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Senator Chuck Grassley, Republican of Iowa, says SEC may have destroyed
documents
“From
what I’ve seen, it looks as if the SEC might have sanctioned some level
of case-related document destruction,” said Sen. Chuck Grassley,
Republican of Iowa, in a letter to the agency’s chairman, Mary
Schapiro.
“It doesn’t make sense that an agency responsible for
investigations would want to get rid of potential evidence. If these charges
are true, the agency needs to explain why it destroyed documents, how many
documents it destroyed over what timeframe, and to what extent its actions
were consistent with the law.”
Agency staff “destroyed over 9,000 files” related to preliminary
agency investigations, according to a letter sent in July to Grassley, the
top Republican on the Senate Judiciary Committee, and obtained by MarketWatch.
The allegations were made by SEC enforcement attorney, Darcy Flynn, in a
letter to Grassley. Flynn is a current employee, and according to the letter,
received a bonus for his past year’s work.
Flynn alleges the SEC destroyed files related to matters being examined in
important cases such as Bernard Madoff and a $50 billion Ponzi scheme he
operated as well as an investigation involving Goldman Sachs Group Inc.
trading in American International Group credit-default swaps in 2009.
Flynn also alleged that the agency destroyed documents and information
collected for preliminary investigations at Wells Fargo, Bank of America,, Citigroup, Credit Suisse, Deutsche Bank, Morgan
Stanley, and the now-bankrupt Lehman Brothers.
The letter goes into particular detail about Deutsche Bank, the former
employer of current SEC enforcement chief Robert Khuzami
as well as former enforcement chiefs Gary Lynch and Richard Walker.
The allegations that the SEC destroyed documents were first reported by the
Rolling Stone magazine in a report Wednesday.
Senator Grassley's
Letter to the SEC
Inquiring minds may be interested in Senator Grassley's Letter to
the SEC
Slap of the Wrist of MarketWatch
Once again I am irritated by articles and authors who quote other sources and
do not have the decency to post a link. In this case the author is Ronald D. Orol, a MarketWatch reporter,
based in Washington.
Orol should have caught that and if not the editors
at MarketWatch should have caught it.
Is the SEC Covering Up Wall Street Crimes?
Please consider Rolling Stone: Is the SEC
Covering Up Wall Street Crimes? by Matt Taibbi
Imagine
a world in which a man who is repeatedly investigated for a string of serious
crimes, but never prosecuted, has his slate wiped clean every time the cops
fail to make a case. No more Lifetime channel specials where the murderer is
unveiled after police stumble upon past intrigues in some old file –
“Hey, chief, didja know this guy had two
wives die falling down the stairs?” No more burglary sprees cracked
when some sharp cop sees the same name pop up in one too many witness
statements. This is a different world, one far friendlier to lawbreakers,
where even the suspicion of wrongdoing gets wiped from the record.
That, it now appears, is exactly how the Securities and Exchange Commission
has been treating the Wall Street criminals who cratered the global economy a
few years back. For the past two decades, according to a whistle-blower at
the SEC who recently came forward to Congress, the agency has been
systematically destroying records of its preliminary investigations once they
are closed. By whitewashing the files of some of the nation’s worst
financial criminals, the SEC has kept an entire generation of federal
investigators in the dark about past inquiries into insider trading, fraud and
market manipulation against companies like Goldman Sachs, Deutsche Bank and
AIG. With a few strokes of the keyboard, the evidence gathered during
thousands of investigations – “18,000 … including
Madoff,” as one high-ranking SEC official put it during a panicked
meeting about the destruction – has apparently disappeared forever into
the wormhole of history.
Under a deal the SEC worked out with the National Archives and Records
Administration, all of the agency’s records – “including
case files relating to preliminary investigations” – are supposed
to be maintained for at least 25 years. But the SEC, using history-altering
practices that for once actually deserve the overused and usually hysterical
term “Orwellian,” devised an elaborate and possibly illegal system
under which staffers were directed to dispose of the documents from any
preliminary inquiry that did not receive approval from senior staff to become
a full-blown, formal investigation. Amazingly, the wholesale destruction of
the cases – known as MUIs, or “Matters Under Inquiry”
– was not something done on the sly, in secret. The enforcement
division of the SEC even spelled out the procedure in writing, on the
commission’s internal website. “After you have closed a MUI that
has not become an investigation,” the site advised staffers, “you
should dispose of any documents obtained in connection with the MUI.”
That is the opening
snip. The entire article is worth a read.
I rather suspect the SEC has safeguarded with perfect care the files on
Martha Stewart, two-bit Joe, and blogger Bob.
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