In 1998, during the final weeks of his second race for state Attorney General, Eliot Spitzer called a confidential meeting for less than a handful of nonprofit leaders and philanthropy experts. The candidate wanted to learn more about the Apollo Theater fiasco in Harlem, in order to more clearly understand the AG's role in regulating charities. At the time, Spitzer and his campaign staff were traveling all over New York state, stumping in rusted-out industrial centers along the Erie Canal and flying back to Manhattan at night, looking to outhustle incumbent Dennis Vacco. Many at the meeting figured that with the election so near and the candidates so evenly matched, Spitzer would ask a few questions, probe for advice, then get onto a plane for Buffalo by lunchtime.

Instead, he wouldn't leave. He stayed at the meeting for four hours.

These days, Spitzer is still everywhere. He's fought gougers who sell overpriced school milk. He's busted wayward tree loggers upstate. He's extinguished tobacco ads from the school editions of news magazines. He's attacked Wall Street's bogus research analysts, of course, and probed trade tampering in the mutual fund industry (he currently has over 100 subpoenas outstanding). His press secretaries' home and cell phones now ring in the middle of the night and on weekends. Spitzer has become one of the nation's most recognized attorneys general. And as political insiders point out, "AG" has consistently stood for one thing in politics: Almost Governor.

But even as his lawyers go after big-money crooks, Spitzer has focused a sliver of limelight on the state's poorly regulated charity industry. Some watchdogs like to compare this do-gooder sector to the Wild West, a land where oversight is scant, and where mischievous board members and imperial directors are free to run for the hills with public money or donations, leaving as their only spoor an incomprehensible paper trail of IRS Form 990s.

Thus, in addition to Bank of America and Merrill Lynch, we have (with help from the Daily News) the charity Hale House, where a home for orphans became a budget for Lorraine Hale's wardrobe. There is the string of queries into improper fundraising and spending after September 11. Less visibly, the AG's office has intervened into and overhauled other negligent nonprofits. One such organization is the Black United Fund of New York (BUFNY) in Harlem. AG investigators discovered that BUFNY president and founder Kermit Eady was taking millions in donations and awards to specific grantees, and spending the money on real estate without board approval. Eady has since been removed, an interim board has been installed, and the AG's office is interviewing candidates for permanent positions on BUFNY's board.

There's a new, take-no-prisoners attitude at the AG's charity bureau, say nonprofit lawyers and leaders who've come under the office's scrutiny--during merger discussions, for example. Attorneys are "more aggressive" and "heavy-handed," and can be "a total pain in the ass," says one. The details of transactions are now subject to vigilance. The bureau seems more aggressive about enforcing basic reporting requirements--it boasts that it has collected 25 percent more in fines this year than last, thanks in part to a $150 penalty on nonprofits that are delinquent in filing their 990s.

But in fact, former staffers say, Spitzer's Charities Bureau isn't doing much more than his predecessors'. That's because the office has always been terribly understaffed--and it still is. Only 20 attorneys and four accountants are responsible for some 48,000 tax-exempt groups that file with the AG's office every year, and another 9,000 registered nonprofits that are delinquent in filing. For the last three years, the number of "assurances of discontinuances" (i.e., civil settlements reached by the Bureau with nonprofits) has been roughly the same: some 10 cases annually, according to documents obtained through a Freedom of Information Act request. With 16 other bureaus in the AG's office and a total of 500 attorneys, and with so much of Spitzer's attention going to investigations of the financial sector, the Charities Bureau has been virtually left to its own devices.

"Eliot doesn't bother us at all," says William Josephson, the Charity Bureau Chief, adding that one of Spitzer's most effective qualities as AG has been his ability to delegate responsibility.

So why have nonprofit executives around the state been competing with hedge-fund managers in the intensity with which they watch Spitzer's every move? The answer goes by the nickname "SOX," but the full reference sounds vaguely like a brand of men's dress shoes worn with argyles: Sarbanes-Oxley.

Over the last year, Spitzer has been advocating a state bill that would enhance his office's capacity to monitor and, if necessary, take action against nonprofit organizations. Not incidentally, the bill is also meant to force nonprofits to govern themselves more effectively. The Charities Bureau has spent the last year on a statewide campaign to sell nonprofits on the measure. "There's not a speaking engagement we turn down," Josephson told a crowd of nonprofit accountants during a speech at "Camp Finance," a retreat at the Mohonk Mountain Resort in October.

The proposal is a nonprofit-oriented, state-based version of the federal Sarbanes-Oxley Act, which regulates publicly traded companies. That's why many in the nonprofit sector dubbed the AG's proposal SOX, and it's also why some leaders in the same field bristle at Spitzer's cross-sector crusade. Financial controls that might be right for profit-making enterprises, they say--including board audit committees and financial statement certifications--may be a crushing burden on nonprofits, which typically run on shoestring budgets. Under the most recent version of the proposed bill, all groups with more than $1 million in revenue would be subject to the regulations.

"It's not a very good fit," says Dan Kurtz, a former Charities Bureau Chief under Vacco and now a partner at Holland & Knight who specializes in representing nonprofit organizations. The SOX-style bill presumes all groups are guilty until proven innocent, he says. It gives the AG's office more power and prosecutorial discretion, and ultimately creates potential for abuse by the AG's office itself. "Not all attorney generals," says Kurtz, "can be as scrupulous and confident as Eliot Spitzer."