Tax Probe Led to Spitzer Prostitution Allegations
Updated: The investigation that led to this week’s shocking revelations about New York Gov. Eliot Spitzer, the respected former state attorney general who reportedly linked up with a high-priced prostitute, was all about taxes.
The probe began when IRS agents were doing a routine investigation of suspicious transactions reported by banks, the New York Times reports. They wanted to know if the governor was moving cash in an apparent attempt to conceal the source, destination or purpose, officials told the Times.
The money was being transferred to shell companies, leading investigators to at first suspect bribery or political corruption. The IRS agents began working with political corruption prosecutors in the U.S. attorney’s office in Manhattan, who received permission from the U.S. attorney general to proceed.
The probe soon found that the money was being transferred to pay the high-priced prostitution ring known as Emperors Club VIP, the paper says. The club used shell companies called the QAT Consulting Group, QAT International and Protech Consulting to hold money from clients who were willing to pay up to $5,000 for sex.
The New York Times, in a separate story, quotes experts who say that investigators likely wanted to know whether Spitzer committed the crime known as structuring, which involves trying to conceal the purpose and source of financial transactions. The federal structuring law bars attempts to keep financial transactions under $10,000 to evade currency reporting requirements.
Spitzer made a statement yesterday acknowledging that he had violated his obligations to his family without specifically addressing the prostitution allegations, first revealed by the New York Times. A wiretap had captured Spitzer arranging to meet a woman employed by the club, and Spitzer had admitted to senior administration officials that he was involved in a prostitution ring, the Times story had said.
Speaking with his wife at his side, Spitzer apologized both to his family and the public. He did not take any questions from reporters and did not say whether he would remain in office.
Updated at 7:55 a.m. to include Times story on the crime of structuring.
