the U.S. Treasury Department authority to demand more information from banks about their customers’ financial transactions, intended to help identify terrorist money launderers. The Treasury Department went still further by issuing stringent new regulations requiring banks themselves to look for unusual transactions, such as odd patterns of cash withdrawals or wire transfers, and to then submit “Suspicious Activity Reports,” or SARs, to the government. Facing stiff penalties for noncompliance, banks and other financial institutions installed sophisticated software to detect anomalies among millions of daily transactions. They also began ranking the risk levels of their customers—on a scale of 0 to 100—based on complex formulas including the credit rating, assets and profession of the account holder.

Unfortunately for Spitzer, one of the elements of the formulas was whether an account holder was a “politically exposed person.” And while the transaction formulas were first focused on potentially crooked foreign officials, the lists subsequently expanded to include U.S. politicians and public officials who were potentially vulnerable to corruption. The data, stored in an IRS computer in Detroit, is accessible by law-enforcement agencies nationwide. Treasury lawyers say that the vast majority of SARs filed these days involve white-collar crime and have nothing to do with terrorism.

Spitzer knew enough not to process large cash transactions, which would have triggered his bank’s requirement to file a currency transaction report (CTR). Instead, he arranged a series of wire transfers in smaller amounts to a bank being used by a company called QAT Consulting Group, a front for the prostitution ring, which uses a number of names (surprise). Apparently, however, he didn’t fully understand that his series of wired payments might trigger the filing of a SAR by his bank (as well as the front company’s bank). Well, that’s just what happened, and it trip-wired a whole series of events.


The Ultimate Climax and Denouement

Because so many SARs are filed, most of them don’t really go anywhere—but it was inevitable that someone would recognize the name of the governor of New York. And sure enough, someone in the IRS Criminal Investigation Division did. Uncertain whether the governor might be a blackmail victim, a victim of identity theft, or a person engaging in political corruption, the investigation was launched.

IRS agents then joined with prosecutors in the Southern District of New York to determine the circumstances surrounding the transfer of the money and the nature of the company to which it was being transferred. The Southern District was chosen because the bank transaction had occurred in Manhattan. Ultimately, the FBI officially joined the investigation because it had greater authority to look into possible political corruption and use wiretaps.

Next, the FBI did indeed begin wiretapping and the next round of electronic evidence proved utterly damning. Forever consigned to history as “Client 9,” the FBI monitored calls between Spitzer and the Emperors Club, working out the monetary details of his paying for his now infamous encounter with “Kristin” in Washington D.C.’s Mayflower Hotel, Room 861, on February 13, 2008. Eventually, the accumulated evidence showed that Spitzer was mixed up with not one but two prostitution rings and that he had been involved in this conduct for some time.

Then, just when he must have thought that things couldn’t get worse, Murphy’s Law struck for Spitzer. Journalists fell all over themselves when they realized that the lady who had an appointment with the governor at the Mayflower Hotel also had a page on MySpace. Kristen (real name Ashley Alexandra Dupre) was a wannabe singer, and the contents of her MySpace page became the last of the electronic evidence to add utter misery to Spitzer’s disgrace. Through the MySpace page, reporters were able to home in on the young woman, her brother and even her mom, with the buzzards circling around these folks to put an ignominious end note to a debacle of the first order.

Bank records, wiretaps, MySpace pages—all common fare to those who know about computer forensics and electronic evidence. But surely to Everyman, the rise and fall of Eliot Spitzer is a clear indicator that skeletons and personal foibles are far less likely to remain in the closet these days. Once any electronic data bubbles to the surface making a person “of interest” to law enforcement, there is very little that is likely to remain hidden. The age-old genre of the morality play now unfolds in the light of the 21st century’s digital world. So beware lawyers and clients—just as George Orwell imagined it, Big Brother is watching.

About the Authors

Sharon D. Nelson and John W. Simek are President and Vice President, respectively, of Sensei Enterprises, Inc., a computer forensics and legal technology firm based in Fairfax, VA. They are coauthors of The Electronic Evidence and Discovery Handbook: Forms, Checklists, and Guidelines ( ABA, 2006).