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Critics Corner: Click Here To Go On To Next Story

Critics Corner
SEC Scrutinized!
As Another Employee Heads for Wall Street!
As another SEC employee exits his government job for a more lucrative position in Wall Street, the SEC comes under scrutiny. This SEC employee, whose name we will not disclose, was planning to leave the government for private industry with a list of half a dozen Wall Street firms for whom he'd like to work. This employee gave the list to his boss, SEC Chairman Arthur Levitt who then put in a call for him. The issue at hand being that Levitt phoned the chief executive of Bear Stearns Cos., a securities firm being investigated by the SEC at that same time the call was made! The moral and ethical standards of an agency such as the SEC is questioned as more of these Market Watchdogs head for Wall Street at an alarming pace. That January phone call has shined a spotlight on Washington's revolving-door tradition of agency heads helping their subordinates find jobs in private industry. The call was brought to the attention of Senator Carl Levin of Michigan, the senior Democrat on a Senate subcommittee that deals with government ethics. Levin believes the call by Levitt, the government's top securities regulator, to a firm under investigation creates the appearance of a possible ethical breach. He said Levin is looking at drafting legislation that would clear up gray areas in the rules covering the kinds of help agency heads could offer in getting people jobs at companies that have business before the agencies. An agency head responding to a query about a subordinate from a prospective employer or providing a reference is quite different than making a phone call to a company that in fact is under investigation. In a private meeting, Levin told the SEC chief he was concerned over the phone call. In March, this SEC employee left the SEC to become a senior managing director of New York-based Bear Stearns Cos. He also assumed the newly created No. 2 position at Bear Stearns Securities Corp., the company's clearing division that processes trades for brokerage firms. Bear Stearns' clearing operations have been under investigation by the SEC and criminal prosecutors, who have been examining whether the company ignored signs of fraudulent activity at the small firms for which it clears transactions. Levitt would have no comment on the matter when questioned. SEC Deputy General Counsel David Becker claims that there was nothing improper about the phone call. Levitt, who came to Washington from Wall Street after heading a major brokerage firm and the American Stock Exchange, often recommends his SEC colleagues to industry executives for jobs. The disclosure of his call on this employee's behalf comes at a time when high-level enforcement attorneys and auditors have been leaving the SEC at a worrisome pace for lucrative jobs in private practice. In the latest departure, the agency announced that another senior associate enforcement director in the SEC's Northeast regional office, was leaving to become chief regulatory officer for Prudential Insurance Co. Levitt claims he did not help this employee to get the new job. Levitt heads a relatively small agency with 3,000 employees and has a management style that emphasizes personal relationships. His relations with Congress have generally been smooth, but he did get into an ethics flap nearly two years ago with Rep. David McIntosh, R-Ind., chairman of a House oversight subcommittee that investigated his travel for 16 months. The panel's majority Republican staff concluded that Levitt didn't break any laws but said that he only loosely follows federal regulations. As a result of the inquiry, the SEC told the panel it would change its travel policy to allow only first-class travel that is authorized by federal regulations and periodically audit all agency travel. Talk about a scandal on Wall Street! Maybe it's time to create an independent agency to watch the SEC! Well it's off to the races folks, I have a pony to bet on! - Cool Ray
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