Investigators were sleeping together. Investigators were sleeping with the lawyers of people they were investigating. It was a mess.
SEC Rocked By Lurid Sex-and-Corruption Lawsuit | Matt Taibbi | Rolling Stone
Weber claims that in recent years, while the SEC Inspector General's office has been attempting to investigate the agency's seemingly-negligent responses in such matters as the Bernie Madoff case and the less-well-known (but nearly as disturbing) Stanford Financial Ponzi scandal, two of the IG office's senior officials – former Inspector General David Kotz and his successor, Noelle Maloney – were sleeping together.
Weber also claims that Kotz was also having an affair with a lawyer representing a key group of Stanford victims, a Dr. Gaytri Kachroo. Where the story gets really strange is where Weber claims that Maloney last year refused to meet with Kachroo as part of the Stanford investigation. By then, Kotz had stepped down as SEC IG and Maloney had replaced him as Acting IG. The complaint describes Weber confronting Maloney over the issue, asking why she wouldn't meet with the lawyer representing a key group of Stanford victims.
Maloney asked Weber to close the door to her office. Maloney told Weber that she would deny the following conversation if Weber were to repeat it.
Maloney then said that, "David [Kotz] was fucking that lady . . ." Maloney stated that Kachroo had received special treatment. Maloney even questioned whether the OIG would have ever opened an investigation into the SEC's oversight over the Court-Appointed Receivership in SEC v. Stanford.
The Weber lawsuit is the latest chapter in an ongoing drama that began when Kotz stepped down last January amid not-world-shaking ethics questions (including, of all things, receiving Philadelphia Eagles tickets from a financial adviser). Subsequently, however, an investigation by the U.S. Postal Service Inspector General David Williams concluded more seriously that Kotz violated rules by overseeing investigations involving people with whom he had "personal relationships."
Weber's complaints, made early last year, were apparently the impetus for that Williams investigation. If what happened to Weber subsequently was retaliation, it didn't take long. Weber was placed on leave in May after being accused of being a "personal threat" who wanted to bring a gun into the office. The "gun" incident was highly publicized, and Weber was ridiculed in the media (sample from the Atlantic Wire: "Do You Really Need a Gun to Police the SEC?").
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It's hard to say how all of this will shake out. Certainly, from a P.R. standpoint, it'll be ugly for the SEC. One other storyline to follow: If the Weber retaliation claims are true, they fall within an ongoing and increasingly disturbing pattern of federal whistleblowers who have come forward and experienced reprisals themselves instead of having their claims investigated properly.
Another story to follow is the possibility that the SEC Inspector General's office in recent years was weakened or compromised by these sexual scandals in any way. If all this kink was common knowledge within the agency, it is not hard to imagine that OIG investigations into things like the Madoff mess might have had their momentum slowed by internal politics.
Anyway, crazy stuff, more to come down the line. SEC spokesman John Nester by the way had no comment on the story today, except to say: "We look forward to filing our response with the court."
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