Under intense scrutiny from congressional critics and a probing inspector general, current and former Securities and Exchange Commission officials have been lawyering up, sometimes at their own expense.
The practice reflects the highly charged atmosphere at the SEC and one of the costs of government service when investigations can put careers, reputations and more on the line.
It goes all the way to the top.
On an afternoon in April, when SEC Chairman Mary Schapiro met privately with members of the inspector general’s office to give sworn testimony on a $557 million lease for office space the agency did not need and could not afford, SEC Inspector General H. David Kotz asked a person accompanying Schapiro to identify himself.
The man said he was Richard Sauber, “counsel for Ms. Schapiro,” according to a record of the session. Sauber is a partner in a Washington law firm and a veteran of the Justice Department.
Former SEC general counsel David M. Becker has hired lawyer William R. Baker III in connection with an open probe into an alleged conflict of interest involving the agency’s work on compensation for victims of Bernard Madoff’s investment fraud. Baker previously worked in the SEC’s enforcement division.
In the same Madoff-related probe, William Lenox, former head of the SEC’s ethics office, is represented by Harvey L. Pitt, a former SEC chairman, according to people familiar with the matter who spoke on the condition of anonymity to discuss confidential information.
But Pitt is representing Lenox for free, those people said. And he has done the same for other SEC officials caught up in inspector general probes, one of the sources said.
The hiring of lawyers has become common when the SEC becomes the subject of investigations and political recriminations, people close to the agency say. SEC spokesman John Nester said SEC lawyers are not allowed by the agency to represent employees in connection with inspector-general probes.
Given all that is on the line in these investigations, it is not surprising that people would want an attorney in their corner, said a lawyer who has represented employees in inspector-general probes.
“The I.G. has the ability to make a criminal referral. So an I.G. investigation can be career- and liberty-threatening. And financially threatening,” said the lawyer, who did not want to be quoted by name to avoid antagonizing the inspector general.
Kotz’s reports have found fault on issues as diverse as a troubled technology contract, the SEC’s failure to act on warnings about an alleged mutibillion-dollar fraud by Robert Allen Stanford, who controlled a bank in Antigua, the agency’s failure to stop Madoff, and employees’ use of SEC computers to view pornography on the job.
Some of his reports have included recommendations that the SEC consider disciplining employees. In the case of the office lease, Kotz suggested that the Justice Department consider whether anyone should be prosecuted for backdating a document used to justify the lease.
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