SEC Attorneys Accused Of Insider Trading CBS News Exclusive: FBI Investigating Two High-Level Attorneys After Inspector General Report Securities and Exchange Commission (SEC) Inspector General H. David Kotz, testifies on Capitol Hill in Washington, Monday, Jan. 5, 2009. A new report written by Kotz and obtained exclusively by CBS News says that two top SEC attorneys engaged in insider trading based on information obtained through their SEC jobs. The FBI has launched a criminal investigation. (AP Photo/Haraz N. Ghanbari) (CBS) Written by CBS News investigative producer Laura Strickler and chief investigative correspondent Armen Keteyian. -------------------------------------------------------------------------------- CBS News has learned that two attorneys at the Securities and Exchange Commission (SEC) are under "active" criminal investigation by the FBI for trading stocks based on inside information. Accusations against the two lawyers - a man and a woman whose names have not been released - are detailed in a report by the SEC inspector general obtained exclusively by CBS News. The report, based on a review and analysis of "more than two years of e-mail and brokerage records," puts increased pressure on a commission that has come under fire lately for failing to detect the $60 billion Bernard L. Madoff Ponzi scheme, and turning a blind eye to the Wall Street financial crisis. "We ought to be outraged if there is one insider trading information thatâs leading to personal profit," Sen. Charles Grassley, R-Iowa, the ranking member of the Senate Finance Committee, told CBS News. In response to the IG report, Grassley sent a letter to SEC Chairman Mary Schapiro expressing that outrage and requesting detailed information about the stock holdings and trading practices of all SEC employees. "Itâs hard to imagine a more serious violation of the public trust than for the agency responsible for protecting investors to allow its employees to profit from non-public information about its enforcement activities," Grassley said in his letter to Schapiro. According to the report, the male attorney under investigation by the FBI works in the Office of the SEC's Chief Counsel and "has access to a tremendous amount of nonpublic information." The report alleges both the male attorney and female attorney - who works in the enforcement division - "traded in the stock of a large financial services company" despite being told by another SEC employee of ongoing "investigations of that company." The report calls this is a direct violation of SEC rules. In another possible violation, the male attorney was found to have sent e-mails from his SEC account to his brother and sister-in-law "recommending particular stocks." The attorneyâs stock portfolio was estimated at one point to be valued at $200,000. Itâs hard to imagine a more serious violation of the public trust than for the agency responsible for protecting investors to allow its employees to profit from non-public information about its enforcement activities. Sen. Charles Grassley As for the female attorney, the report states that "two months before an investigation of a large health care company was opened" she "sold all of her shares of stock in the company." And "two days before an inquiry was opened" by a colleague who "occupies the office next to her" the female attorney sold stock in an oil company. Investigators say the female attorney traded stocks 247 times between January 2006 and January 2008. At one point her stock portfolio was valued as high as $170,000. In addition, the report says that the female attorney âspent much of her work day e-mailing and searching the Internet about stocks.â It quotes her telling investigators: "It's my main hobby. It's my passion.â And: âItâs my way of keeping intellectually above what other people are doing.â While the woman told investigators she did not check the SEC database - known as EDGAR - for information related to her personal stock trades, the inspector general said computer records reveal that she did, in fact, check the database on at least four separate occasions. SEC employees are prohibited from accessing EDGAR for personal trading purposes. Said Grassley, "Isnât it odd that youâve got people in the prosecuting department that are trying to profit from information that they get from it. Their job is to be prosecuting and not profiteering." According to employee interviews with investigators and SEC e-mails, the two colleagues shared many of the same stocks, frequently discussed their trades via e-mail, and regularly talked about SEC investigations and their own stock trading during weekly lunches. In one instance, a third SEC employee told investigators the two attorneys under investigation encouraged her to buy stock in a company - despite knowledge of multiple ongoing investigations into that company, a violation of SEC rules. Inspector General David Kotz, who uncovered the possible insider trading, declined a formal request for an interview, citing the ongoing investigation. But when we caught up with him near his office Kotz told CBS News, "The report talks about our concerns that there is no true compliance system at the SEC." Both attorneys - who deny any wrongdoing - still work at the SEC and make six-figure salaries. The investigation was triggered after the high volume of trades by the female attorney set off alarms inside the agency. As it now stands, thereâs no telling how many other employees are not reporting their trades because the SEC has no compliance system in place to monitor the trades of their employees. In fact, the two attorneys under investigation say that no one at the SEC had ever before questioned their reported securities holdings or transactions in the decades they have worked at the commission. In an e-mailed statement to CBS News, the SEC said, "We take seriously even the suggestion that any SEC employee would engage in insider trading. We note that the IG's report neither accuses any SEC employee of insider trading nor concludes that any such conduct took place." The statement went on to say, "Even so, we have been taking additional steps to enhance our protections against the potential for improper conduct. Those include developing a new computer system to facilitate reporting and review of securities trading by all SEC personnel; hiring a chief compliance officer; and providing greater clarity of our rule governing the reporting of trades." © MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
Imagine, in 2003 I started www.investigatethesec.com and in the 6 years since the SEC has been before Congress many times for violations of the laws and for derailing investigations due to political pressures. This most recent OIG investigation exposes only the tip of the iceberg regarding insider trading at the SEC. Too many SEC attorney's use hedge funds to initiate their work and such a relationship has become unhealthy. SEC attorney Richard Sauer admitted to running investigations on behalf of David rocker and Rocker partners and when he left the SEC he went to work for Rockers former fund (Copper River) at a significant raise. Knowing that these investigations would result in an immediate stock decline in the markets, do you not think Sauer was trading on the info?
Good find. "In fact, the two attorneys under investigation say that no one at the SEC had ever before questioned their reported securities holdings or transactions in the decades they have worked at the commission." I've asked myself that questions for years. There's a plethora of non public information and no one checks for insider trading at the SEC?
just the beginning. The next arrests will be higher up. Anybody asking any questions why, since the US collapsed, all of the sudden they pop a Ponzi scheme every two days, an investigation here, there? It takes years to make a case, but since 12/11, Madoff Day, all these cases pop. Whose desk where they on? Who was covering up? Why? Think critically, and you'll see. It's all right in front of you. The entire system was gamed to the point where it had to collapse. If you go to "investigatethesec.com", you'll see Elgindy, in his own transcripts, call out a short because the SEC is about to announce an investigation into the company. That would seem to be information obtainable from only one source.
This is peanuts compared to "failure to supervise" regarding derivatives, large company job prospects via the roladex.....etc. etc.... There is a long long list....which should be cause for the total elimination of the SEC....as it is deft, ignorant of securities products, and simply lets the big fish slide.....with their reason being that their staff is underpaid.... Hence the revolving door....and the formation of Fascism in the USA.... And no.... THIS IS NO JOKE.... Just look at what has happened..... What is happening.... And what will continue to happen.... As long as there is a big difference in pay between the police and the job suppliers....this will never change....
You have an agency where the standard career path is to go to work for the very people you're supposed to be regulating and investigating. No potential conflict there, right? You have hedge funds capable of providing riches that dwarf the entire Enforcement Division's combined salaries. No potential for corruption there either? You have a documented instance of a career attorney fired for raising inconvenient questions about a hedge fund whitewash. So what do they do to restore confidence? Go after a couple of smalltimers for some dubious stock trades. We are told the female attorney had a $170k portfolio. Hedge fund managers suppress snickers. Congressmen get to pontificate and wring their hands. After a show trial, there will be a ritual sacrifice. Everyone is happy. Business as usual may now resume.
AAAInTheBeltway You have an agency where the standard career path is to go to work for the very people you're supposed to be regulating and investigating. No potential conflict there, right? You have hedge funds capable of providing riches that dwarf the entire Enforcement Division's combined salaries. No potential for corruption there either? You have a documented instance of a career attorney fired for raising inconvenient questions about a hedge fund whitewash. So what do they do to restore confidence? Go after a couple of smalltimers for some dubious stock trades. We are told the female attorney had a $170k portfolio. Hedge fund managers suppress snickers. Congressmen get to pontificate and wring their hands. After a show trial, there will be a ritual sacrifice. Everyone is happy. Business as usual may now resume. ................................................... 1000% correct.... Good post.... So the question remains.... What does the average American do about it ? What is the solution ? The SEC just basically scapegoats a few doables rather infrequently, making sure the press covers it .... What the public should have available are the payscales of all ex-SEC employees....where they were ....where they went....did they come back....etc.... ..................................................... As I have mentioned in other posts.... Justice in the US is for those selected few.... The rest just devise every scheme imaginable with past, current, and future govt. officials....LEGAL of course.... The term for mixing govt. and private is fascism.....intended or not....
<embed src='http://www.cbs.com/thunder/swf/rcpHolderCbs.swf?partner=userembed&vert=News&autoPlayVid=false&releaseURL=http://release.theplatform.com/content.select?pid=soj7EIMJbn0comdKPaQv7AJfuIPzDKIJ' name='cbsPlayer' allowFullScreen='true' allowScriptAccess='always' width='506' height='494' wmode='transparent' type='application/x-shockwave-flash' pluginspage='http://www.macromedia.com/go/getflashplayer' />
The good news. The SEC is going to hire a compliance officer. The bad news, minimum wage. The good news, you get stock options. bad news. umhnnn, we're not sure what stocks yet. The good news, You'll be reporting to Inspector Clouseau Stay tuned....