By Daniel Trotta
NEW YORK (Reuters) - New York Gov. Eliot Spitzer, theone-time "Sheriff" of Wall Street who campaigned on a promiseto clean up state politics, battled reports of a sex scandal onMonday that threatened to force his resignation.
A New York Times report linked him to a $1,000-an-hourprostitute, saying he was caught on a federal wiretap at leastsix times on February 12 and 13 arranging to meet with her at aWashington hotel last month. The Times said he was the mandescribed in court papers as Client 9.
Spitzer, a married 48-year-old Democrat, apologized forwhat he described as "private matter" but said nothing aboutresigning. Some media reports said he would quit and some stateRepublicans called for him to step down.
CBS 2 television in New York, citing unnamed sources, saidSpitzer could resign and be replaced by Lt. Gov. David Patersonas early as Monday night.
"I have acted in a way that violated the obligations to myfamily and that violates my -- or any -- sense of right andwrong. I apologize first, and most importantly, to my family. Iapologize to the public whom I promised better," Spitzer told apacked room of reporters in New York City with his wife at hisside.
"I am disappointed that I failed to live up to the standardthat I expect of myself. I must now dedicate some time toregain the trust of my family," Spitzer added.
The news rocked Wall Street, where power brokers resentedSpitzer's high-profile inquiries into financial cases when hewas New York state's chief prosecutor, and sent shockwavesthrough the Democratic Party.
"Get ready for a schadenfreude festival on Wall Street,"said Barry Ritholtz, director of equity research at Fusion IQin New York.
Spitzer has been described a rising star in the party andis pledged to support Democratic presidential candidate Sen.Hillary Clinton of New York as a superdelegate at theDemocratic Party convention in August.
As state attorney general before being elected governor inNovember 2006, Spitzer built his reputation going afterwhite-collar crime on Wall Street. As governor, he vowed toclean up state politics.
FORMER "CRUSADER OF THE YEAR"
Time Magazine named him "Crusader of the Year" in 2002after his landmark settlement with 10 of the country's largestsecurities firms over charges of misleading investors.
The New York Times, citing an administration official,reported that Spitzer had told his top administration officialshe had been involved in a prostitution ring that had been underinvestigation by federal authorities.
Spitzer is the individual identified as Client 9 in courtpapers that were filed last week when four people were chargedwith running a multimillion-dollar international prostitutionring, the Times reported, citing unidentified sources.
Client 9 arranged to meet with a $1,000 an hour prostituteon February 13 in room 871 of a Washington hotel and paid$4,300 for services rendered and as a down payment for futureengagements, according to those court documents.
The papers describe six telephone calls between Client 9and one of the defendants that were intercepted by wiretapsbetween February 12 and 13.
Client 9 visited a women identified as Kristen, who wasdescribed by one of the defendants as an American, petite, verypretty brunette weighing 105 lbs (48 kg).
BLOW TO DEMOCRATS
Julian Zelizer, politics and history professor at PrincetonUniversity, said the case was a blow to Democrats beyond thestate of New York.
"He was a rising star. Before he became governor he wasseen as a potential president. ... Whenever you lose a risingstar, it's a little demoralizing, " Zelizer said.
As a high-ranking elected Democrat, he is a superdelegateto the party's convention where the presidential nominee forthe November 4 presidential election will be chosen. Thesuperdelegates are in addition to delegates elected duringnominating contests around the states.
Shares of bond insurers fell on the news. Spitzer has beena crucial figure in helping the insurers raise more capital andkeep their top credit ratings.
The bond insurers, which guarantee more than $2.4 trillionof debt against default, have been scrambling to get capital astheir expected payouts have been surging.
New York law firm Paul, Weiss said it was representingSpitzer but had no comment. Spitzer previously worked for thatlaw firm.
Spitzer has been married to Silda Wall Spitzer since 1987and they have three daughters.
(Additional reporting by Jennifer Ablan, Michelle Nichols,Robert Campbell, Joan Gralla, Gary Crosse and Ken Barry;Writing by Daniel Trotta; Editing by Ellen Wulfhorst andFrances Kerry)
