SEC transparency faulted by watchdog group

The Securities and Exchange Commission has been remiss in posting reports by its inspector general that probe employee behavior in such areas as conflicts of interest, misuse of travel funds and retaliation against whistleblowers, according to a compendium released Thursday by the Project on Government Oversight.

"These Are the Investigative Reports the SEC Doesn't Want You to See," was the headline on a news release and list of website links that include 20 reports POGO obtained under the Freedom of Information Act and made public for the first time.

The SEC and its IG have posted many newsworthy reports on their websites, covering such major issues as the commission's handling of the Ponzi scheme involving imprisoned investment fund manager Bernard Madoff, and results of a probe into whether the SEC's enforcement division was impartial in 2009 when it made a settlement offer to ailing Bank of America when it was a recipient of funds under the Troubled Asset Relief Program.

But it had not previously released an array of reports, with names and employee titles redacted, on investigations into such issues as:

  • Whether an SEC manager violated ethics during a group business trip to New York by steering the party to a bed-and-breakfast owned by the manager's sister-in-law.
  • Whether an SEC contracting officer violated procurement rules by having lunch with a contractor and disclosing that the contractor's pending bid would be unsuccessful, which was nonpublic information.
  • Whether an SEC manager violated ethics by repeatedly phoning the Morgan Stanley brokerage, identifying herself as an SEC employee, and pressing issues involving her mother's account.
  • Whether an SEC employee who wrote a memo to his bosses complaining of program mismanagement experienced unfair retaliation in the form of "personnel actions consisting of a performance management counseling, abusive daily monitoring, and a letter of reprimand."

"We're not suggesting that the SEC should be proactively redacting and posting every single investigate report issued by the OIG," wrote POGO investigator Michael Smallberg. "Such a policy would likely place a substantial burden on agency and OIG staff since most investigative reports need to be heavily redacted prior to public release. And we're not sure there's sufficient public interest in releasing every investigative report, especially those that do not find any evidence of wrongdoing by the agency.

"On the other hand," Smallberg wrote, "once an agency has already taken the time to redact and release a report in response to a FOIA request, it shouldn't be too much extra work to post the report online. Even if the OIG doesn't find any wrongdoing, posting the report online would allow the public to examine whether the OIG conducted a thorough investigation."

David Kotz, the SEC's inspector general, stressed the distinction between audits and investigative reports. He said his office "posts to its website all audit and related reports it has issued. The OIG also provides a detailed discussion of the investigative reports it has completed and on which it is working on in its semiannual reports to Congress, which are also posted to the SEC OIG website.

"The investigative reports themselves, however, contain nonpublic and/or privacy-protected information. The OIG does not have authority to release nonpublic information outside of the agency; rather, such authority resides with the commission," Kotz added. "Once the commission has approved the public release of an OIG report, the OIG makes the released report available on its website."

John Nester, a spokesman for the SEC, pointed to a workload issue, noting that management must decide how best to spend staff labor on determining what is released. "The SEC is committed to transparency and annually provides about 2,000 sets of documents in response to FOIA requests," he said.

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