See, you say "SEC" down here in Georgia and all people think of is South Eastern Conference football. When I hear SEC, I think Securities and Exchange Commission, Matt Taibbi, and another stunning revelation that the SEC, the "police department of the financial sector," has been involved in its own criminal activity the past decade or so.
Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.
That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed.
By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.
This basically answers the question "why haven't there been any high-profile prosecutions of the Wall Street thugs who wrecked the economy?" The evidence was destroyed by the very agency charged with making cases.
The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission's records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted [the National Archives and Records Administration, NARA] to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission's improprieties.
Four days later, the SEC responded to NARA with a hilariously convoluted nondenial denial. "The Division is not aware of any specific instances of the destruction of records from any other MUI," the letter states. "But we cannot say with certainty that no such documents have been destroyed over the past 17 years." The letter goes on to add that "the Division has taken steps... to ensure that no MUI records are destroyed while we review this issue."
Translation: Hey, maybe records were destroyed, maybe they weren't. But if we did destroy records, we promise not to do it again – for now.
Worse, the agency's reliance on "self-policing," allowing the banks under preliminary investigation to handle the accusations themselves, is an unbelievable breach of responsibility on behalf of the agency. As Taibbi notes:
During the past decade, the SEC routinely began allowing financial firms to investigate themselves. Imagine the LAPD politely asking a gang of Crips and their lawyers to issue a report on whether or not a drive-by shooting by the Crips should be brought before a grand jury – that's basically how the SEC now handles many preliminary investigations against Wall Street targets.Meanwhile, on this Labor Day weekend, we had a jobs report yesterday of zero growth last month, sparking more fears of another recession (and begging the question: does anyone think it really ended two years ago?); we have a president and congress, so intent on dithering and fighting on the playground, that even my elementary school age kids find them a joke; we have a clueless FHA filing civil lawsuits against the mortgage industry, rather than criminal complaints; we have 15 million people unemployed, 45 million on food stamps, and 55 million without health insurance.
It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases. "Street-level law enforcement is increasingly data-driven," says Bill Laufer, a criminology professor at the University of Pennsylvania. "For a host of reasons, though, we are starved for good data on both white-collar and corporate crime. So the idea that we would take the little data we do have and shred it, without a legal requirement to do so, calls for a very creative explanation."
We'll never know what the impact of those destroyed cases might have been; we'll never know if those cases were closed for good reasons or bad. We'll never know exactly who got away with what, because federal regulators have weighted down a huge sack of Wall Street's dirty laundry and dumped it in a lake, never to be seen again.
And the number of Wall Street thugs who have been prosecuted and imprisoned for causing this? Zero, zip, nada, none.