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Eliot Spitzer’s Wall Street blind spot

By
Dan Primack
Dan Primack
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By
Dan Primack
Dan Primack
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July 10, 2013, 9:04 PM ET

FORTUNE — Wall Street is more than a bit freaked out Eliot Spitzer’s redemptive campaign for New York City Comptroller, and what he might do at the helm of a $140 billion public pension fund system.

But one niche group that need not worry is the placement agent crowd — a group of folks who serve as outsourced salesmen on behalf of hedge funds, private equity funds and other sorts of alternative investment opportunities.

Placement agents have a particularly dirty name in New York, due to a large pay-to-play scandal that ultimately landed former New York City Comptroller Alan Hevesi in prison (albeit for later actions taken while running the state’s pension system, rather than the City’s). In fact, they no longer are allowed to do business with state-level pension systems.

Spitzer, however, was sitting in the AG’s chair while the corruption was ongoing. No arrests, no prosecutions. All of that had to wait for his successor, Andrew Cuomo.

Moreover, when the scandal did come to light, Spitzer’s only real public comment was to brush it off during a 2009 television appearance on MSNBC. When asked about charges brought by Cuomo against private equity fund manager Steve Rattner, Spitzer referred to Rattner as an “extremely smart guy who appears to be doing a very good job” and one who did not commit an “illegal abuse of power.”

The remarks clearly reflected an ongoing friendship between the two, but also that Spitzer did not view the placement agent scandal as terribly important.

For the record, Rattner would later agree to pay $10 million in restitution to the State of New York, and refrain for five years from appearing in any capacity before the New York pension fund.  He also paid out $6.2 million to the SEC and agreed to a two-year securities industry ban.

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By Dan Primack
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