“It is a cancer,” Kidney said of the agency’s use of numbers. “It should be changed.”
‘Lower Burden’
Kidney said in the interview that he will always be an SEC loyalist and was trying to offer constructive criticism that could help the agency. He said he wasn’t singling out any specific cases or officials in his comments.
“I don’t think we did a very aggressive job with all the major players in the crash of ’08,” he said, noting that as a civil enforcement agency, the commission does not need to prove its cases beyond a reasonable doubt like the Justice Department does. “The SEC has a lower burden of proof and we should be pushing the envelope a bit.”
The Goldman Sachs suit was one of the highest-profile SEC actions arising from the credit crisis. The bank agreed to pay $550 million to settle claims that it misled investors when it packaged and sold a complex security known as a collateralized debt obligation that was linked to subprime mortgages.
The SEC also sued Fabrice Tourre, who was vice president on the team that put together the deal at issue in the SEC case, known as Abacus 2007-AC1. A federal jury found Tourre liable last year, and he was ordered in March to pay $825,000 in penalties and other costs.
Goldman Executives
Kidney, who was part of the initial team that was building the Goldman Sachs case, pressed his bosses in the enforcement division to go higher up the chain. He later took himself off the team after being given a lesser role, according to people familiar with the matter.
In particular, the people said, Kidney argued that the commission should sue Tourre’s boss, Jonathan Egol. Kidney also wanted to bring a case against Paulson & Co. or some executives at the hedge fund, which helped pick the portfolio of securities that were underlying the Abacus vehicle and then bet against it.
The SEC ultimately decided not to sue Egol, the Paulson firm or any individuals from the hedge fund.