Spitzer Fumbles in Red Zone

Of course, that's not how Spitzer saw it on Feb. 3, 2004, when he had Flynn arrested outside of his Westchester County, N.Y., home. A press release issued at the time of the arrest was high on moral rhetoric.

"This prosecution sends the message that those who arrange funding for illegal trading will be held accountable, as are those who make the trades," said Spitzer, in a press release announcing the arrest.

Twenty-one months later, the only prosecution Flynn faces is on civil fraud charges filed against him by the Securities and Exchange Commission. A Spitzer spokesman said the New York attorney general might also move to file his own civil charges against Flynn, but at this time, none are pending.

Either way, securities lawyers say Spitzer's handling of the Flynn case sets a poor example for government regulators.

"Government lawyers, in my opinion, have a higher ethical duty to make sure that their cases are well-founded in fact and in law,'' says Derek Meisner, an attorney with Kirkpatrick & Lockhart in Boston and a former senior SEC enforcement attorney.

Jacob Zamanksy, a New York attorney who usually represents investors in disputes with Wall Street brokers, says the Flynn case bears out what many have long suspected about Spitzer: that his cases often fall apart if pushed to the limit.

"There seems to be a big gap between Spitzer bringing charges and what he actually is able to produce as a lawyer,'' says Zamansky. "If you are going to bring charges, you better be able to prove it.''

Bill Singer, a securities lawyer in New York, says the dismissal in the Flynn case will rekindle a debate about Spitzer's tactics and allegations that he uses heavy-handed tactics to force defendants to either reach a civil settlement or plead guilty. In particular, he says many continue to object to Spitzer's frequent use of press conferences to browbeat defendants until he gets what he wants.