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Sex, Lies, Stupidity, Oh My: SEC Whistleblower David Weber Vindicated, Receives Huge $ettlement

Posted by Larry Doyle on June 10, 2013 8:21 AM |

“Doing the right thing can be hard” . . .
David Weber, former assistant Inspector General of the SEC, June 10, 2013
——————————

In a world in which it is all too easy to look the other way, to go along to get along, and to sit down when the public needs you to stand up, hope springs eternal.

I am heartened that America still has a chance to eradicate the corrosive and corruptible elements that have thrived within our financial regulatory system when I learn that there are still people who care enough to do the right thing. Who is one of those people?

Former assistant inspector general of the SEC David Weber. Today is his day and America should feel very good about that.  

Regular readers may recall the suit Weber brought against the SEC last fall. I highlighted Weber’s case in writing, SEC Whistleblower’s Suit: Sex, Lies, Stupidity, Oh My!! Weber was not bashful in pulling back the regulatory blanket conveniently utilized to cover a host of “activities.” I wrote then:

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.

Today Mr. Weber is vindicated and then some. In a release put out just this morning:  SEC SETTLES WHISTLEBLOWER’S LAWSUIT, AGREES TO CLEAR DAVID P. WEBER’S RECORD, MAKES $580,000 WHISTLEBLOWER RETALIATION PAYMENT . 

OH MY!

Today, it was announced that the Securities and Exchange Commission (SEC) paid one of the highest settlements on record to a former federal employee subjected to whistleblower retaliation. In addition to making a payment of $580,000, the SEC retracted its retaliatory allegations against former employee, David P. Weber, and fully cleared his record.

On October 31, 2012, the Securities and Exchange Commission terminated Weber, its assistant inspector general for investigations, after he disclosed allegations of serious agency misconduct to his superiors and to members of Senate and House oversight committees. The termination came despite an independent report by the Inspector General for United States Postal Service clearing Weber of any wrongdoing. The Postal Service IG had been asked to investigate because the allegations involved the conduct of Weber and others within the office of the SEC IG.

The fact that Weber was terminated, despite the independent report produced, speaks volumes as to the manner in which the SEC was run under former chair Mary Schapiro and to the incestuous relationship between the SEC and those it is charged to monitor.

After clearing Weber, the USPS IG also substantiated concerns Weber raised with his superiors and legislative committees, including what the report labeled “flirtatious communications” a “personal relationship” and an “inappropriate relationship” between the former SEC IG and women he worked with on the Bernard L. Madoff and R. Allen Stanford ponzi schemes. The report found that these relationships involved conflicts of interest and violations of the applicable standards of conduct.

Will the SEC reopen the investigations of the Madoff and Stanford cases and go down the paths inhibited by these conflicts of interest? They should and Mary Jo White should issue a statement asserting as much.

The September 17, 2012 report also found that Weber did not mischaracterize evidence when he discussed a matter of potential “national security” and “possible espionage” by possible “foreign nationals” related to a case Weber was investigating that “involved unencrypted computer hard drives that contained sensitive stock exchange information.” These issues were raised by Weber in great detail immediately prior to Weber being placed on leave and, eventually, terminated.

The same goes here. Will the SEC answer to the American public on this case as well? Sounds to me as if Weber was looking deeply into the workings of our equity exchanges. Were the exchanges compromised or complicit in allowing supposed “foreign nationals” access to information?

So many questions. So few answers.

Under the settlement paid today, Weber received substantial damages, his termination has been rescinded, and he was reinstated. The SEC has agreed to fully and finally clear Mr. Weber’s record. All “negative references” in Mr. Weber’s file will be deleted.

Cary J. Hansel, Weber’s attorney, issued the following statement, “The SEC’s job is to protect Wall Street whistleblowers and investigate the misconduct they report. When Mr. Weber blew the whistle on wrongdoing in the SEC’s own ranks, the SEC engaged in a retaliatory cover up.” Mr. Hansel went on to say, “This case is a reminder that there are grave consequences for retaliation against whistleblowers. American law favors the free disclosure of government waste, fraud and abuse. Nothing cures these problems like the light of day.”

Amen.

Mr. Weber’s only comment for the media is, “Doing the right thing can be hard – just as my family and I experienced. Yet I still teach my students in fraud and forensic investigations classes that you need to raise your hand. Now that my name has been cleared, I look forward to helping others through my growing law and forensic investigations practice.”

With that statement, David Weber is inducted into the highest echelon of the Sense on Cents Hall of Fame.

As for the SEC, recall that Weber’s issues were raised in 2012. Is there any doubt that this commission remains in bed with Wall Street and subsequently a poorly run if not totally corrupted excuse for investor protection?

Navigate accordingly.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no 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.

  • CH

    I’ve spent 15 years focusing my practice on government liability of various types.

    During that time, I have seen lawsuits and media coverage change policies, defeat bad law and vindicate the wrongly accused.

    Your work matters.

    • Ray

      Way to go Larry.

      Justice is done at least in Weber’s case.

      Let’s get rid of the stench at the SEC. What a travesty! What a bad joke this “watchdog” agency is.

  • Peter Scannell

    Another reason for Kotz’s sudden departure?

    Dear Mr. Scannell,

    On November 6, 2009, we issued a report to the Enforcement Division which included the findings of our inquiry. The report also included a complete transcript of your testimony as well as copies of all other relevant documents. Since that date, we have been in touch with Mr. Smyth and have provided him copies of all testimony, documents, and emails that he requested that could be useful in the Enforcement Division’s analysis of the allegations you are raising, including the documents that you recently sent us. You can be assured that we are doing everything we can to assist and encourage the Enforcement Division to take your allegations seriously and conduct an appropriate investigation.

    Sincerely,
    Natasha Dandridge
    Legal Assistant
    On behalf of the Office of Inspector General
    of the U.S. Securities and Exchange Commission

  • Peter Scannell

    In April of 2010, David Smyth was promoted to Assistant Director in the SEC’s Enforcement Division the very month my file was forwarded to him by Kotz’s office. I had number conversations with Smyth before I completed my “What Are The Odds” document – a component of my response to the SEC OIG report. A number of months past after forwarding Smyth the document before I learned that Smyth unceremoniously left the Commission – no Sorkin Award farewell for him.

    I’m trapped like a rat – yet I’m a whistle-blower!

    Cryptic crap is just that – crap!

    Whoa…

    Hells bells.

    • Hilly

      Peter-

      Remember what I told you a couple of years ago about DK? I was happy to share part of my files on Kotz with Weber’s attorney, Cary Hansel. I kept the big ones on Kotz for my case, that is if I have to go that route.

      Hilly

  • Mr. Doyle;

    I’m beginning to really like you and enjoy the reads.

    BTW, Mr. Weber’s counsel Gary Hansel deserves an applause too!

  • Petter Scannell;

    Please reach out to me and let me know the details of your case? I too, ran into many of the same issues (and worse).

    Was just informed the guy (chief investigator of the DOJ’s Public Corruption Task Force) – who was reviewing my case; just got promoted to the OIG.

    As for – whether or not – our case traveled with him, was assigned to another (or simply abandoned/closed).

    Who KNOWS!

  • laser (dot) haas @ yahoo

  • Russ

    LD,

    If the question is: Will the SEC reopen the investigation into Madoff and Stanford, the answer will be “NO.”

    Irrespective of all the revelations, the basic corruptive influence that Wall Street has over campaign contributions will keep the SEC at bay. Also, there are only a few thousand people currently being screwed by the actions of the SEC in the Madoff and Stanford cases. Too few to worry about.

    In the best case scenario, what COULD happen; The SEC reopens the cases and finds that there was complete negligence.

    What would then happen? Would the US government compensate all the people who lost money in these schemes? Not likely. No money is going to leave the treasury for the pocketbooks of the victims. That move would be exploited by either or both political parties as another government bailout.

    What this is boiling down to is that the government is ALLOWING Wall Street to steal the remaining money of Stanford or Madoff victims so as to lessen their (Wall Street’s) financial burden through SIPC and to set the stage for future failures so that they won’t have to pay for those either.

  • First allow me to applaud Larry Doyle for his continued public service as a columnist and journalist on behalf of investors and taxpayers. His insight and relentless pursuit of the truth is invaluable in a world in which hard nosed investigative news (“peak journalism”) has become virtually nonexistent–especially in the sordid realm of finance.

    Mr. Weber also has performed a valuable public service for which he has been fairly rewarded.

    But what of Ms. Schapiro and others who have allegedly violated public trust? What do we do about them? Unfortunately, the system is set up to allow them to skip blindfolded past the grave. Ms. Schapiro and Mr. Kotz will likely remain fat and happy in other Wall Street-related venues, or perhaps they will be slotted back into government positions where they will be in positions to enable the endless game of bilking the public.

    Fraud is at epidemic proportions. Insider trading is rampant in congress. Lobbyists sell information without hesitation in order to gain favors. Today, the Washington Post reports that at least 400 HHS employees profited from confidential decisions regarding Medicare(the story was buried inside the paper). Will anyone be fired for this indiscretion? Doubtful. I could go on and on, and of course I’m preaching to the choir.

    Would it surprise anyone to learn that I was threatened numerous times for my reporting on the still-unsettled auction rate securities fraud? Nor will anyone be shocked to discover that I have received threats during my ongoing journalistic interest high frequency trading. “You’re risking your life,” I’ve been warned.

    I appreciate the work of Paul Krugman and other professorial pundits. Writers like Robert Reich are well-meaning public advocates. They are widely admired for their bromides. But it takes front line fighters like Mr. Weber to endure the hard, dangerous work of public advocacy (personally, I don’t like the negative connotations of the term “Whistle blower”).

    We need others to follow Mr Weber’s example. We need more Matt Taibbis, the no-holds-barred reporter at Rolling Stone. And we need the work of Larry Doyle to reach out and engage a wide public audience. If the journalistic jungle of financial reportage were less insular, less political and ultimately less cowardly, Mr. Doyle’s efforts would appear regularly on the Op-Ed pages of the Wall Street Journal.

    For the time being we encourage those working inside the bureaucratic bubble, along with the handful of legislators and journalists who refuse to be bullied and are unafraid of the truth.

    • LD

      Phil,

      I am not often at a loss for words so allow me to merely say, I wholeheartedly concur and am deeply grateful for your own passionate fights and your kind words directed my way. Let’s both ‘keep punchin’.

  • The Congressional Watchdog Caucus (http://speier.house.gov/index.php?option=com_content&view=article&id=950&Itemid=96) states on its website, “As Members of Congress we have the responsibility to our constituents to conduct government oversight to ensure that federal programs are run properly, taxpayer dollars are spent effectively, and employees are treated fairly. We are the watchdogs entrusted to investigate waste, fraud, and abuse, and the authority to hold leaders accountable for misconduct. We have created the Congressional Watchdog Caucus to educate Members and staff about our joint oversight role and to develop strategies for effective investigations.”

    I encourage everyone to write members of the Senate Banking, Senate Finance, and House Financial Services Committee to work with and support the actions of the Congressional Watchdog Caucus.

  • David Weber informed me that he’s unable to discuss the case for various reasons (I’m sure one of them is cashing the check 1st).

    Mr. Weber is not going to take a vacation. Instead, he is hungry to be the champion of others cases he is now involved in – where people are facing the bad faith of D.C. power mongers.

    KUDOs to Mr. Weber, and a thank you to his counsel (Carl Hansel) for going where most fear to tread – against big Gov!

  • Congressional Watchdog Caucus

    R U 4 REAL?

  • Have a conference call with Hansel. Mr. Weber is not able to work our Goldman Sachs/ Bain Capital fraud case until November of 2014. Even though the SEC has (over and over again) refused to do their job concerning our debacle; the one good guy who is willing is prevented.

    Same type of justice that withheld my Motion against Romney on October 24 2021, from being placed in the public docket record until November 6, 2012.

    The same type of justice where the 3rd Circuit is actually upon a reported Opinion record stating that the Federal Rules of Appellate Procedure doesn’t apply to our case.

    When it is Goldman Sachs and Bain Capital – they simply ARE above the Law – and damn anyone who gets in their way.

    Even Matt Taibbi only told part of our story (I’m one of the sources of his “Greed & Debt” article).

    Too bad, LD, you don’t have the same platform as Taibbi; then you could kick some massive butt with your candor.

    Wish I had found this realm sooner. In a few weeks I’m filing a RICO Indictment of Romney and his Gang; you guys/gals will only see the bull bring out his horns then in their efforts to squash us.

    Thanks for this website Larry Doyle;
    wish you much success in the future.

    (BTW – just today, I was informed that the chief investigator (RG) of the DOJ’s Public Corruption Task Force; was promoted OFF our case a few weeks ago (par for the course here) to the Office of Inspector General.

    [IN]Justice in America – ain’t it grand!

  • Well, the story is going viral now guys/gals.

    Associated Press chimed in this afternoon…

  • Larry, thank you for writing about my case. I really did learn that doing the right thing can be hard. Kind regards, David P. Weber

  • Tony Grimes

    Well done, great job as usual!

  • Blujeanz

    We have not even begun to scratch the surface regarding Mary Schapiro. Things are heating up in Texas and making things uncomfortable for some judges who participated in the R. Allen Stanford debacle. The SEC never had lawful jurisdiction or regulatory authority to even file a complaint against SIB in Antigua, much less confiscate any Stanford assets or appoint an Equity Receiver who spent, dismantled and destroyed Stanford businesses three years before the trial while Stanford was in detention. While the SEC admitted they had not one customer complaint regarding Stanford prior to the 2/17/2009 seizure of Stanford assets, that all changed when Receiver Ralph Janvey got his hands on the Stanford assets. He violated his court ordered mandate and the financial losses started to roll in. There is now solid, indisputable case law backing up the SEC’s criminal attack and Stanford is taking it to the Supreme Court where he will win. Two U.S. Supreme Court cases, one case in the 2nd Circuit COA and one in the D.C. Circuit tell a tale Janvey can’t win against, though the SEC propaganda machine is in full swing right now. For an eye opener, read the document-supported book, Brutal Takeover on Amazon. One of the two key “witnesses”, Karyl Van Tassle, absent any evidence, admitted that her spreadsheets and flow charts regarding Stanford’s solvency were not a product of her own review but given to her by the Receiver’s law firm. They are not also an accounting firm. All is not what it seems.






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