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SEC Whistleblowers Are Talking – Here’s What They Have to Say

9 | By Shah Gilani

It’s not easy being a whistleblower.

Just ask the few at the Securities and Exchange Commission’s Office of Inspector General, the SEC’s independent watchdog group who police everyone at the SEC, when they filed a complaint against two of their own.

Last year, after whistleblowers in the IG’s office claimed one of their supervisors and a junior subordinate were guilty of “time and attendance fraud” because the “two employees regularly disappeared together for several hours during workdays and engaged in inappropriate conduct in the office,” the unappreciated whistleblowers had to then blow the whistle on the superiors they complained to for retaliating against them for blowing the whistle on their buddies.

If you think superiors retaliating or even threatening to retaliate against would-be whistleblowers could impede investigations the SEC’s supposed to conduct… You’re right.

It Can Pay to Whistle While You Work

This may look like a small example, or perhaps just one scandal of many.

But what if it happened at the SEC to would-be whistleblowers years before Bernie Madoff’s Ponzi scheme was discovered?

I’ll give you the facts, and then I want you to be the judge.

In the small arena last year, the IG’s probe of the supervisor and subordinate accused of time and attendance fraud was led by two senior officials. One of those senior officials hired and supervised the two employees.

It also turns out that Carl Hoecker, the SEC’s Inspector General since 2013, appointed one of the two employees under investigation to, according to the Wall Street Journal, “help coordinate a review of procedures in the inspector general’s office.” Interestingly, the target of the complaint, “removed language designed to prevent conflicts of interest affecting internal investigations, such as allegedly happened in this case,” reported the Journal.

Something smells fishy here. Maybe a close relationship between the investigating superiors and the employees under investigation is why the investigators found “insufficient evidence to conclude the two employees had an inappropriate relationship.”

Now, keep in mind, this all occurred well after the SEC’s Office of the Whistleblower was signed into law in 2010.  According to the office’s website, they have awarded more than $162 million for “tips resulting in enforcement actions” since 2011. For an organization that puts such a high premium on their whistleblowers, one would assume that they would take them seriously. Of course, that’s when there’s money to collect that’s not just whistling Dixie. But when there’s no money, or that whistleblowing makes some friendlies frown, the whistling seems to fall on deaf ears.

Inspector General Hoecker also serves as chairman of the investigations committee of the Council of the Inspectors General on Integrity and Efficiency. That Council, which represents inspectors general across the federal government, reviewed the allegations of retaliation by Mr. Hoecker and did nothing.

The potential irony here is staggering, but the situation may be even bigger than what these facts suggest.

Plenty of Whistleblowers, Not Enough Listening

What good are whistleblowers if they get blown off?

Not good at all, if you ask me. And yet, it seems to be exactly what happened in the Bernie Madoff case according to the Report of Investigation by the SEC (Case No. OIG-509, if you’re interested in looking it up).

The executive summary is as follows:

    The OIG investigation did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard L. Madoff Investment Securities, LLC (BMIS) had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work. The OIG also did not find that former SEC Assistant Director Eric Swanson’s romantic relationship with Bernard Madoffs niece, Shana Madoff, influenced the conduct of the SEC examinations of Madoff and his firm. We also did not find that senior officials at the SEC directly attempted to influence examinations or investigations of Madoff or the Madoff firm, nor was there evidence any senior SEC official interfered with the staffs’ ability to perform its work.

    The OIG investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme, and that despite three examinations and two investigations being conducted, a thorough and competent investigation or examination was never performed. The OIG found that between June 1992 and December 2008 when Madoff confessed, the SEC received six substantive complaints that raised significant red flags concerning Madoffs hedge fund operations and should have led to questions about whether Madoff was actually engaged in trading. Finally, the SEC was also aware of two articles regarding Madoffs investment operations that appeared in reputable publications in 2001 and questioned Madoffs unusually consistent returns.

It sure looks to me like plenty of would-be whistleblowers were huffing and puffing to the SEC… And the SEC looked the other way.

But I’m not just looking at the facts available. I’m looking at how youcan make money from situations like this – the nefarious deeds taking place in Wall Street back channels. Take Big Tobacco, for example. When the Attorneys General blew the whistle on the “Big Four” of the industry, they were utterly hung out to dry, and it created a backdoor opportunity for everyday taxpayers to get a “piece of the pie”.

That means thousands of dollars in extra monthly investment income, tax-free, for people who know about these “deals”. Even if you’ve never smoked a day in your life, you can claim your stake today. [Click here to learn more]

Sincerely,

Shah

P.S. You be the judge; is the SEC doing all it can to root out corruption in their organization, and conduct their investigations honestly? Or are the whistleblowers helpless in the face of their superiors’ influence?

Let me know what you think in the comments below.

9 Responses to SEC Whistleblowers Are Talking – Here’s What They Have to Say

  1. James Denike says:

    The SEC reminds me of a principle I learned in the Navy when a subordinate you promoted really steps on his hands, to wit:
    Persecute the Innocent, Protect the Guilty.
    JJD

    • Lincoln Craighead says:

      Whistleblowers should have have an established hearing officer not part of SEC chain of command
      to report their complaint to for investigation and action. Otherwise “the fox is guarding the henhouse”.

  2. Whistleblower says:

    As a former Cryptographer, I was tortured when I blew on the potential hacks… (and on sexual misconduct in a separate blow) and then they found out that I was right and they apologized or began to “attone.” But they didn’t clean the back side well enough. I was hit by the fake .gov that I made an effort to warn. All of that… and we didn’t even have Supreme Justice by proxy. Meanwhile, U.S. unfunded liabilities exceed the GLOBAL GDP. Judge not… Anybody for a move to Portugal?

  3. wanna-be-Whistleblower says:

    I have stored hard evidence the SEC et al turn a blind eye. I can’t find anyone that isn’t dirty and at risk of being exposed themselves or at risk of jeopardizing their livelihood. And so, the criminals and their acts continue. Drain the swamp is an understatement.

  4. ROBERT ROARK says:

    ​I was contacted by the SEC back in 2011, after reporting a stock fraud conspiracy involving a lot of carrier criminals who were falsifying the financials and purposes of OTC “public companies”, to the FBI. I gave both agencies names and dates of the swindles, and even had a face to face meeting with Agent Thomas Reitz. I never heard that there was an investigation, nor of any prosecutions, until 2017, when I was contacted by the US Federal Court in Santa Ana, CA; and told that I was a “victim” of one of the people that I had named so many years ago. I registered with the Victim Identification Notice (VIN) system, and was notified about a “sentencing hearing” for Mr. Brian Kingsfield, and told that I had the right to speak before he was sentenced. The notice told me to “check in with the system, a few weeks before the hearing if I wanted to appear”…I called two weeks before the hearing, and was told that “You are not on the list”. I tried to get some explanation about that citing the fact that I had been the first one to “blow the whistle” on this guy and all of the other perpetrators who were arrested at the same time in 2015. I finally spoke to the US attorney, Jennifer Waier, and she got real angry that I was insisting that I speak at the hearing, citing my letter from the Court, dated 2015. She insisted that she “had never heard about me”, and that I would not be allowed to appear. I called Agent Reitz, and he couldn’t remember talking to me until I refreshed his memory, and asked him to call the Court. He never did that. I wrote to the court, and called the SEC victim advocate, and still got no reply. I decided to go the the hearing anyway, with another victim, and my letter that told me I was a victim of the defendant. I arrived early, and watched defendant Kingsfield arrive with his female lawyer, next came an entourage of friends of the defendant, and then came the prosecutor and a female FBI Agent. Those two immediately went over to the defendant, all smiles “hi Brian” and had a friendly chat with the defense lawyer, lots of chuckles, very casual. The Judge arrived, and asked if anyone wanted to speak before he pronounced sentence, and I and my fellow victim raised our hands. Prosecutor Waier jumped up and told the Judge that we were not a part of “Her case”, and tried to stop me from speaking. The Judge said that since we were there, that he would listen to what we had to say. When my turn came, Ms Waier again tried to stop me, and told the judge that she thought that I has “colluded with” Kingsfield somehow, and deserved to lose my money! The Judge didn’t comment after that, but did cut me off after about 3 minutes, and asking me about another phoney company that Kingsfield had been involved with. KIngsfield got a “slap on the wrist”, year and a day prison sentence, (to a “country club prison, no doubt; and a fine, and was ordered to reimburse a short list of victims, neither I nor the other victim present were named. So this career criminal who has swindled at least $20,000,000 in the last 20 years, ($5,000,000, from one elderly couple for an “annuity for their children) was told by Judge James Selna, that he “probably doesn’t have to pay” restitution, or even the fine to the government, if he doesn’t have “sufficient funds”, and that he doesn’t have to turn himself into the prison until two weeks after Christmas! Judge Selna was almost apologetic about having to give him jail time!

    I just got another call from the SEC, asking about the same people that I told the FBI about in 2011.

    Apparently the reason that Kingsfield and Adesh Kumar Tyagi, were out on their own recognizance for two years after they plead guilty to the single lowest count of the many that were in the original charging indictment; was that the FBI was trying to get them and three others who also plead to low level violations (intent to defraud the US, and interstate mail fraud) to testify against their “boss”, and other “masterminds” of the elaborate ongoing conspiracy of fraudulent public stock companies. Why would they do that, when their “boss” James Price, CEO, of Aero-Financial, and “JP Anderson holding Corp llc” will pay their fines, and keep them working on the next scam?

    My lesson is that “the government” doesn’t care about “white collar” crime, and investigates it as the lowest priority. That’s why it is the biggest and best way to make money today…

  5. ROBERT ROARK says:

    sorry that I left a few typos in my long comment, please change “has” to had colluded, and take out the capital I in “Kingsfield” got a “slap on the wrist”…if you print it at all, rr

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