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SEC Drops Retaliation Suit with $580K Payment to Whistleblower

Case had publicized misconduct allegations against former SEC inspector general.

The Securities and Exchange Commission on Monday acknowledged that it has settled a whistleblower retaliation case brought by former SEC Assistant Inspector General David Weber.

The agency paid Weber $580,000 and dropped accusations against him. Weber had been terminated in October 2012 after having accused other SEC employees of misconduct.

Under the settlement reached May 23, his termination has been rescinded, and he was reinstated, said his attorney, Cary Hansel, in a press release. The SEC has agreed to fully clear Weber’s record. All “negative references” in his file will be deleted.

“The SEC’s job is to protect Wall Street whistleblowers and investigate the misconduct they report,” Hansel said. “When Mr. Weber blew the whistle on wrongdoing in the SEC’s own ranks, the SEC engaged in a retaliatory coverup. This case is a reminder that there are grave consequences for retaliation against whistleblowers. American law favors the free disclosure of government waste, fraud and abuse. Nothing cures these problems like the light of day.”

SEC spokesman John Nester said, “The settlement resolves the matter to everyone's satisfaction and permits the Office of the Inspector General to continue focus on its important work.”

Weber’s case emerged in 2012 after he discussed with superiors and congressional staff a matter of potential “national security” and “possible espionage” by possible “foreign nationals” related to a case he was investigating that “involved unencrypted computer hard drives that contained sensitive stock exchange information.” He was accused of being a physical threat to colleagues for seeking to carry a handgun at work, placed on leave and later terminated.

Weber sued the SEC asking for $40 million in damages. A report by the independent inspector general for the U.S. Postal Service in October 2012 cleared him of wrongdoing, though “substantiating concerns,” his lawyer said, about sexual misconduct among SEC IG staff, including allegations of conflict-of-interest and “flirtatious” behavior by former SEC Inspector General H. David Kotz while probing the aftermath of the Bernard Madoff and R. Allen Stanford ponzi schemes.

Kotz in November wrote an essay for Government Executive denying the allegations, which were sometimes graphic.

“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,” Kotz wrote. “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.”

Reached Monday by Government Executive, Kotz said his earlier essay remains his statement.

Weber, who has been working as a principal and fraud examiner in a suburban Maryland law firm while teaching at the University of Maryland, issued a statement saying, “Doing the right thing can be hard -- just as my family and I experienced. Yet I still teach my students in fraud and forensic investigations classes that you need to raise your hand. Now that my name has been cleared, I look forward to helping others through my growing law and forensic investigations practice.”

(Image via Keith A Frith/Shutterstock.com)

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