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SEC: Rife With Sex, Lies And Mismanagement

Via Matt Taibbi at Rolling Stone, an utterly pathetic tale of abused power, mismanagement, mishandled cases, and incredibly sloppy IT procedures. In a salacious 77-page complaint that reads like Penthouse Forum meets The Insider meets the

Via Matt Taibbi at Rolling Stone, an utterly pathetic tale of abused power, mismanagement, mishandled cases, and incredibly sloppy IT procedures.

In a salacious 77-page complaint that reads like Penthouse Forum meets The Insider meets the Keystone Kops, one David Weber, the former chief investigator for the SEC Inspector General's office, accuses the SEC of retaliating against Weber for coming forward as a whistleblower. According to this lawsuit, Weber was made a target of intramural intrigues at the agency (which has a history of such retaliation) after he came forward with concerns that his bosses may have been spending more time copulating than they were investigating the SEC.

I spent some time reading the complaint and it's as bad as Taibbi describes. Unfair firing aside, this allegation was particularly frightening:

145. In the OIG inquiry into the alleged misuse of computer equipment, Weber and his investigators found that the laptops which were used by SEC examiners during these examinations, and on which all the information from the examinations were stored, neither contained virus protection, encryption programs, or firewalls, nor were they ever wiped clean after testing. Some of the computers at issue were used in every stock exchange in the United States, and therefore exposed exchanges to infections or compromises that could be brought from exchange to exchange. This was in complete violation of SEC and government-wide IT security standards for governmental computer equipment, and in direct contradictions to the oral and written representations the SEC made to regulated exchanges in accessing exchange computer and IT systems.

146. Much to his dismay, Weber then discovered that some of these laptops were brought to foreign countries by SEC management, and by certain SEC management and employees to the “Black Hat” Conference in Las Vegas, Nevada. The “Black Hat” Conference is an annual convention for computer hackers and security experts. Attendees to these conferences have included hackers, representatives from corporations, federal agencies, and foreign intelligence agencies

But they weren't paying attention to what data infections they might be courting, because they were too busy engaging in extracurricular activities. Like, for example, this incident which appears to have begun the ball rolling toward Weber's termination:

36. Maloney asked Weber to close the door to her office. Maloney told Weber that she would deny the following conversation if Weber were to repeat it.

37. Maloney then said that, “David [Kotz] was f*cking that lady.” Weber expressed shock and dismay. Maloney told Weber to “watch out” for Kachroo and to be careful when he met with her.

38. Maloney stated that Kachroo had received special treatment. Maloney even questioned whether the OIG would have ever opened an investigation into the SEC’s oversight over the Court-Appointed Receivership in SEC v. Stanford.

Awesome. There's much, much more, like the text messages being sent in the middle of legal proceedings.

40. Weber suggested to Maloney that Kotz was possibly “pulling her leg.” Maloney then stated that Kotz had shown her text messages he had received from Kachroo. Maloney said that Kotz had even shown her text messages that Kachroo had sent to him during Kachroo’s oral testimony to the OIG, as part of the Stanford Receivership Investigation, on December 11, 2011. Maloney said that one of the text messages she saw had said something to the effect that Kachroo could not bear to be giving testimony from across the table without being able to touch and kiss Kotz during her testimony.

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