Today Ladies Home Journal 2001 pie baking champion Matt Taibbi takes a break from bashing Goldman Sachs to bash the SEC in Rolling Stone. Like others, he’s kind of unimpressed by the SEC’s failure to keep track of complaints / referrals / pretty much anything that’s going on. Unlike everyone else, though, he attributes this failure not to incompetence but to a far-reaching cover-up:

But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”

Translation: a government agency takes a look at what you’re up to. They conclude you’re doing nothing wrong. And their (formal, publicly announced) policy is to dispose of your file rather than sending it to the National Archives.

So … this doesn’t trouble us that much? Matt Taibbi may actually be right that it breaks the law – he has, on occasion, been right about facts in the world, though it’s often a coincidence. Here he suggests that some SEC staffers were worried about personal criminal liability for not archiving records of preliminary inquiries, which sounds a little far-fetched but possible. And there are some more interesting accusations here – including some suggestive coincidences where SEC enforcement execs squashed investigations and then left for the firms that were being investigated. But we were always under the impression that the trouble with Big Brother was too much all-pervading surveillance, not too little.

Is the SEC Covering Up Wall Street Crimes? [RS]

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Comments (17)

  1. Posted by Nails | August 17, 2011 at 4:00 PM

    Best post yet!

  2. Posted by Hey Later | August 17, 2011 at 4:10 PM

    Did Chazzy G. just bust a lemon meringue nut all over his visage?

  3. Posted by deal_mkr | August 17, 2011 at 4:16 PM

    another post for the memory hole

  4. Posted by Dr_Rosenrose | August 17, 2011 at 4:18 PM

    “you should dispose of any documents obtained in connection with the MUI.”
    Taibbi, I'll give you possibly illegal, but are we really going to call this elaborate??

  5. Posted by VonSloneker | August 17, 2011 at 4:20 PM

    …this guy again

    -Vampire Squid

  6. Posted by guest | August 17, 2011 at 4:33 PM

    I like the picture… kind of a Martha Stewart/Peter North hybrid thing going on

  7. Posted by anon | August 17, 2011 at 5:24 PM

    Its not Orwellian. It is just pure corruption.

    Massive logic fail:
    "Translation: a government agency takes a look at what you’re up to. They conclude you’re doing nothing wrong. And their (formal, publicly announced) policy is to dispose of your file rather than sending it to the National Archives."

    Logic Fails:
    1) Lest you forget, the SEC is actually a regulatory body which oversees those which they have investigated. It is their job to investigate and oversee! Its not the NSA reading your text messages!
    2) If they decide not to continue the investigation does not mean that they have concluded that you are doing nothing wrong. I.e. it is not in any way a judgement of innocence or guilt.

  8. Posted by Guest | August 17, 2011 at 6:14 PM

    re: 1) The SEC is an agency with both regulatory and enforcement arms. If you read the quote, you would have noticed this is a policy of the enforcement division

    re: 2) there are only a few reasons an investigator decides not to pursue an investigation: a) he concludes you have not done anything wrong, b) he concludes that it will be impossible to prove you did something wrong. From the standpoint of the justice system, both are equivalent since you're not guilty of anything until it's been proven, and both imply an investigator's judgement you're not guilty of anything

    During an inquiry or investigation, the investigator becomes privy to all manner of information that people have every right to keep secret. He only has a right to access that information inasmuch as it is required to prosecute a case. If there is no case to prosecute and never will be, he no longer has any right to that information and is subject to all manner of penalties if it is mistakenly made public. Destroying it is the logical thing to do. In the event he decides to re-investigate, he can always request/subpeona the same information again.

  9. Posted by guest | August 18, 2011 at 12:31 AM

    You forgot one!
    re:2)c)they get a juicy job offer to get them off the case when they are getting close to prosecuting an offense and go to work in some made-up job for some scumbag trading house like GS or JPM. Notice also I left mine gender neutral as there are useless government "cubical hamsters" of both sexes. The NKI=buying off a government prosecution for $120K a year.

  10. Posted by Reza | August 18, 2011 at 2:29 AM

    Among the missing 18,000 files, there were 2 on Bernie Madoff, 2 for Lehman Brothers,insider trading by Goldman Sachs, along with at least 3 cases involving the infamous hedge fund SAC Capital.

    Many of these cases were kaiboshed by the director of enforcement. For example "On October 1st of that year, the mystery was solved: Dick Walker was named general counsel of Deutsche Bank. Less than 10 weeks after the SEC shut down its investigation of the bank, the agency's director of enforcement was handed a cushy, high-priced job at Deutsche."

    -from the Taibbi article

  11. Posted by Colonel_Ingus | August 18, 2011 at 9:07 AM

    You "quash" investigations, not "squash"

  12. Posted by Anon | August 18, 2011 at 11:42 AM

    More fail logic.
    1) It doesn't matter which arm you are talking about, the point is that it is the SEC's job for oversight of the industry. So it is not a creepy invasion of privacy as implied in the "translation".

    2) Other reasons they might decide to pursue an investigation – i) lack of resources, or what else can I think of, oh wait, yeah ii) CORRUPTION in the SEC itself as alleged by Taibbi and Senator Grassley. DUH.

    3) I know that Mitt Romney thinks that corporations are people, but during an inquiry of a securities firm over which a government agency has oversight — what could possibly be secret here that the SEC really shouldn't know?!

    To defend this one must either be corrupt or naive or both.

  13. Posted by MaggiesFarmboy | August 18, 2011 at 12:11 PM

    Levine,

    I'm under the impression that in your desperate attempts to trash Taibbi, you missed the main point of the article and got key facts wrong. I'll let Felix Salmon explain:

    http://blogs.reuters.com/felix-salmon/2011/08/18/

    And "squashed" investigations? Seriously?

  14. Posted by dbdt | August 18, 2011 at 7:29 PM

    Kudos to Bess for staying on this phony.

    I think it's a pretty broad swath of journalism that understands Taibbi to be an aggrandizing, conspiracy-obsessed crank. He's made RS, and himself, some dough, but what an intellectual fleecing of the Left it has been. His privileged, prep-school roots covered up by his faux populist outrage… Sadly it seems that there aren't too many (of us) progressives that actually can see through this guy's bullshit.

    In fairness, I suppose the outrage is real, but I suspect it's as much about his daddy as it is about the conspiracies & villans he conjures from the ether.

  15. Posted by Justin | August 19, 2011 at 12:41 AM

    Is that your suspicion, dbdt? Do you know Matt? Better, do you know "a pretty broad swath of journalism," at least well enough to speak for it?

    Read the RS piece (mis-)cited by Mr. Levine. Do you find any errors of fact? Do you disagree with any conclusions Matt draws? If so, which? Why? Or do you simply rest on his having gone to "prep school?"

  16. Posted by Kunst | August 20, 2011 at 1:06 AM

    Shame on you, Matt Levine. What a piece of trash. I hope you were paid well.

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