Investing for Organizational Sustainability

settlement with Aguirre the SEC filed charges against Pequot. The Senate released a
report in August 2007 detailing the issue and calling for reform of the SEC.
On September 26, democratic senator Mark Warner in a letter asked the SEC to
evaluate whether the current disclosure regime was adequate, citing the low number of
companies' disclosures to date.
Others have criticized the SEC for taking an overly rule-based and enforcement-focused
approach to regulation, rather than an approach that emphasizes industry-wide safety
and learning and thus ensures the reliability of the national securities trading system.
Inspector General Office Failures
In 2009, the Project on Government Oversight, a government watchdog group, sent a
letter to Congress criticizing the SEC for failing to implement more than half of the
recommendations made to it by its Inspector General. According to POGO, in the prior
two years, the SEC had taken no action on 27 out of 52 recommended reforms
suggested in Inspector General reports, and still had a "pending" status on 197 of the
312 recommendations made in audit reports. Some of the recommendations included
imposing disciplinary action on SEC employees who receive improper gifts or other
favors from financial companies, and investigating and reporting the causes of the
failures to detect the Madoff ponzi scheme.
In a 2011 article by Matt Taibbi in Rolling Stone, former SEC employees were
interviewed and commented negatively on the SEC's Office of the Inspector General
(OIG). Going to the OIG was "well-known to be a career-killer".
Because of concerns raised by David P. Weber, former SEC Chief Investigator,
regarding conduct by SEC Inspector General H. David Kotz, Inspector General David C.
Williams of the U.S. Postal Service was brought in to conduct an independent, outside
review of Kotz's alleged improper conduct in 2012. Williams concluded in his 66-page
Report that Kotz violated ethics rules by overseeing probes that involved people with
whom he had conflicts of interest due to "personal relationships." The report questioned
Kotz's work on the Madoff investigation, among others, because Kotz was a "very good
friend" with Markopolos. It concluded that while it was unclear when Kotz and
Markopolos became friends, it would have violated U.S. ethics rules if their relationship
began before or during Kotz's Madoff investigation. The report also found that Kotz
himself "appeared to have a conflict of interest" and should not have opened his
Standford investigation, because he was friends with a female attorney who
represented victims of the fraud.
Destruction of Documents
According to former SEC employee and whistleblower Darcy Flynn, also reported by
Taibbi, the agency routinely destroyed thousands of documents related to preliminary
investigations of alleged crimes committed by Deutsche Bank, Goldman Sachs,
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