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SEC Whistleblower Suit: Sex, Lies, Stupidity, Oh My!!

Posted by Larry Doyle on November 19, 2012 7:56 AM |

If the whistleblower complaint I read this weekend did not have the United States Securities and Exchange Commission and Mary Schapiro as defendants, one might have thought it belonged in a cheap tabloid at a supermarket checkout.

Regrettably, given the incestuous (pun intended) activities that have been all too prevalent on Wall Street and in Washington over the last four years, this complaint brought by the recently deposed Assistant Inspector General of the SEC may be tawdry in its delivery but not surprising in its content. Let’s navigate and review David P. Weber, Plaintiff vs. United States Securities and Exchange Commission and Mary L. Schapiro, Chairman. 

Mr. Weber joined the SEC early this year as the Assistant Inspector General after the seemingly abrupt departure of then IG David Kotz. I have often wondered why Kotz seemed to exit the SEC in such hasty fashion. Well, Mr. Weber leaves little to the imagination in asserting that Mr. Kotz’s “intimate relationships” within the Commission (including with his immediate successor as IG) and with counsel for plaintiff in the Stanford Financial scandal was a literal phrase. Weber goes so far as to say that Kotz’s relations compromised SEC investigations in both the Stanford and Madoff affairs. Oh my!!

Weber’s titillating testimony turns its focus on other executives within the Commission, including the COO and chair Mary Schapiro. Weber’s charges of nepotism and a lack of meaningful internal controls expose the risks that the Commission presented in its daily management of operations and beyond that as well. One does not need to read very hard to understand Weber’s belief that the SEC’s COO utilized a “pay to play” practice. Additionally, in a scene fit for the classic movie Dumb and Dumber, Weber asserts that SEC representatives brought highly sensitive computer code and encryption data to monitor activity on our equity exchanges to a hacker’s conference in Las Vegas. You cannot make this stuff up, folks.

Saving some venom for Ms. Schapiro as well, Weber paints her as a “LIAR” for perjuring herself during a presentation before the House and Senate Oversight Committee regarding the SEC’s bungled attempt to move to new office quarters. Weber would not be the first to label Ms. Schapiro with the big L. Recall that Attorney Richard Greenfield did just the same in the case brought on behalf of Standard Chartered v FINRA, Mary Schapiro et al.

What did Weber receive in return for running these tales of sex, lies, and stupidity up the chain of command? A pink slip, a defamed reputation, and much more. In his defense, Weber points out that an independent investigation by an Inspector General outside of the SEC who looked into charges made against him by those inside the SEC ultimately cleared him of these allegations.

What to make of all this?

Weber’s complaint really begs the question as to just what the hell has gone on and is going on within this Commission. Will Weber’s complaint receive the attention it deserves? It should. Weber would not be the first whistleblower within the SEC to call out his superiors and expose serious failings and misbehaviors within the organization. Recall that none other than our Sense on Cents Hall of Famer Gary Aguirre did just the same.

In the spirit of truth, transparency, and integrity, I sincerely hope that Mr. Weber gets his day in court and that America might really learn just how the SEC could be so dysfunctional. Little wonder how and why the crowd on Wall Street runs roughshod over those at the SEC charged with monitoring their activities.

For those who care to be entertained and informed, I welcome providing a link to the complaint: David Weber vs. SEC and Mary Schapiro (click on image below to access pdf of complaint).


Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Gary

    I think you hit the target perfectly with this one.

    I especially liked the “now hiring” ad. I think it should be circulated among the big law firms.

  • Peter Scannell

    Not only do have deep concerns with Kotz’s sudden departure – I also have deep concerns with the resignation of David Smyth of the SEC’s Enforcement Division. Mr. Smyth’s departure from the division in August of 2011, one year after being promoted to assistant director, and six months after having received my damning document, has given me significant concern.

  • Andrew

    Wow! LD, who is going to play you in the movie?

  • Mark J. Novitsky

    This whole corruptable concept of “Sovereign Immunity” / “Get Out Of Jail Free” for ANY govt. official / employee needs to be explored and rescinded. Let’s not forget Director of (un)Enforcement Robert Khuzami GC at Deustche Bank! And should be a no-brainer that Elizabeth Warren gets selected for the Senate Banking Committee. If not…There’s your sign.

  • Brian Penny

    The risk/reward ratio for whistleblowers is great. It’s not for everyone, but if you want to learn how to blow the whistle from a veteran whistleblower, check out my blog on the Huff Post:

    • Peter Scannell

      Brian, there are only two ways to blow the whistle. The first is through the appropriate authorities. The second is going public!

      Hells bells

  • Bill

    The SEC needs to be abolished and just begin anew. I was Kudlow last night and the subject of the disproportion of private sector pay vs. federal.
    Some shill was on there using the example of border and prison guards for proposition there is no disparity, instead of clowns like these SEC bureaucrats who get compensated $200k a year to watch porn and engage in skullduggery.

  • Jim

    I agree with Bill. The corruption within the SEC can only be eliminated by cleaning house and rebuilding from the ground up. Revisit the lawsuit filed by “OVERSTOCK.COM”. They won or at leas we thought they did. One of the “naked-short sellers lost a finger to the mafia so he wouldn’t talk and got a little jail time “BUT” the SEC Attorneys that were his co-conspiritors got off scottfree and were transfered to better paying jobs within the agency. Now they are trying to pull the same thing with LPHI. I wouldn’t be suprised if it wasn’t with the same actors; except for a new “naked-short seller” from Goldman Sac’s originized crime division.

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