Spitzer’s Bunch: Odd Bedfellows Join His Campaign

Shortly after noon on Jan. 10, Attorney General Eliot Spitzer stood before a crowd of more than 900 women who had gathered in a rococo ballroom at the Pierre hotel for the year’s first “Women for Spitzer” fund-raiser, and told them what all Upper East Side dowagers secretly long to hear: that he doesn’t just love them for their money, he loves them for their minds as well.

“It is important to raise money in a campaign, and I thank you,” Mr. Spitzer told the women, who had paid $200 to munch on cold chicken and listen to a 15-minute speech by the State Attorney General on why he’d decided to run for Governor in 2006. “But more important, ideas are the currency of politics,” he added, “and I will be calling on you for ideas that will drive not only this campaign but … campaigns to come.”

This little nod to “ideas” was clearly smart strategy on the part of Mr. Spitzer; as the women filtered from the Pierre ballroom, they burbled happily about how pleased they were to have been asked for their input, sounding almost as if they’d been invited to the prom. “I really like that he wanted to know what we have to say,” said one donor as she flitted through the crowd, which included such veteran society fund-raisers as Karenna Gore Schiff and former New York State party chairwoman Judith Hope.

But Mr. Spitzer’s plea for ideas was not just a case of idle flattery; it also seemed to reflect his campaign’s financial confidence, a tacit nod to the fact that money has been flowing quickly enough into Mr. Spitzer’s war chest that he can at least pretend to be interested in more than just fat checks.

According to the most recent campaign-finance reports, released on Jan. 18, Mr. Spitzer has raised some $7.9 million for his 2006 campaign for Governor. Culled from checks as small as $50 and as large as $50,000 (thank you, Bob Weinstein!), from donors ranging from Republican lobbyist Armand D’Amato to a heap of hedge-fund managers, this money gives Mr. Spitzer a cozy lead over any potential challengers on either side of the aisle. Most notably, it’s nearly double the amount that Governor George Pataki had four years ago as he prepared to run for a third term-and it handily outstrips the Governor’s current $2.35 million nest egg. (Of course, it’s also worth noting that Mr. Pataki’s finance team was busy during the first half of the funding cycle pumping loyal donors for $10 million in contributions to George W. Bush.)

At this point, it’s not even clear that Mr. Pataki is going to run for a fourth term. Mr. Spitzer’s fund-raising prowess would seem to discourage another run by the Governor, although Mr. Pataki is quite skilled at raising cash in a hurry, spending $45 million to win a third term in 2002.

“The message this sends is: ‘Everybody get out of the way, Eliot’s coming,'” said Doug Muzzio, a professor of political science at Baruch College, referring to Mr. Spitzer’s fund-raising windfall. “He’d virtually cleared the field already of both Democrats and Republicans, and this just adds to it. This is like increasing the megatonnage during the Cold War.”

In building this fund-raising arsenal, Mr. Spitzer’s campaign has benefited heavily from the largesse of Manhattan’s traditional Democratic elite. All the usual fund-raising suspects have lined up to throw money into the Spitzer hat, from real-estate moguls like Abby and Edward Milstein to Albany lobbyists like Mel Miller, from media titans like Harvey Weinstein to the whole perfumed menagerie of ladies who lunch.

In some ways, this is surprising, since Manhattan’s society Democrats don’t often pony up large checks for statewide elections, even a Governor’s race. (H. Carl McCall raised just $16 million for his race against Mr. Pataki in 2002.) But with Democrats struggling to define themselves in the wake of the Presidential loss, the idea of a winning candidate might be just too tempting.

“At a time when there’s sort of a vacuum in leadership … people know that if the Democratic Party is going to succeed, it’s people like Eliot [Spitzer] and Barak [Obama] who are going to lead them out of the current morass,” said Adam Solomon, a longtime Democratic donor who sits on Mr. Spitzer’s finance committee. “At least they feel, ‘Jesus Christ, there’s someone I can respect.'”

Nor are Democrats the only ones who are lining up for Mr. Spitzer. Along with all the predictable players, there have also been quite a few unusual suspects on Mr. Spitzer’s team, beginning with a handful of Republicans with close ties to Mr. Pataki and his former mentor, Alfonse D’Amato (who recently praised Mr. Spitzer as “a great attorney general”). At the Dec. 9 fund-raiser, Mr. D’Amato’s brother, lobbyist Armand, as well as Mr. D’Amato’s former chief of staff, John Zagame, were among the guests grazing on glazed chicken and little cakes garnished with chocolate disks that read “Spitzer 2006.” Among other unexpected fans is former South Dakota Senator Larry Pressler, who not only gave Mr. Spitzer a $300 check but also wrote the A.G. a letter saying he had never before given money to a Democrat, according to sources close to Mr. Spitzer.

Securities lawyers-who are notorious Democratic donors-seem to have been particularly generous to Mr. Spitzer, perhaps in recognition of all the business he indirectly sent their way when he launched his probes into crooked stock analysts and greedy mutual funds. A donor list for Mr. Spitzer’s Dec. 9 fund-raiser listed as many as 10 securities attorneys, including Max Berger, a prominent litigator who most recently represented aggrieved WorldCom investors, and Stanley M. Grossman, who once helmed the influential National Association of Securities Attorneys.

But perhaps the most intriguing of Mr. Spitzer’s supporters are the hedge-fund managers who have showered hundreds of thousands of dollars on his campaign.

The “hedgies,” as they’re sometimes called, love Eliot Spitzer. While Wall Street bankers have tended to steer clear of his campaign-in part because of a state law prohibiting contributions by any corporations that sell bonds to the state, in part because they’re still peeved about his crusade against corrupt stock analysts-hedge-fund managers seem to have Spitzer headquarters on speed-dial. Some of these guys, like Kynikos Capital’s James Chanos, always pop up on Democratic host committees (what else are they supposed to do with their $10 million year-end bonuses?). But others, like Stanley Druckenmiller, who runs Duquesne Capital Management and is a registered Republican, are genuine converts to the Spitzer cause.

And why not? While the Attorney General brought his prosecutor’s wrath down on Canary Capital-a hedge fund tied up in the mutual-fund market-timing scandal-he has, thus far, left hedge funds largely alone. As the hedgies are fond of saying, Mr. Spitzer seems to “understand” hedge funds. After all, some of his best friends are hedge-fund managers, and for many years he was a loyal hedge fund investor, reaping what his good friend James Cramer described in his book, Confessions of a Street Addict, as a “boatload” of money from the Cramer-Berkowitz fund.

But, perhaps most compelling, Mr. Spitzer’s tactics have been good for hedge-funders’ wallets.

“People act like [Eliot Spitzer] is attacking the industry, but it’s the opposite: He’s helping make the industry stronger by cutting out bad practices and crooks,” said a money manager who has donated $7,500 to the Spitzer war chest. “A good investment depends on transparency, [because] people who are trying to invest using their insights can’t do that if the insights are based on wrong information. So their business is better if things are clearer,” he added.

Still, transparency is only half the equation for hedge-fund managers. The other half of the equation is fantasy-or rather, the tendency of hedgies, like so many other donors, to identify with the crusading A.G. as some kind of idealized reflection of themselves.

“There’s a kind of a rebelliousness among hedge-fund people, [so] they identify with Eliot Spitzer,” explained the money manager. “He’s a smart, aggressive guy who appeals to that same kind of I’m-going-to-change-the-world-and-blow-things-up kind of excitement.”

And, like so many of their breed, the hedgies know a good investment when they see one. “It’s a lot like investing,” said Keith Rosenbloom, a Spitzer fund-raiser who runs ComVest Investment Partners, a $1.4 billion fund-of-funds. “When you find an investment that’s really special, you’re supposed to bet more on that one if you really understand it. This is a guy who is really special-and you try to back the guys who are really special.”