Spitzer Fumbles in Red Zone

All of the sudden, Eliot Spitzer, Wall Street's dragon slayer, doesn't look so scary.

Over the past five months, the New York attorney general has suffered a series of courtroom defeats that have tarnished his well-crafted image as protector of the small investor. No longer does Spitzer carry the aura of untouchability that marked the first six years of his administration.

The losing streak began this summer when a New York court tossed out most of the criminal case Spitzer's office had filed against former Bank of America(BAC Quote) broker Theodore Sihpol in the mutual fund trading scandal. Close on the heels of that, a federal judge said Spitzer had overstepped his authority in investigating the home-lending practices of the nation's big banks.

Spitzer's latest setback occurred Monday when he dismissed criminal charges against Paul Flynn, the lone investment banker charged in the mutual fund trading scandal. The case against the former Canadian Imperial Bank of Commerce(BCM Quote) financier came to a quiet end during a brief two-minute hearing before New York Supreme Court Justice James Yates.

Flynn's walk plays into the hands of Spitzer's critics, who say he is an ambitious politician who brings cases solely to raise his public profile. Clearly, it's not kind of publicity the New York Democrat wants as he begins his campaign for governor of the Empire State.

A Spitzer spokesman declined to comment on that criticism. He said: "The recommendation for dismissal does not speak to the defendant's legal guilt, but rather to the fact that, in light of post-indictment developments, alternate sanctions for his conduct are more appropriate."

Prosecutors had charged Flynn with providing more than $1 billion in financing to two hedge funds --- Canary Capital Partners and Samaritan Asset Management -- that engaged in abusive mutual fund trading.

But in a five-page order submitted to the court, Spitzer said the dismissal is warranted because Flynn is not as culpable as once thought. "A dismissal of the criminal action against defendant Flynn,'' the order says, "will neither undermine confidence in the sphere of securities enforcement nor adversely impact the welfare of the community.''