Former SEC inspector general challenges allegations of bias, sexual improprieties

By Charles S. Clark

November 26, 2012

In a lawsuit filed in federal court this month, the former assistant inspector general for investigations at the Securities and Exchange Commission said he was wrongfully terminated in October because he had forwarded evidence of misconduct to SEC commissioners, Congress and the agency’s oversight committee.

In a sometimes graphic complaint, David Weber also alleged that former SEC Inspector General H. David Kotz unethically conducted personal relationships with colleagues that might have compromised the SEC’s enforcement actions in such cases as the Bernard Madoff and Allen Stanford Ponzi scheme prosecutions. An independent investigation by U.S. Postal Service IG David Williams in October for the most part exonerated Kotz, the former SEC IG says, finding no evidence of improper sexual relationships or influence upon investigations.

Two whistleblower advocacy groups contacted by Government Executive declined to comment on the issues of the case. Tom Devine, legal director of the Government Accountability Project, noted the whistleblower protection law, recently amended, does not apply to cases in federal district court. And Michael Smallberg, an investigator at the Project on Government Oversight, said of greater concern is the fact the SEC IG office has gone “300 days without a permanent leader at a time when the SEC is implementing a sweeping overhaul of Wall Street regulations and deciding whether the charge the companies that fueled the financial crisis. We’re concerned no one’s minding the store.”

On Monday, SEC Chairman Mary Schapiro announced she would leave the agency as of Dec. 14. She has led the SEC since 2009.

Kotz, now with a private consulting firm in Washington, was approached by Government Executive for comment on the Weber complaint. He agreed to write the following exclusive account of his version of the story.

In January 2012, I left the Securities and Exchange Commission after having served as its inspector general for over four years. While I was in that position, my office conducted numerous significant investigations and audits that uncovered many inadequacies in the manner in which the SEC performed its operations, and made hundreds and hundreds of recommendations that the SEC accepted and implemented. I have no doubt that I left the SEC in a much better position than I found it when I joined the SEC in December 2007.

My office during my tenure at the SEC was a model of efficiency and cohesion. Together with my small but very committed staff, we achieved tremendous successes. We worked very hard but also enjoyed each other’s company and had a palpable sense of camaraderie. I cannot recall any particular complaint levied by one employee against the other during the entire four years of my tenure. No employee of mine was placed on extended leave, no employee was terminated and no employee was even ever given a reprimand.

When I left my position, I was given an enormous goodbye party by my staff with tremendous well wishes for the future. I was also feted by the agency itself -- Chairman Mary Schapiro praised me as a “committed public servant who has served the SEC with great distinction.” There was no “cloud” surrounding my decision to leave and I was not pushed out in any way, shape or form. I left the position because being an inspector general of an agency like the SEC during the financial crisis is an exhausting job, and I felt like I had achieved my responsibilities and was entitled to move on to other endeavors.

The only issue that arose in the few months before I left was an insignificant matter regarding Philadelphia Eagles tickets that I purchased for my two sons, which I paid face value for and for which I got approval from the ethics office before I made the purchase.

Unfortunately, things have been very different for my old office since I left the SEC. Shortly before my departure, our assistant inspector general for investigations resigned to join the World Bank, and we needed to fill the position. I actually did not take a leading role in this process, given that I had been offered a position in the private sector and had already advised my staff that I would soon be resigning.

David Weber was hired for this position only a couple [of] weeks before I left and, in fact, one of the only few substantive conversations I ever had with him was telling him on his first day of work that I was leaving the office in a couple of weeks and would not be working with him. I barely interacted with him at all because I was focused on matters I needed to complete before I would leave my job.

Over the past 10 months, there has been considerable tumult in the SEC OIG, with allegations back and forth and disciplinary actions brought by SEC management culminating in a recent lawsuit filed by Mr. Weber. I don’t know anything about why Mr. Weber was placed on leave, and eventually terminated, or his allegations of retaliation. Yet, for some inexplicable reason, my name has been dragged through the mud in the most ludicrous and unbelievable allegations. Although my tenure at the SEC overlapped with Mr. Weber’s for only a couple of weeks, he has seen fit to make the most outlandish allegations about me in his complaint.

Each one of these allegations has been thoroughly investigated, in some cases by multiple parties, and found to be completely without merit. The U.S. Postal Service OIG conducted a forensic analysis all of my emails, computer files and documents and those of many other individuals as well. I even gave them my BlackBerry PIN number so that they could check for any alleged texts I had sent. (I was not actually even aware that my BlackBerry had a text function.) The Postal Service IG concluded there was no substantiation of any romantic relationships. Allegations of no less than multiple affairs are so absurd that it is difficult to even dignify them with a comment. They would be laughable if they were not so hurtful and damaging. The Postal Service also concluded that there was no evidence that any investigation of mine (regarding Madoff, Stanford or any other) had been tainted or that I interfered with any inquiry. Allegations regarding my former deputy and myself have also been thoroughly investigated in two different forums and in both cases found to be without any shred of evidence or substantiation.

Apart from my personal situation, the real tragedy in this case is that my former office, which was once extremely productive and effective, has been severely damaged by these absurd allegations. There have been very few significant reports issued since I left, and many investigative and audit matters I worked on 10 months ago have still not been concluded.

I sincerely hope that this situation will be remedied shortly and that people will judge me and my former office on its record of accomplishments rather than on unsubstantiated and lurid allegations made in a lawsuit.


By Charles S. Clark

November 26, 2012

http://www.govexec.com/oversight/2012/11/former-sec-inspector-general-challenges-allegations-bias-sexual-improprieties/59733/