SEC’s IG Kotz Says Headquarters Not “Icy” Despite Critical Reports

The Corporate Crime Reporter had a great article yesterday that profiles H. David Kotz, Inspector General (IG) at the SEC since December 2007.  In his short time as IG, Kotz has issued two reports that are harshly critical of the SEC’s Enforcement Division and its director, Linda Thomsen – the Pequot/Aguirre report (discussed in detail here) and the Bear Stearns report, in which the IG was critical of the Enforcement Division for dropping the ball on an investigation of Bear Stearns.

More recently, as discussed here, Kotz received an anonymous letter alleging that, in the Bear Stearns case, Thomsen gave inside information to Stephen Cutler, the general counsel for JP Morgan Chase, about the state of ongoing SEC investigations of Bear Stearns.  Kotz and Sen. Charles Grassley of the Senate Finance Committee have both been following up on that complaint.

In an interesting interview with Corporate Crime Reporter, Kotz discusses the work that his office is currently doing, and among other things addresses the dynamics at the SEC’s headquarters in D.C., where Kotz sits just a few floors away from his fellow SEC employees in the Enforcement Division.

He says that although some in the SEC have complained that he has been too critical, things have not gotten “icy” in the building despite the recent report issued by his office:

“I haven’t experienced anything,” Kotz said. “Through the conduct of our investigations, we have dealt with many SEC employees. In fact, we have received many calls from folks in the Enforcement Division after the issuance of these reports, thanking us for the work, telling us how much they appreciated that we provided the information, complimenting us on the job we did. So, I have not felt anything icy.”

He also says that the IG’s office does not use the SEC’s press office to put out its reports, stating that

“Our audit reports go on the web almost immediately when they are issued. That law requires us to do that. We don’t normally have much contact with the press at all. We just issue our reports. And whatever happens happens. We don’t have anybody in this office who deals with the press. And we don’t work through the SEC press office.”

As Securities Docket pointed out earlier this week, however, the two recent reports criticizing the Enforcement Division have not been posted on the OIG’s website (here) for unknown reasons.  We will reach out to Mr. Kotz today to ask for clarification on this.

Read the Corporate Crime Reporter article