Money Laundering, Cross-Border Prostitution at Heart of Spitzer Allegations

An IRS investigation into the financial dealings of a high-priced international prostitution ring apparently also snagged New York Gov. Eliot Spitzer, who allegedly was caught on tape booking a "date" last month with a hooker named "Kristen" for a romp in a Washington, D.C. hotel room.

Spitzer, believed to be the individual known as "Client 9" named in an FBI complaint that led to the arrest last week of four people charged with running the call-girl ring – now may be in violation of federal anti-money laundering and anti-prostitution laws.

The scandal threatened to end Spitzer’s political career as the chorus grew Monday night for New York’s squeaky clean crime-fighting chief executive to resign.

But in a possible sign that Spitzer was not yet ready to step down, his spokesman late Monday that said that Spitzer had hired the Manhattan law firm of Paul, Weiss, Rifkind Wharton & Garrison, one of the nation's biggest.

If Spitzer, 48, is indeed ‘client 9,’ he could be in trouble for paying $4,300 to the Emperors Club VIP call girl service. Though he paid cash for the services of a "petite, pretty brunette, 5-feet-5 inches and 105" pound hooker named "Kristen" on the night of Feb. 13, he may have run afoul of the Bank Secrecy Act.

Anti-money laundering laws require financial institutions to report suspicious transactions to the government. The objective of the laws are to help the government catch terrorist financiers, drug lords and other criminals. One bank's call on suspicious activities is the reason the FBI's public corruption unit got called in and uncovered the prostitution ring, one Justice Department official told ABC News.

The investigation into Emperors Club VIP began with an Internal Revenue Service inquiry into wire transfers that showed up on transaction records as QAT consulting. QAT and the Emperors Club have the same address listing in New York.

Four people were arrested last Thursday and two — Mark Brener, 62, and Cecil Suwal, 23, who live together in Cliffside Park, N.J. — were charged with conspiracy to launder more than $1 million in ill-gotten gains. The other two — Temeka Rachelle Lewis, 32, of Brooklyn; and Tanya Hollander, 36, of Rhinebeck, N.Y. — are accused of arranging meetings between prostitues and clients.

The Emperors Club advertised services anywhere from Los Angeles to New York and points in between. All four defendants were charged with violating the Mann Act, a 1910 federal law against crossing state lines for purposes of prostitution.

Client 9 called for "Kristen" to be put on a train from New York to Washington, D.C., on the night of Feb. 13 and to go to the Mayflower Hotel, Room 871. Spitzer reportedly was staying in Washington, D.C., that night, and was on Capitol Hill the next day. The hotel room was reserved under another person's name.

According to the Emperors Club Web site, which has since been disabled, a three-diamond prostitute would cost $1,000 per hour while a seven-diamond prostitute could fetch $3,100 and the highest paid $5,500 an hour. Client 9's fee paid for Kristen to take the regular service train, not the high-speed Acela, cab fares to and from the train station, and room service and drinks from the mini-bar. Client 9 also got credit placed toward his next order, according to the document, which said that wiretaps suggested he was a repeat customer of the agency.

Democratic lawmakers and New York officials are stunned by the allegations, especially since Spitzer was known as "Mr. Clean," and "Eliot Ness Spitzer" for his tough prosecutions against Wall Street crime.

"I don't think anyone remembers anything like this," Democratic Assemblyman John McEneny said. "The fact that the governor has a reputation as a reformer and there is a certain assumption as attorney general that you're Caesar's wife. It's a different element than if you were an accountant."

"I feel bad for him and his family but until he makes a more complete statement, I have nothing more to say," said New York senior Sen. Charles E. Schumer.

"I'm very sad and disappointed," said Rep. Louise Slaughter, D- N.Y., chairwoman of the House Rules Committee. "My heart was broken. We have to see about the legal consequences."

But not everyone is so forgiving.

"He has to step down. No one will stand with him," said Rep. Peter King, a Republican congressman from Long Island. "I never try to take advantage or gloat over a personal tragedy. However, this is different. This is a guy who is so self-righteous, and so unforgiving."

The National Republican Congressional Committee also targeted Democratic Reps. John Hall, Kristen Gillibrand, Michael Arcuri and candidates Dan Maffei and Eric Massa to return money contributed by Spitzer, calling it "tainted."

Spitzer did not announce any future actions during a minute-long press conference Monday afternoon in which he accepted no questions.

"I have acted in a way that violates my obligations to my family and violates my, or any, sense of right and wrong," Spitzer said, with his wife by his side. "I apologize first and most importantly to my family. I apologize to the public, whom I promised better."

Democratic Lt. Gov. David Paterson would become New York's first black governor if Spitzer were to resign.

FOX News' Chad Pergram and The Associated Press contributed to this report.