Publicity Hound With Teeth

A radio payola scandal arguably lacks the gravity of other financial misdeeds in the Big Apple. It’s only rock ‘n’ roll, after all. That’s why New York Atty. Gen. Eliot Spitzer’s investigation into how songs win radio play is being dismissed by some who say he’s just setting the stage for a 2006 run for governor.

If that’s the worst that can be said about Spitzer, so be it. He’s filling a void left by federal regulators, who are either asleep or choosing to look the other way. Yes, it’s worrisome when Spitzer stretches his limited powers to do things better left to the federal government; the last thing the country and economy need is 50 attorneys general doing their own things. As a result of Spitzer’s actions, however, mutual funds do a better job of explaining fees, pharmaceutical companies publicize drug research results and investment bank researchers have a tougher time printing mere propaganda.

Spitzer’s payola investigation has sent ripples into Southern California, with subpoenas going to Sony BMG Music Entertainment, Universal Music Group, EMI Group and Warner Music Group. Industry insiders grumble, as usual, that Spitzer is usurping the Federal Communications Commission’s role -- but that agency has levied just one payola fine in the last decade. Spitzer also broke new ground with his probe into alleged insurance industry kickbacks. He forced the chairman of Marsh & McLennan to resign Monday, even before finding evidence of wrongdoing. The brokerage has been accused of steering its clients toward insurance companies that paid money back to Marsh & McLennan. It has vowed to accept payments only from clients from now on.

Spitzer’s investigations have targeted industries with questionable business practices that make it hard for investors to understand what’s really going on. The Securities and Exchange Commission on Tuesday ordered the $900-billion hedge fund industry, which played a key role in the recent mutual fund scandal, to submit to federal regulation that arguably will help to protect investors. Would the SEC have acted without Spitzer breathing down its neck? There’s no way to be sure, but a little uncertainty about what Spitzer might be up to next is good for keeping the regulators awake.