The Securities and Exchange Commission, under fire for its handling of a series of corporate scandals, is making progress toward changing how it investigates fraud and other allegations of wrongdoing, two federal law enforcement officials said today.
At a panel on corporate investigations sponsored by the American Bar Association, the two officials said that the SEC is approaching its cases more like a criminal prosecutor would. The commission is becoming more selective in deciding whom to charge, they said, by focusing its investigations on high-level staff rather than trying to charge every employee of a corporation who could be charged.
“There’s going to be just a great, great effort to bring people around to recognizing that we need to paint the barn and not the Sistine Chapel,” said Steve Korotash, associate regional director for enforcement in the commission’s Fort Worth office. He added, “We can finish the case when we get the first two or three people, and then we can move away and say, ‘For reasons of prosecutorial resources, we can stop now.’ It’s never been that way before.”
Valerie Caproni, general counsel to the Federal Bureau of Investigation, said the change should make it easier for the SEC and the Justice Department to work together. “We want to roll the lower employees and move up the chain and do that quickly,” Caproni said. “So, I’m hoping that what this means is … there will be a much more efficient investigation, which is good for everyone, and that we’ll be focusing on the major actors and not on collateral players.”
The SEC’s past approach has sometimes hurt its own cases, Korotash said. He cited one example in which he was prosecuting a case related to municipal bonds in Oklahoma, and the SEC brought charges against his sole cooperating witness. “We had to,” he said, “because that’s how the commission did business.”
Korotash, whose office has brought civil charges against Texas billionaire R. Allen Stanford, prefaced his remarks by saying he did not speak for the SEC. But he said new Chairwoman Mary Schapiro and new Director of Enforcement Robert Khuzami have reinvigorated the commission.
“For the first time in my 20 years at the SEC, things are improving, in my perspective, to the extent that we’re going to start looking like a law enforcement agency just any day now,” he said. “We’ve contorted ourselves over 20 years into this agency that anguishes over the minutiae. We look generally more like a law school debating society than we do like a law enforcement agency, in many respects. It’s going to change, and within a few weeks, the winds that have blown through that building on F Street are truly, truly remarkable.”
He also said the commission is going to be spending less time investigating conduct that is several years old. “We’re going to be current,” he said. “If we find something, through some exam or some whistleblower, whatever, that happened five or four years ago, we’re just not going to focus on it. We’re going to be looking at the stuff that’s current.”