SEC's Financial Crimes Cover-Up

Posted by Brianna Panzica - Thursday, August 18th, 2011

Here’s a haunting question: Is the government really in control of its actions?

As a huge financial-crime cover-up scheme is exposed, it appears that the answer is no.  Matt Taibbi revealed the details of his investigation in Rolling Stone.

According to the article, the Securities and Exchange Commission has been wiping clean the slates of financial criminals since 1993, destroying evidence from thousands of potential investigations that never came to fruition.

An SEC deal with the National Archives and Record Administration (NARA) says that any and all records must be maintained for at least 25 years.

And the right to maintain or destroy records is reserved by the NARA.

But as the article relates, the SEC has been destroying preliminary investigations called MUIs (Matters Under Inquiry) immediately after the cases failed to receive approval for full investigation.

And, Taibbi writes, the instruction was even written on the SEC internal website:

“After you have closed a MUI that has not become an investigation, you should dispose of any documents obtained in connection with the MUI.”

SEC attorney Darcy Flynn, the source behind this information, began learning of these actions when he was given new responsibilities in 2010 and saw this instruction on the website.

He discovered that in many of the cases, senior officials involved in the SEC investigation were shortly thereafter given positions in the company under investigation or were otherwise “compensated”.

The case he found and reported to SEC enforcement director Robert Khuzami, which Taibbi describes in detail, was against Deutsche Bank.

In short, the CEO of Deutsche Bank had falsely claimed that the company had no intention of taking over Bankers Trust, a claim that caused Bankers Trust stock to fall and probably had an influence on merger price.

When the SEC began an MUI, they found enough information to actually make a case. All that was needed was approval of the director of enforcement, Richard Walker.

But for some reason Walker dismissed the case. Later that year, Walker was appointed to the general counsel of Deutsche Bank.

In a funny twist of fate, Khuzami, to whom Flynn was reporting, had been hired under Walker at Deutsche before obtaining his position with the SEC.

But Flynn eventually went straight to Congress.

According to notes that Flynn took in a meeting with members of SEC on how to deal with the impending revelation of these activities, there were “18,000 MUIs destroyed, including Madoff,” referring to con artist Bernie Madoff.

And with all the “coincidental” partnerships between SEC members and companies under investigation after their MUIs failed to become investigations, it appears that it might be the outside forces that have the most control over these government actions.

  +14

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