SEC Accused of Hiding Wall Street Wrongdoings

(August 18, 2011) — US Senator Charles Grassley (R., Iowa) has asked the Securities and Exchange Commission (SEC) to respond to allegations that it destroyed documents and compromised enforcement cases involving activity at large banks and hedge funds during the height of the financial crisis in 2008.

The US regulatory agency is being accused of destroying files from initial investigations of firms including Goldman Sachs Group, Wells Fargo, Bank of America, Deutsche Bank, Lehman Brothers, SAC Capital Advisors, and Bernard Madoff Investment Securities.

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” Grassley said in a statement. “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

According to Grassley’s statement posted on his website, his investigation of the US regulatory body comes after an agency whistleblower sent him a letter describing “the SEC’s unlawful destruction of the federal records generated in at least 9,000 informal investigations.” The documents are said to support “matters under inquiry,” which is the first step in investigating a case that may or may not result in a formal investigation.

After reviewing the whistleblower’s letter and other related documents, Grassley sent a letter to the SEC, requesting a full account of any document destruction policies, including whether the allegations are correct that the SEC destroyed documents related to major Wall Street banks and hedge funds.

In a letter to SEC Chairman Mary Schapiro, Grassley wrote: “If (the whistleblower’s) allegations are correct, the intentional destruction of at least 9,000 MUIs would appear to greatly handicap the SEC’s ability to create patterns in complex cases and calls into question the SEC’s ability to properly retain and catalog documents.”

Click here to read Grassley’s letter to the SEC chairman.