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FBI Watched Spitzer Before February Incident

By Keith B. Richburg, Susan Schmidt and Carrie Johnson
Washington Post Staff Writers
Wednesday, March 12, 2008

NEW YORK, March 11 -- Weeks before a hotel meeting with a prostitute that threatens to derail his career, the FBI staked out New York Gov. Eliot L. Spitzer at the same hotel in an unsuccessful effort to catch him with a high-priced call girl, according to a person with knowledge of the investigation.

The FBI placed a surveillance team on Spitzer at the Mayflower Hotel for the first time on Jan. 26, after concluding from a wiretapped conversation that he might try to meet with a prostitute when he traveled to Washington to attend a black-tie dinner, the source said Tuesday.

As new details emerged about the extent of the FBI's surveillance of Spitzer, the embattled governor spent the day secluded with his family and also met with a few close aides and his lawyers in his Fifth Avenue apartment, weighing whether to resign and facing calls for his impeachment if he does not.

Spitzer, a Democratic rising star and married father of three girls, was identified by a law enforcement source as the anonymous "Client-9" in court papers who paid for a prostitute to travel from New York to Washington on Feb. 13 to meet him at a hotel. It was later identified as the Mayflower, the same hotel the FBI had staked out in January.

The court papers, including details of wiretapped conversations, suggested that Spitzer was a regular client of the escort service, known as the Emperors Club VIP.

There was widespread speculation, some reported in local media, that he would resign Tuesday afternoon, and the state capital of Albany has been in a surreal state of limbo, with politicians from both parties thinking a resignation is imminent. Spitzer would be replaced by Lt. Gov. David A. Paterson, a Harlem Democrat.

"I don't know what the mechanics are, what the deliberations are, " said state Sen. Bill Perkins (D), also of Harlem. "I know it's inevitable there's going to be a change. . . . I'm anxious to get it done. David is going to be the new leader, and I'm anxious for that to get in place."

James Tedisco, the leader of the Republican minority in the State Assembly, said he had already spoken to Paterson about the transition and promised that "he'll have our full support." Tedisco said if Spitzer did not resign within 48 hours, he was readying impeachment articles to try to force him out of office.

Spitzer has not been charged with any crime, and in a brief statement Monday offered only a vague apology for unspecified actions. But state officials said the governor may have left himself vulnerable by paying for the prostitute's transportation to Washington -- a possible federal crime under the Mann Act -- as well as possibly using state funds for trips to meet with prostitutes and making his police guards complicit in the behavior.

Various legal and political analysts said they thought the governor was considering his legal jeopardy as part of his decision on whether to resign. Spitzer has hired a lawyer, Michele Hirshman, from a prominent New York firm.

The January stakeout at the Mayflower came roughly two weeks after a federal judge authorized investigators to intercept the escort service's telephone calls and text messages.

A team of agents from New York and Washington was hurriedly dispatched to the hotel after an escort service employee was heard on a wiretap calling the front desk to say that flowers were being sent to Spitzer and wanting to confirm that he would be there, said a source knowledgeable about the investigation who requested anonymity in order to speak freely.

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.

A sole supporter stood holding a sign that said, "Governor Spitzer please do not resign, give him a break."

In another development, George Fox, a hedge-fund manager and longtime friend of the governor, sent a letter to clients of his Titan Advisors firm saying that Spitzer had "personally apologized" to him for using the name "George Fox" to check into the Mayflower last month for a sexual liaison with a call girl named "Kristen."

"I have been a close friend of Mr. Spitzer's for more than 20 years and am extremely disappointed by these developments," he said in the letter.

"Some of the reports have included information that the Governor used the name 'George Fox' as an alias," Fox said in the letter. "This development is of great concern to me and my colleagues at Titan. I assure you that I had no knowledge of and no involvement in Mr. Spitzer's alleged activities. Furthermore, I in no way authorized or was informed about the improper use of my name."

The letter concludes: "Mr. Spitzer has personally apologized to me for creating this unfortunate situation."

Staff writers Dan Eggen in Washington and Robin Shulman in New York, and researcher Richard Drezen in New York contributed to this report.

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