This is a partial transcript from "Your World with Neil Cavuto," February 15, 2005, that was edited for clarity.
NEIL CAVUTO, HOST: Eliot Spitzer (search) promised he would come on this show eventually. And today he did, the very same day his widening probe of the insurance industry three more guilty pleas now for a total of nine at four different companies, just part of a wide-ranging exchange in part inspired by you in your hopes he would come on FOX eventually.
Here now, unedited and in its entirety, Eliot Spitzer.
ELIOT SPITZER, NEW YORK ATTORNEY GENERAL: I love you guys, glad to be on-air with you and thrilled to do it any time in the future.
CAVUTO: All right. So prior issues where you didn't come on the show or couldn't arrange to be on the show, this is nothing personal, right?
SPITZER: Of course not. No, I am a huge fan of your guys' programming. It was scheduling issues, as you can imagine, there were a lot of demands for interviews, which I'm flattered by, but I have a job to do. And so I try to keep myself at the desk most of the day and I look forward to chatting with you any time in the future.
CAVUTO: All right. Mr. Attorney General, let's go right to the subject at hand. Now in going after the insurance companies. In going after, particularly, AIG (search), the company's chairman, Mr. Greenberg, had expressed at least indications to analysts just the day before your latest wave came down that the company was out of the woods. What made him think that?
SPITZER: Well, my understanding -- and again, of course, I can't speak for Mr. Greenberg -- but, my understanding is that it had done an internal audit, an internal examination of some sort. And I base this knowledge on press reports that they had reported that they had found only one individual in one unit who had been culpable in whatever they considered to be impropriety.
And of course, I haven't seen their internal examination, so I can't respond to it, except to say that, with the guilty pleas that are being entered today, there will be now four individuals from AIG who will have pled guilty. And as a consequence, whatever claim they've made that only one person was implicated clearly is wrong, and the problems there are more expansive than, certainly, their internal audit had demonstrated to them.
I'm not suggesting that there is corruption rife through the company. We have served subpoenas. That has been reported by them. I obviously cannot comment upon ongoing investigations, but the subpoenas are broad in nature, and we will see where they take us.
CAVUTO: Are they serious enough, Mr. Attorney General, for the company to have to restate its earnings?
SPITZER: I simply can't pass judgment on that. A subpoena is merely a mechanism by which we gather information. It would be wrong for either me or anybody else to draw conclusions at this point about what may or may not eventuate from this inquiry. The inquiries that the SEC (search) and I together have made to the company are pointed and are direct. And we will just have to wait and see what results from it.
And obviously, the company felt that this was what the lawyers would call a disclosure item they felt they needed to reveal to the investing world, that the subpoenas had been received and hence, they did so yesterday.
CAVUTO: And on a disclosure item on some of their nontraditional products. So this is a whole new area you're looking at?
SPITZER: Well, it is an area we have been looking at for a fair bit of time now, and there are a number of subpoenas out there investigating or inquiring about the use of nontraditional products that have occasionally, but not always, been used to smooth over earnings in a way that violates the law and accounting principles.
Whether or not that is the case here, of course, only time will tell. It is premature to draw any conclusions at this point.
CAVUTO: Let me ask you something that, Mr. Attorney General, when our viewers knew that you were going to be on here, many of them are investors, some directly in AIG. One of them wrote me and said: "I wonder if Mr. Spitzer can be sued for the losses suffered by AIG investors?"
What do you think of the losses that they've been incurring, just on your request for information from the company?
SPITZER: Well, the law enforcement process is one by which government gathers information. I would suggest to him, as an investor, that he is paying the unfortunate price for a leadership in a company that was not sufficiently attentive to its legal obligations.
There are stock drops in companies which are the recipients of subpoenas and ultimately plead guilty. Marsh is perhaps a more unfortunate example. And we feel terrible for the losses that are incurred by investors, by employees, but our responsibility is to ensure integrity in the marketplace. And that is what we have been doing.
Marsh has paid a fine of $850 million. Their market cap has dropped significantly, because there was a core illegality in their business model. They have now been acting to get rid of it. They are doing what is necessary and appropriate to clean up that business model.
The culpable parties are the executives at the companies who oversee and know and participate in the illegality. That is where liability falls. That's where it should fall. Our job, whether it's mine or the SEC or any other federal entity, is to examine and enforce the law to ensure integrity and transparency in the marketplace. That is what we are trying to do.
CAVUTO: But some of this issue of contingent fees and some of the other things for which you have tried to go after many in the insurance industry, sir, the industry itself isn't saying they're necessarily a bad idea and have not backed away from them. Are they just cruising for a bruising or what?
SPITZER: No. I think you need to understand, Neil, that we have not filed a complaint against any insurance company merely because it had a contingent fee in its fee structure.
We have filed criminal and civil complaints, and again, as of the pleas that are going to be entered today, there will be nine guilty pleas across four different major companies. And these are all individuals who are cooperating with us, which I think indicates to most people who understand the way this works, they are cooperating so we can build bigger cases against others more senior in the industry.
Nine guilty pleas, hundreds of millions of dollars of fines, not because contingent fees were being paid, but because fraud was ongoing, deception, bid rigging, falsehoods throughout the bidding process that has cost American purchasers of insurance vast sums of money. The scheme here was to drive up the cost of insurance in a way that was illegal. That was the core of what was going on, and that is why people were being harmed.
CAVUTO: Is your sense, sir, that most insurance brokers are dishonest or are they...
SPITZER: No. Absolutely not. Absolutely not. The last thing anybody in my position should do is generalize in that way. There are clearly instances of illegality, hence nine guilty pleas so far. And there will be many more.
There was a business model that had severe problems because the way the contingent fees were structured, it then led to a violation of duty, contrary to law. It led to bid rigging, which is a rank illegality. So one problem in the business model then led to a larger circle of illegality, which is what we're attacking. And we are trying to root it out, trying to work with the industry to solve the problem.
CAVUTO: Well, what would you say?
SPITZER: That is what we all want to do.
CAVUTO: What would you say, sir, do you think that 5 percent are bad guys, 10 percent?
SPITZER: Neil, I simply can't put numbers on it. I don't want to even begin to throw a number out. My overwhelming presumption and confidence is that the vast majority of insurance brokers and agents are honest, hardworking, good individuals. I know, as every one of us does, many people who are in that profession, that they work hard. They work diligently. They look out for their clients. They do what is right.
Those whom we have been prosecuting clearly were not in that category. But the last thing anybody should do is generalize or jump to conclusions about an entire group of people who are in a sector that is vitally important.
The importance of the insurance sector to our economy can't be overstated. And that is why we have to work so diligently to make sure that it is functioning properly and ethically.
CAVUTO: Mr. Attorney General, I guess what troubles many in this industry is that you don't often say that most of them are pretty good. Ken Crerar of the Council of Insurance Agents and Brokers (search) said: "The attorney general has made broad claims of corruption. That's just not the industry we know. We disclosed the compensation. That's our position, period."
SPITZER: Well, I don't know him, and I don't want to get into a back and forth with him. I understand he obviously wants to speak well of his industry, and I think well of his industry.
Having said that, when we revealed that there were structural problems within the analyst community, within the mutual fund community, now within the insurance world in terms of how some of these products are being sold, there's a reflexive desire on the part of those who speak for the industry to say it's merely one or two bad apples.
I think unfortunately, we're finding that it's at least a crate. Maybe not a bushel. Maybe many bushels. Who knows? We're going to have to wait and find out.