FBI Watched Spitzer Before February Incident

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Spitzer Addresses Media

New York Gov. Eliot Spitzer apologized to his family and the public Monday, but did not elaborate on the reported links to a prostitution ring.

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Spitzer spent part of the day and evening at the hotel, but if he had a date from the escort service, the agents did not see her or she did not show up.

Spitzer was accompanied to Washington by members of his police detail, who were apparently unaware of the FBI surveillance even though an officer from the detail watched the governor's room from across the hall, through a cracked door.

The criminal investigation into Spitzer began when North Fork Bank notified the Treasury Department's financial crimes network about suspicious activity in one of the governor's personal accounts, another source familiar with the case said.

Spitzer, whose father presides over a Manhattan real estate empire, holds certificates of deposit at North Fork, as well as a bond portfolio and mutual funds at other financial institutions, according to his financial disclosure reports.

In this case, the bank's report was triggered by Spitzer's attempt to structure a $10,000 cash transaction into three parts, according to a senior law enforcement official familiar with the evidence. When investigators looked more closely at the transactions, they learned that the recipients were apparent shell companies associated with the Emperors Club.

Investigators have identified at least eight instances in which Spitzer used the Emperors Club over the past several years, this official said, adding that they are still examining records to determine the scope of his activity.

The companies targeted in this case, QAT Consulting Group and QAT International, are incorporated in New York. But on Tuesday, there were few signs of the front companies at their listed addresses.

In a building on Avenue of the Americas that was listed in the complaint as the offices of QAT International Inc., a security guard said he had never heard of that company, and it was not listed in the building directory. But on the 24th floor, a receptionist said that QAT International had offices there -- but that no one was present at that time.

Meanwhile, a man named Morgan Chang had registered the domain for the Emperors Club VIP at 65 Wall St. -- an address that does not exist.

One former senior federal law enforcement official, who supervised similar probes while in the Justice Department, said a "whole host of things" can trigger a Suspicious Activity Report by a bank, including transactions that are inordinately frequent or large, or are tied to overseas banks known as money havens.

"The people who are filing are typically only getting a very small window into what's causing these transactions to be processed," the former official said. "You often don't know where you're going to end up."

Meanwhile, the scene outside Spitzer's apartment has become something of a media encampment, with satellite trucks lining the street. About 50 reporters milled outside in the hope the governor would make an appearance. Photographers took photos of photographers and TV reporters did standups with little news to report.