Grey Lady
I guess the moral of the story (or "key takeaway" in the language of our new overlords) is don't mess with the Vampire Squid? Who else here feels that it will be the most "troublesome" SEC enforcers who get bounced?July 23, 2010
Inquiry Begun of S.E.C. Timing in Goldman Fraud Case
By EDWARD WYATT
WASHINGTON — The inspector general of the Securities and Exchange Commission is investigating whether political or other factors influenced the timing of the filing and subsequent settlement of the commission’s securities fraud case against Goldman Sachs, according to letters between his office and a Republican congressman.
The inquiry also focuses on Representative Darrell E. Issa’s assertion that commission officials leaked details of the case to The New York Times before it was formally announced, and whether the settlement timing was influenced by an article in The Wall Street Journal.
The S.E.C. charged Goldman in a civil complaint on April 16 with securities fraud related to the creation and sale of a subprime mortgage security. On July 15, Goldman agreed to pay $550 million to settle the case without admitting or denying the accusations.
H. David Kotz, the S.E.C. inspector general, who is an independent watchdog for the agency, began the inquiry in response to an April 23 letter from Mr. Issa, a California Republican who is the ranking minority member of the Committee on Oversight and Government Reform.
The S.E.C. has denied that its timing was influenced by politics.
A spokesman for the S.E.C. said Friday that the agency announced the lawsuit in a news release at 10:35 a.m. on April 16. In an April 20 letter to Mary L. Schapiro, chairwoman of the S.E.C., that was also sent to Mr. Kotz, Mr. Issa stated that “a version of the story” by The Times was published on its Web site at 10:39 a.m. that day.
Diane McNulty, a spokeswoman for The New York Times, confirmed that the Times article was published after the announcement of the S.E.C. lawsuit. She declined to comment on whether the newspaper had been contacted in the investigation.
On Thursday, Mr. Kotz wrote to Mr. Issa that his office was expanding his investigation to include further allegations made in a second letter received that day from Mr. Issa. In the latest letter, Mr. Issa raised questions about the timing of the S.E.C.’s settlement of the case with Goldman Sachs, which occurred on July 15, the same day that the Senate passed the financial regulation bill.
In the letter, Mr. Issa noted that a July 17 article in The Wall Street Journal about the settlement reported that Robert Khuzami, the director of the S.E.C.’s enforcement division, accused Goldman of leaking a story to The Journal suggesting that “Goldman had bested the S.E.C.” in the settlement negotiations.
As a result, Mr. Issa said, the commission “may have entered into a ‘landmark settlement’ resulting in the ‘largest-ever penalty paid by a Wall Street firm’ in order to avoid further criticism in the press.”
A spokeswoman for The Wall Street Journal said the newspaper had not been contacted by the inspector general about the investigation.