Paul Flynn’s walk out of a state court yesterday as a free man is a moment for New Yorkers to reflect on the judgment of Attorney General Spitzer. Fresh on the heels of failing to convict a Bank of America trader, Theodore Sihpol, of 29 market timing and late trading charges and dismissing the other four counts, Mr. Spitzer threw in the towel yesterday, dropping the charges against Mr. Flynn just as a trial was scheduled to start. Perhaps we’ve been watching too many reruns of “Law & Order, “but we were under the impression that the dominos are supposed to fall in the other direction when a prosecutor takes on an industry.

Mr. Spitzer had charged Mr. Flynn, who was the managing director of Canadian Imperial Bank of Commerce, in connection with a broader investigation of alleged misbehavior in the mutual fund industry. According to court papers, Mr. Flynn was charged as an accomplice for supposedly helping his two co-defendants, Grant Seeger and William Kenyon, exploit “opportunistic trading practices” to benefit two hedge funds. Mr. Flynn apparently secured loans for the hedge funds to facilitate the trading. Seeger and Kenyon have already pleaded guilty and Mr. Flynn’s former employer agreed to pay a $125 million fine to settle related claims in connection with the case, albeit without admitting or denying wrongdoing.

In the court filing requesting the dismissal of charges against Mr. Flynn, the attorney general’s office argued that Mr. Flynn had only played a bit part in the conspiracy Mr. Spitzer alleged. Given that the two individuals who pled guilty received only probation, perhaps Mr. Spitzer concluded that it wasn’t worth pursuing Mr. Flynn. Maybe Mr. Spitzer even learned a lesson from the Sihpol embarrassment – one key aspect of Mr. Flynn’s defense was that his employers had known about what he was doing, an echo of the Mr. Sihpol’s successful argument.

Mr. Flynn isn’t completely in the clear yet. He still faces civil actions from the Securities and Exchange Commission. Mr. Spitzer faces bigger problems. At least twice now, a trip to the court house has led to such a rude awakening for Mr. Spitzer, and a third may be on the way as an investment advisory firm, J & W Seligman & Company, sues him in federal court to stop an investigation. The last thing Mr. Spitzer needs as he goes into the race for governor is to be racking up retreats in his campaign against the financial industry he’s done so much to vilify. If Mr. Spitzer folds this easily against Wall Street bankers, imagine how he’ll collapse when it comes to taking on the trouble in Albany.