The position of Linda Chatman Thomsen, director of the enforcement division of the US Securities and Exchange Commission, is fast moving from tenuous to untenable. Already facing disciplinary action — hopefully involving the phrases “Clear your desk” and “grand jury subpoena” — following the inspector general’s report into the handling of L’Affaire Aguirre, she’s now alleged to have tipped a wink or two in the general direction of her old boss, Stephen Cutler, during the JPMorgan (JPM)-Bear Stearns stitch-up.
According to Sen. Chuck Grassley (R. Iowa):
Specifically, I have received anonymous but specific information that:
[T]he enforcement director gave information to the [General Counsel] of JP Morgan Chase (himself a former SEC enforcement director) about the state of various investigations into Bear. The GC had called the director to get assurances and inside knowledge from the SEC to help Morgan’s negotiating position (i.e. how much to bid). This inside information, gotten through a personal relationship, would be critical in helping Morgan put together a low-ball bid to Bear and the US government: Morgan could cite litigation (as Ill [sic - Ed] as valuation) uncertainties, while having the assurance (that at least from the SEC) the risk of litigation was not really that great. This could have materially affected the amount of guarantees that Morgan was able to negotiate from the Federal Reserve.Moreover, the Enforcement Director also allegedly “made representations about the investigation without talking ...to the staff doing the investigation.” The similarity of these allegations to the conduct criticized in our report and the Inspector General’s report is striking.
All of which puts rather a large hole in Thursday’s blatherings on the SEC’s announcement of its Fiscal 2008 enforcement results (the vast majority of which consisted of actions against long-defunct companies for long-defunct filings, with a lot of the rest settled under the Cox discount).
“The SEC’s role in policing the markets and protecting investors has never been more critical,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “The dedicated enforcement staff has been working around the clock to investigate and punish wrongdoing. The staff’s commitment is unwavering year-in and year-out. We look forward to continuing our vital mission of investor protection in the coming year.”
Always excepting the assorted ne’er-to-be-investigated-let-alone-prosecuted thuggees and criminules represented by attorneys huddled under the Friends of Linda umbrella.
(Letter from Sen. Chuck Grassley)
Oct. 21 2008
SEC announces Fiscal 2008 Enforcement Results
SEC press release Oct. 22 2008
Tug o’ the forelock, Portfolio.
Earlier on NakedShorts:
