SEC Inspector General Sweats the Small Stuff

Leafing through U.S. Securities and Exchange Commission Inspector General H. David Kotz's 220-page semi-annual report to Congress released earlier this week, it's easy to see why he's not likely to win any popularity contests within the agency.

Indeed, Reuters reported today that two SEC employees filed formal complaints against Kotz this year, claiming he smeared reputations and bullied witnesses, and that his tactics "have caused SEC employees to fear the [Office of Inspector General’s] false allegations and retaliations,” according to one complaint.

To be sure, the inspector general’s latest semi-annual report delves into substantive questions of waste, fraud and abuse, like the SEC’s decision to lease vastly more office space than the agency needs. He also reviewed a cost-benefit analysis of Dodd-Frank rulemakings.

But it also seems that no employee infraction is too small for Kotz to investigate -- a marked contrast to reports by inspector generals from other regulatory agencies such as the Federal Housing Finance Agency, the U.S. Equal Employment Opportunity Commission, the Federal Communications Commission or the Federal Trade Commission, which don’t even remotely touch on equivalent conduct.

Kotz, by contrast, launched what sounds like a full-out investigation to determine whether a “senior officer” used two weeks of sick leave rather than annual leave to go on vacation Hawaii.

The inspector general contacted several airlines, then "issued a subpoena to an airline for the senior officer’s airline tickets and related reservation information.” The IG determined she flew to Hawaii on May 8, 2011, and returned on May 19, 2011, when she was supposedly out sick.

Kotz recommended disciplinary action up to dismissal, but the employee already announced she was resigning from the SEC in August 2011. The 80 hours of vacation, however, were counted as annual leave, not sick time.

In another case, an employee was busted for using the SEC shuttle that runs between the agency’s Operations Center in Alexandria and headquarters in downtown Washington to commute to and from work. At the same time, the employee “may have also improperly collected her full month’s transportation subsidy from the agency.” Disciplinary action was recommended.

Another employee was found to have used her SEC e-mail, telephone, computer and copy machine for "a private travel business." Also, the employee “regularly claimed overtime pay for lunchtime, which is prohibited by federal rules.” Kotz referred the matter to the U.S. Attorney’s Office for the District of Columbia, which declined to prosecute.

Yet another employee was investigated for performing undisclosed work for an outside vendor. After a search of his e-mails for 18 months and sworn, on-the-record testimony, Kotz determined that the employee fulfilled his work schedule obligations and was not required to seek ethics advice or obtain approval for his outside employment. Still, he recommended disciplinary action because the employee didn’t report the work on an annual form.

Still, not everyone was found guilty. A supervisor who was “rumored to be getting a Master’s Degree, while pretending to work from home,” was cleared after a “search of the supervisor’s e-mails revealed no evidence that he was pursuing a Master’s Degree.” Also, Kotz noted, “Our review of information concerning the supervisor’s background revealed that he had already received a Master’s Degree several years earlier.”

Another positive -- unlike in prior reports, no SEC workers were caught watching porn on office computers.

Comments

[Dave Patch]

Kotz is doing what his job requires. Unlike his predecessor (Walter Stachnik) who chose not to investigate anybody or chose to cover up those events in which wrongdoing was actually taking place (Ref. Gary Acguirre), Kotz is acting upon referrals by others and is exposing the problems. The fact that SEC staff doesn't like it is too bad. I suggest those that think Kotz is being overly aggressive with them, I suggest they look in the mirror. many corporate officers have accused the SEC enforcement staff of harassing behavior.

[Larry Flynt]

"Another positive -- unlike in prior reports, no SEC workers were caught watching porn on office computers."
*****
pffff. as long as they did it on their own off-hours, who cares.....