Earlier today I wrote about Treasury Secretary Timothy Geithner's announcement of initiatives to revers the US financial crisis, and he talked about major priorities of transparency and oversight.
Then, in the papers, I spotted this article below that the head of enforcement for the SEC just resigned after she was grilled in a congressional hearing about not acting on the Madoff Ponzi scheme and other fiscal calamities.
Good - there is no excuse for the lapse in oversight in the SEC. When I lived in California, former SEC head Chris Cox was my representative and I went to many of his functions. He was considered to be an intellectual and I thought his appointment to run the SEC was a good thing. But, apparently oversight was not one of his priorities. The Dems need to ramp up oversight, or they will be next on the chopping block and they have full control, so have no one else to blame if there is another fiscal collapse.
vj
SEC Enforcement Director Linda Thomsen to Step D - Bloomberg News Service
By David Scheer and Jesse Westbrook
Feb. 9 (Bloomberg) -- U.S. Securities and Exchange Commission Enforcement Director Linda Thomsen, whose unit is the target of congressional scrutiny for failing to detect Bernard Madoff’s alleged $50 billion fraud, will step down as new Chairman Mary Schapiro replaces senior management.
Thomsen, head of the division since 2005, will return to private practice after 14 years at the SEC, the agency said in a statement today. A departure date isn’t set and she will stay to help ensure a smooth transition, SEC spokesman John Nester said.
Schapiro, appointed by President Barack Obama, is replacing senior managers after being sworn in Jan. 27 with a pledge to “reinvigorate” an enforcement arm faulted by lawmakers for missing Madoff’s alleged Ponzi scheme. Former federal prosecutor Robert Khuzami, now a top Deutsche Bank AG lawyer, is the lead candidate to succeed Thomsen, two people familiar with the matter said last week.
“It’s not unusual at all for a chairman to bring in his or her own people,” said David Ruder, a Republican SEC chairman under Ronald Reagan. “The division has done extremely well during Thomsen’s time under very difficult circumstances.”
Schapiro on Feb. 7 named David Becker, 61, a partner at Cleary Gottlieb Steen & Hamilton in Washington, to be the SEC’s chief legal officer and senior policy adviser. She has also asked Commissioner Elisse Walter, a Democrat, to seek candidates who may replace other senior managers, people familiar with the matter said last week.
Enron, Insider Trading
Thomsen, a former assistant U.S. attorney in Maryland, joined the SEC as a trial lawyer in 1995 and advanced through the ranks. She oversaw the investigation of Enron Corp., the energy trader that went bankrupt in 2001. The agency handled more than 2,000 cases while she was enforcement director.
In 2005, then-Chairman William Donaldson promoted her to become the first woman to run enforcement, the agency’s biggest division. In an interview today, he described her as “a person of high integrity and a dedicated public servant.”
During her tenure, investigators cracked down on insider trading, corporate bribery of foreign officials and backdating of employee stock options. Last year, the SEC and state regulators forced banks to buy back more than $50 billion in auction-rate securities to settle claims that the firms falsely touted the investments as safe, cash-like investments.
Pequot Probe
At the same time, the enforcement unit has faced criticism from U.S. Senators Charles Grassley and Arlen Specter over its handling of an insider-trading probe into hedge fund Pequot Capital Management. Iowa’s Grassley and Pennsylvania’s Specter, both Republicans, examined claims from a fired SEC attorney that superiors impeded his Pequot inquiry because of the prominence of those he was trying to investigate.
SEC Inspector General David Kotz also reviewed the matter and called in an October report for the agency to consider disciplining Thomsen over a conversation she had with an outside attorney about the case. An SEC administrative judge cleared Thomsen of wrongdoing a month later.
Thomsen’s time on the job was also marked by wrangling among commissioners over whether to scale back fines of publicly traded companies to avoid punishing shareholders already hurt by fraud. Schapiro’s predecessor, Republican Christopher Cox, began requiring that penalty ranges be set before Thomsen’s staff could begin settlement talks. Schapiro scrapped the policy last week.
Adequate Resources
After sanctions dropped 51 percent in fiscal 2007, Senate Banking Committee Chairman Christopher Dodd and committee member Jack Reed, both Democrats, asked the Government Accountability Office last year to examine whether the SEC has adequate enforcement resources.
The question arose again in December, when Madoff was arrested after allegedly admitting his investment advisory business was “all just one big lie.” Lawmakers have held three hearings to examine the SEC, including why investigators in 2007 decided to close an investigation of Madoff’s firm. The agency hasn’t indicated Thomsen was directly involved in the probe.
“She runs the division, she doesn’t personally investigate the cases,” former Chairman Harvey Pitt, who led the SEC from 2001 until early 2003, said in an interview. “Whatever lapses occurred in terms of pursuing Madoff wasn’t because Linda isn’t industrious, hardworking and thorough.”
In testimony to the Senate last month, Thomsen said the agency’s resources haven’t “kept pace with the rapid expansion in the securities market over the past few years,” leaving investigators unable to pursue all leads. Her division now has about 1,150 employees, or 80 fewer than its peak in 2005. In the past two years, it has brought the second- and third-highest number of cases in the agency’s history.
“Linda’s achievements have been nothing short of extraordinary, even heroic, in an era of unprecedented challenges in our securities markets,” Schapiro said in a statement today. Her “wisdom, judgment, integrity and humor will be sorely missed by all of her colleagues.”
To contact the reporters on this story: David Scheer in New York at dscheer@bloomberg.net; Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
Last Updated: February 9, 2009 18:51 EST
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