(Bloomberg News) A Securities and Exchange Commission worker gave investors false and misleading information about an alleged Ponzi scheme that could have hindered investigation of a fraud in which he also was a victim, the agency's watchdog said.
The employee, based at SEC headquarters in Washington, shared nonpublic information with several investors during the SEC's investigation and litigation of the case, SEC Inspector General H. David Kotz said in his semiannual report to Congress released today. The report didn't identify either the SEC employee or the firm accused of conducting the fraud.
Kotz opened his probe in February after a senior official said the employee had contacted fellow investors and told them that the company was legitimate and that investors "would be receiving considerable sums of money," according to the report. Some or all of the investors knew the man worked at the SEC and believed he had first-hand knowledge of the investigation, according to the report.
"His conduct not only confused certain investors and gave them a false sense of hope, but it also had the potential to adversely affect an ongoing enforcement investigation," Kotz said in the report. The employee was placed on administrative leave, and Kotz referred the matter for disciplinary action "up to and including dismissal," according to the report.
The SEC sued the firm on Oct. 6 and won a judgment on Feb. 14, according to the report. Imperia Invest, a Web-based entity with a fictitious Bahamian address, was ordered to pay more than $15 million in a default judgment on Feb. 14 after failing to respond to the SEC's lawsuit, according to court documents.
Becker
Elsewhere in the report, Kotz summarized the status of other ongoing investigations, including one involving former SEC general counsel David M. Becker. Kotz said his office has searched 1.7 million e-mails and is beginning witness interviews to determine whether Becker violated conflict-of-interest rules.
Becker, who rejoined the SEC in 2009 after the Bernard Madoff Ponzi scheme unraveled, has been sued by the trustee liquidating the jailed money manager's business over profits he inherited from his parents' Madoff account. Becker helped set SEC policy stemming from the case before leaving in February.
The inspector general's staff has met with congressional investigators on the Becker probe and plans to issue findings before Sept. 30, according to the report.
Pornography