The Spitzer Backlash

As state attorneys general clamp down on corporate wrong-doers, companies fight back.

At least once a week, Pennsylvania Attorney General Tom Corbett gets an E-mail asking him to join his fellow attorneys general in signing letters to Congress, announcing joint positions — or, frequently, suing companies.

He reads the invitations carefully — and also checks to see who has signed on. “Sometimes you can tell that the state [attorneys general] signing on are activists,” says Corbett. “They probably have an agenda different than mine.”

Corbett describes himself as an “active, not activist” attorney general who understands the “detrimental effect” of politically charged enforcement actions. He should. From 1998 to 2002, he served as vice president of government relations for Waste Management, representing the scandal-plagued company before regulators and legislators in 14 states. An easy target, the company was regularly written up for a slew of hauling and dumping violations in several of those states. “The frustrating part,” he recalls, “was trying to diffuse the heat of political rhetoric to look at the facts.”

Today, he says, that experience helps him to be “fair and balanced” in deciding whether Pennsylvania joins multistate suits. Two summers ago, for example, New York State Attorney General Eliot Spitzer led an eight-state suit against power-plant owners for causing global warming. Some of the AGs in that action, Corbett now says, “signed on totally for political purposes.”

State attorneys general have been banding together to take corporate wrongdoers to task for decades. That tactic has matured over the past few years, creating a powerful new regulatory force. Recently, attorneys general have forced changes in business practices and extracted millions of dollars in settlements from such household names as DirectTV, Western Union, Blockbuster, and, in January, mortgage giant Ameriquest. (Pennsylvania was a participant in most of these suits.)

Now, a corporate backlash is brewing. Angered by the growing prosecutorial fervor and the efforts to impose restrictions on their operations, some of the nation’s largest companies are pressing a campaign to rein in aggressive attorneys general and elect candidates more friendly to business.

Hitting Back

Such a campaign has been long anticipated. Taking a swing at the nation’s big corporations is risky business, says James Tierney, former attorney general for Maine and now head of the National Attorneys General Program at Columbia Law School in New York. Sooner or later, he warns, “they hit back.”

The U.S. Chamber of Commerce is leading the charge with a state-by-state ground war to elect more business-friendly attorneys general. This will be a watershed year for such contests: 29 of the 43 elected attorneys-general seats are up for election in 2006. (In seven other states and the District of Columbia, the attorney general is appointed, not elected.) Once regarded as merely local affairs, these races are now seen as critical to corporate interests.

The Chamber’s Institute for Legal Reform (ILR) is spending millions to try to influence elections in 2006. The Institute is the fourth largest lobbying group in the United States, according to PoliticalMoneyLine, which tracks such data from its offices in Washington, D.C. Since 2000, the ILR says it has targeted 16 attorney-general races, and it has claimed victory in 13. Its campaign spending topped $14.1 million in 2004, the last full year for which statistics are available.

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