The whole point of the Securities and Exchange Commission (SEC) is to keep tabs on Wall Street, by making sure banks and other financial institutions and firms are abiding by the law. If suspected of not behaving lawfully, then investigations are supposed to be conducted—and the records of initial probes maintained. But it has been revealed that the SEC—for decades—has been destroying its preliminary investigations of wrongdoing by individuals and entities, including those who helped cripple the financial sector a few years ago and endanger the U.S. economy.

 

Details of the SEC’s jaw-dropping behavior were exposed by attorney Darcy Flynn, who helped manage the agency’s records. Flynn appeared before Congress in July to tell how the SEC since 1993 has, as a matter of policy, told its employees to “dispose” of any initial reports (known internally as “Matters under Inquiry” or MUI) that don’t turn into full-fledged investigations.

 

One high-ranking SEC official told Rolling Stone that the number of records wiped out may be 18,000.

 

By taking this action, the SEC has kept federal investigators in the dark about warning signs about Bernard Madoff and large institutions such as Lehman Brothers, which collapsed during the 2008 meltdown.

 

Flynn reportedly told investigators of one case against an influential bank that went nowhere because the SEC’s enforcement division killed the probe. The head of that division then left the agency and went to work for the bank in question.

 

Senator Charles Grassley of Iowa, the ranking Republican on the Senate Judiciary Committee, who has written to the SEC demanding answers as to why MUIs were destroyed, said: “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law.”

-Noel Brinkerhoff

 

File Disposal Still an Issue for S.E.C. (by Edward Wyatt, New York Times)

Is the SEC Covering Up Wall Street Crimes? (by Matt Taibbi, Rolling Stone)

S.E.C. Files Were Illegally Destroyed, Lawyer Says (by Edward Wyatt, New York Times)

Letter to SEC (Senator Charles Grassley)

Justice Dept. and SEC Allow Companies to Investigate Themselves (by Noel Brinkerhoff, AllGov)

SEC Lawyer Refused to Investigate Allen Stanford Ponzi Scheme…then Represented Stanford (by Noel Brinkerhoff, AllGov)

Bush-Era SEC Hindered Investigations (by Noel Brinkerhoff, AllGov)