Tuesday, June 22, 2010
Another SEC Snow Job
"A recent report by [SEC's] inspector general shows that the investigation of Bernard L. Madoff was not the only one to go badly awry. While the impact of the SEC's missteps were not nearly as significant as in the Madoff case, the report shows that the agency's enforcement division allowed itself to be manipulated by a company it should have been investigating more thoroughly while allowing former staff members to influence decisions on how to proceed. ... The report made available by the Post is redacted, but it gives a fairly damning picture of the SEC staff ignoring seious allegation of corporate misconduct while different offices failed to communicate about the subject matter of the investigation. ... Mr. [David] Einhorn also criticized the financial reporting of Lehman Brothers before that firm collapsed into bankruptcy in September 2008. As is often the case in these situations, each side proclaimed that the other was acting improperly. ... Allied Capital got the upper hand, at least initially, when the SEC started a 'vigorous' investigation of Greenlight Capital after its representatives met with enforcement division staff members. But the report notes that the investigation began 'without any evidence of wrongdoing.' Less than a year later, it ended without finding any violations, but the SEC did not officially close it until 2006 and never notified Mr. Einhorn of its conclusions. ... The investigation by the compliance officer was derailed because one of Allied Capital's representatives was a former SEC staff member, and an ssociate director of the office said that anyone who had worked at the commission was 'not going to be doing anything illegal.' ... The original supervising attorney on the Greenlight Capital investigation was effectively pushed out of his job for performance reasons, and a year later he ended up registering as a lobbyist for Allied Capital. The report notes that the former supervisor 'learned a susbtantial amount of sensitive, nonpublic information regarding Einhorn and Allied.' To make matters worse, when he sought clearance from the SEC's ethics office to represent the company, his response regarding prior involvement with the company while at the commission was incomplete'," Peter Henning at the NYT, 25 March 2010, link: http://dealbook.blogs.nytimes.com/2010/03/24/how-not-to-run-an-s-e-c-investigation.
This is SEC standard operating procedure. Do you really want these guys regulating the accounting industry?