The Securities and Exchange Commission’s Inspector General Carl Hoecker remains on the job, despite an investigation in which he was charged with “serious misconduct,” according to a report Reuters broke yesterday.

The commission temporarily suspended Hoecker without pay in May 2020 from his job as inspector general—in which he ensures that employees and managers at the agency do their job ethically. He is now back on that job as the internal watchdog of the SEC—the nation’s top securities cop, responsible for surveilling billions of dollars’ worth of financial transactions, securities offerings and investor protection each year.

The issue involves Hoecker’s investigation into an alleged sexual relationship between two of his employees, one that “created the appearance that he attempted to conceal potential wrongdoing” by the two staffers, according to a federal investigation into Hoecker that Reuters obtained through a public records request. The two employees had worked for him previously and followed him to the SEC.

The investigation was conducted by the Integrity Committee, the investigative arm of the Council for the Inspectors General on Integrity and Efficiency that is charged with looking into allegations of wrongdoing by inspectors general. The committee’s report, according to Reuters, said that Hoecker’s investigation into the two employees was “remarkably biased and flawed.”

Two whistleblowers triggered the investigation into Hoecker in 2017, when they alleged that he conducted “a substandard investigation that protected the two employees”—a female agent and her male supervisor who were “accused of skipping work, while getting paid, to spend time together because they were having a sexual relationship.” The supervisor also supposedly gave the female agent preferential treatment, Reuters said.

Hoecker cleared the employees of the allegations, the committee reported, and meted “minimal discipline.” He said only that the male supervisor had “created the appearance of an inappropriate relationship.”

Hoecker reported to the committee in a 2019 rebuttal to its draft findings “that he did not investigate whether the pair were actually having sex because ‘a sexual relationship between employees is not prohibited by SEC policy,’” Reuters reported. But a policy sent to SEC employees in February 2016 “requires any supervisor with a romantic or sexual relationship with a subordinate to notify the agency. Failure to do so may result in termination,” Reuters said of the policy, which it obtained.

According to the global news service, “the two employees, whose names are redacted from the Integrity Committee’s report, didn’t respond to requests for comment. One of the employees remains at the SEC inspector general’s office; the other is now working for the inspector general's office at another federal agency.”

Hoecker's investigators also failed to read the pair their Fifth Amendment rights against self-incrimination before interviewing them, which would derail any potential criminal prosecution, Reuters said.

The committee report called it a “highly unusual” error and said it had not occurred in 59 previous SEC inspector general probes over three years.

The investigation concluded that Hoecker abused his authority by conducting a “remarkably biased and flawed” internal probe.

Hoecker was allowed to respond in 2018 to a draft version of the report, whose witness names were redacted, Reuters said. He figured out the identity of one of the witnesses and contacted her via cell phone to ask her what she had told investigators, the federal panel found. He later told the panel that he didn’t think contacting the witness had violated any rule, a position that the committee said lacked credibility given Hoecker’s experience in law enforcement.

In March 2019, he disputed the Integrity Committee's allegations, saying he undertook the probe “in good faith” and conducted an “objective and thorough” investigation, Reuters reported.

The SEC’s decision to suspend Hoecker in May 2020 came seven months after the report, government documents show. The commission had four members at the time (the fifth seat was vacant).

Neither the SEC nor Hoecker immediately responded to a request for comment on the committee’s findings or on whether he will resign, be terminated or keep his position.

“The allegations and the action taken against him have pretty much ruined his credibility, making it impossible for him to do his job effectively,” said Andrew Stoltmann, the founder of Stoltmann Law Offices, in an interview with Financial Advisor.

“The watchdog is supposed to be beyond reproach and has to be, as an old law school professor once said, ‘purer than Caesar’s wife.’ It would seem that these are the sorts of actions that should cause him to lose his position in order for his office to retain credibility,” Stoltmann said.