According to ABC News, New York Gov. Eliot Spitzer wasn't caught up in a federal investigation of a prostitution ring -- it was the other way around.
Unnamed federal officials have told ABC News reporter Brian Ross that the investigation of the prostitution ring began after a bank alerted the IRS to"suspicious" money transfers by Spitzer. These transfers led federal agents to believe the governor might have been hiding bribes; after some months, Ross reports, the FBI and IRS determined that the transfers were in fact being used to hide payments to a front used by the ring, known as Emperors Club VIP. Ross quotes an anonymous Justice Department official as saying, "We had no interest at all in the prostitution ring until the thing with Spitzer led us to learn about it."
The complaint filed against the defendants alleged to be the leaders of the Emperors Club VIP notes that the FBI and the IRS began their investigation into the ring "[i]n or about October 2007."
Ross also reports that, according to a Justice Department official, Spitzer may be prosecuted for a crime known as "structuring." According to a Bureau of Justice Assistance bulletin, structuring "means breaking transactions larger than $10,000 into smaller increments by making multiple deposits or withdrawals or by buying cashiers' checks, money orders, or other monetary instruments for the express purpose of evading the reporting requirements. These reports, required by the Bank Secrecy Act and the Internal Revenue Code, must be filed with the Internal Revenue Service every time a transaction involving more than $10,000 in cash is carried out with a financial institution."