Spitzer Loses the Siphol Case

Last week, in Eliot Spitzer's first showdown against Wall Street fraud, the jury dealt Spitzer a severe blow by finding Ted Siphol not guilty of grand larceny for allegedly helping a hedge fund make illegal "late trades" after the closing bell (4 pm).

I sat through some of the trial and carefully observed the jury's demeanor and body language. Here are my criticisms of Spitzer's case.

First, the prosecutors tried an overly complex and boring case to ordinary jurors and never really explained why trading after 4 pm was illegal. Prosecutors should have honed the theme that Wall Street "insiders" have special privileges such as late day trading which ordinary investors don't enjoy.

Second, Spitzer picked the wrong case to try. He allowed the "big shots" at Canary Capital hedge fund to pay $40 million to avoid prosecution while going after the "small fish" Ted Siphol who was simply a low level broker carrying out orders. I believe that going after the small fish rather than the big shots who bought their freedom may have alienated the jurors.

Lastly, Spitzer should work harder and prepare his cases better by choosing to try the right case in Court - through clear and convincing evidence - rather than trying cases in the Press.

While the case is a big blow to Eliot Spitzer's reputation it is also a blow to ordinary investors. The acquittal lessened pressure on Wall Street to do the right thing believing that they now may have a vulnerable Spitzer as an opponent. Spitzer's motives in bringing cases will also be challenged from here on in as to whether the cases are designed to promote his candidacy for Governor or whether he really believes in stopping Wall Street fraud and corruption.