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Project on Government Oversight

New Report Discloses Recent Investigations by SEC Inspector General

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December 1, 2010

Twice a year, Inspectors General are required to submit reports to Congress describing their recent audits and investigations, and these reports are made available to the public. In the case of the Securities and Exchange Commission (SEC) Office of Inspector General (OIG)—which is restricted in its ability to post its own reports of investigation—these semiannual reports to Congress are often the only resource the public can consult to learn about the OIG’s recent investigative activity. In fact, most OIGs do not proactively make their reports of investigation available online unless they receive several Freedom of Information Act (FOIA) requests or some other expression of significant public interest in the reports.

This week, the SEC OIG issued its latest semiannual report to Congress for the period of April 1 to September 30, 2010. There are only two investigative reports from this period that have been officially released to the public by SEC management: one on the timing of the SEC’s charges filed against Goldman Sachs, and the latest one (released today) on the SEC’s favorable treatment of Bank of America at a time when BofA had received billions in taxpayer assistance under the Troubled Asset Relief Program (TARP).

But that’s not all the OIG has been investigating recently, according to the latest semiannual report. Here are some other highlights of the OIG’s recent investigations:

  • An SEC Headquarters attorney has not been a member in good standing of any state bar since 2006; he misrepresented his bar status to SEC management; he may have violated a criminal conflict-of-interest statute by sending documents from his SEC computer which were used by a foreign national to assist with her visa application; he may have disclosed sensitive, non-public information to a friend who was outside counsel for companies overseen by the SEC, and potentially received favors in return, including a round-trip flight; he served on the board of directors of two companies that issued public securities; and he represented a prospective professional athlete as an attorney and agent while working at the SEC and using SEC equipment

  • An SEC Regional Office Branch Chief violated federal ethics rules by soliciting charitable contributions and accepting gifts from her subordinates

  • As SEC Headquarters supervisor created an appearance of impropriety by serving on the investment committee of a non-profit organization

  • An SEC Regional Office employee violated the Hatch Act by participating in a partisan political election

  • An SEC Headquarters employee received over 10,000 denials during a five-and-a-half week period for attempting to access pornographic websites

In addition, the semiannual report revealed that the OIG is currently investigating:

  • A senior official at an SEC Regional Office who allegedly instructed examiners not to pursue certain “red flags” at an investment adviser in order to cover up his involvement in a previous botched examination (the complainant in this case further alleged that there was a hostile work environment in the office because SEC management failed to discipline the senior official for viewing pornographic materials on an SEC computer)

  • An SEC official who allegedly violated federal laws, as well as conduct and ethics rules, while testifying before Congress

  • A senior management official who allegedly awarded contracts to a company in violation of the laws, rules, and/or policies related to contracting procedures

  • A former Enforcement attorney who allegedly committed acts of negligence during an insider trading investigation

  • Several allegations of unauthorized disclosure of non-public information to the news media

  • Attorneys at an SEC Regional Office who allegedly gave improper preferential treatment to a prominent law firm that was being investigated for obstruction of an ongoing SEC case

  • A former SEC employee who allegedly violated federal post-employment restrictions by going to work for an entity regulated by the SEC

Based on summaries provided in this latest semiannual report, there are now at least 34 reports of investigation issued by the SEC OIG since the beginning of 2009 that have not been made available to the public.

Also, the semiannual report describes several instances in which SEC management did not follow the OIG’s proposal to take disciplinary action against employees cited for serious misconduct. POGO has been tracking numerous cases over the past few years in which senior SEC officials—whose names are typically redacted in the publicly released version of OIG reports—never faced any disciplinary action for their misdeeds.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO’s investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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