Over Two Hundred SEC Officials Have Gone To Private Sector Since 2006

WASHINGTON (Tim Reid) - At least 219 former officials at the Securities and Exchange Commission have left since 2006 to help clients with business before the agency, bringing fresh allegations of a "revolving door" that leaves the commission too cozy with the Wall Street firms it regulates.

According to a report to be released on Friday, between 2006 and 2010 there were 219 former SEC employees who filed letters with the agency indicating their intent to represent a client with business before the commission.

In all, those former officials advised firms on SEC business nearly 800 times, according to an advance copy of the report seen by Reuters.

The study by the nonpartisan Project on Government Oversight, which analyzed post-employment statements provided by the SEC after a Freedom of Information Act request, says the former officials joined a total of 131 firms to provide legal, lobbying, accounting and other advice to clients being investigated or regulated by the SEC.

Republican Senator Charles Grassley, a senior member of the Senate Finance Committee, said of the report: "The SEC's revolving door seems to be more active than ever."

Grassley said there should be public disclosure of where former financial regulators are working and what issues they are working on. "Transparency is a proven back-stop to enforce ethics rules," he said.

A report by the SEC's Inspector General earlier this year criticized the SEC for failing to keep adequate records about potential conflicts of interest.

While critics such as Grassley contend the system leaves the SEC unable to effectively regulate Wall Street, defenders argue the practice of officials leaving government agencies to work in the private sector is to be expected.

"Who do you want representing these clients before agencies such as the SEC with very, very complex rules," said Roberta Karmel, a former SEC commissioner and now a professor at Brooklyn Law School. "Lawyers who know nothing about the rules -- or lawyers who do?"

Professor Karmel added that the SEC is one of the few agencies that require former employees to provide written notice if they intend to represent a client before the commission.

SEC employees are barred by federal law for life from working on matters that they worked on while at the commission.

"We have a rigorous program for departing employees to help them meet both the spirit and the letter of the law," said John Nester, an SEC spokesman.

The oversight group's report shows some SEC officials joined new employees with business before the commission within days of leaving the agency. Alan Reifenberg, for example, a branch chief in the SEC's Enforcement division, resigned on June 6, 2006. Six days later he joined Credit Suisse.

Many companies who hired SEC officials turned to them for help in SEC litigation. Jill Slansky, a former senior attorney in the SEC's New York Regional Office, resigned in December 2009.

In June 2010, she filed a statement saying she had been retained to represent an unidentified client in a lawsuit brought by the SEC against Galleon Management, the complaint that charged billionaire hedge fund owner Raj Rajaratnam with insider trading. He was found guilty on 14 counts this week.

John Freeman, a former SEC lawyer and now an emeritus professor at the University of South Carolina School of Law, did his own SEC "revolving door" study in 2003 and found a high proportion of officials left to work for regulated entities.

"A lot of the brain power and logistical know-how that existed in the SEC was being used for the benefit of mutual fund managers and not for the benefit of shareholders," said Freeman.

(Reporting by Tim Reid; Editing by Tim Dobbyn)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[floodmfx]

12:52 PM on 05/16/2011

The SEC is a massive waste of tax-payer money.
It is 100% captured by the industry it regulates.

The SEC is the gov't working for Wall St -
It is not a valid law enforcement agency.

[Darlie Brewster]

01:15 PM on 05/16/2011

The SEC was gutted by Bush just like he did the EPA , FDA ! The SEC can be cleansed but it is going to take a lot of work. It needs to be changed and laws imposed where you can't work for the industries for 10 years after working for the SEC. Corruption charges need to be laid. The CEO's of JPMorgan, Goldman Sachs and Bank of America need life prison sentences now.

[Intolerantcentrist]

10:45 PM on 05/14/2011

And if you are an effective regulator the chances of promotion within your agency is bleak; the chances of being employed by those you regulated, even bleaker.

[foresure]

09:16 PM on 05/14/2011

BREAKING NEWS:

For an update on this issue search "Spencer Barasch" in the search window on Huffington Post.

[Iceneedle]

07:48 PM on 05/14/2011

So if I understand the article correctly, they leave, and are "hired" the next day. Somehow no one sees the apparent contradiction of enforcement and moral trupitude? His seat is not even cold, and he is now arguing before SEC lawyers the next day for his clients behalf. I am sure there has been more than one occasion where the SEC attorney says, "hey I didn't knwo you left."

What about the forensic auditors or accountants? Do they go from SEC to the private secotr just as quickly? If they do too, then why are they being wooed so easily to go to the other side? If it was done a tthe NSA or CIA there would be seriosu questions as well as ramifications when it came to these employees.

[Matt12]

07:22 PM on 05/14/2011

Hey, the smart ones have to make a buck

[garymc8]

07:21 PM on 05/14/2011

Stockbrokers
Extorters
Club

[Get RealSoon]

07:10 PM on 05/14/2011

Like trying to find a lawyer to defend foreclosure and fight fraud. You can't. Zero next to none are out there. Everyone else is bought and paid for. Never believe in the justice system and learn to survive. It's an ugly truth but it's true.

[Trustfunded1]

04:48 PM on 05/14/2011

Wall Street always needs help from those on the inside.

A ponzi scheme can't operate without insider corruption.

[Tierce]

02:12 PM on 05/14/2011

This might be a good time for people to remember a great presidents statement, "Think not what your country can do for you, but what you can do for your country." JFK

[MarkInEugene]

02:07 PM on 05/14/2011

Analysts at the SEC need to start asking: How can we change the way we operate that makes former employees useless to Wall Street firms. The SEC always seems to be a step behind the Wall Street gang's legalized theft.

[Trustfunded1]

04:49 PM on 05/14/2011

Make it illegal for them to work for a financial or lobbying position for 20 yrs after leaving the SEC.

[Aikaterina]

12:37 PM on 05/14/2011

It's not just in the SEC, but in all government departments and agencies, charged with protecting the general public (taxpayers) and government. Government employees are well-piad and receive good benefits. Their job is to guard against violatins of laws, regulations by corporate entities: oil, financial, etc. It seems most willingly accept gifts, junkets, cash or lucrative job offers in exchange for selling their employer (taxpaying public and government) out.

Geithner, Paulson, Summers, Bernake and others should be dismissed from their positions. They've each profitted handsomely from Wall St. and engineered the "sweetheart" deal for Goldman-Sachs, either before - after having worked for the firm, having investments there, or close friendships with executives.

Geithner-Paulson made AIG paid 100% on the "losses" of G.S. not allowing the firms to negotiate a price, and precluded any litigation against G.S. by AIG or other firms, yet allowing Lehman Bros., Bear-Stearns, and others (competitors) to fail.

This explains why Blankfein wasn't indicted or prosecuted for fraud: bribing ratings agencies; hedging bets against funds the firm was peddling to investors, knowing they would be worthles. Mark Patterson, a former G.S. lobbyist is Tim Geithner's chief of staff. Geithner claimed that as while president of the N.Y. Fed., he wasn't aware of the impending implosion of the market. Bernake has allowed G.S. to borrow 0-interest over $800 billion from the Fed., even while earning interest-dividends on it.

Greenspan contributed to the collapse, between deregulation, low interest and other policies.

[MayorsRevenge]

11:19 AM on 05/14/2011

Um - guys and gals - this really bothers you but Rahm (former I-banker) and Daly (former I-banker) helping run the executive branch does NOT?!

[Cipo]

05:21 PM on 05/14/2011

Who does that not bother? I am disgusted by both.

[nothingchanges]

11:13 AM on 05/14/2011

Maybe we're just getting around to noticing it, but it seems to me that in my youth people got into politics to serve the public's best interests.

Now it's just a "stepping stone" into the high ranks of management in the private sector.

Who watches the watchers?

[MayorsRevenge]

11:18 AM on 05/14/2011

You do.

[BroadwayJoe]

10:25 AM on 05/14/2011

Just ban them completely from lobbying the SEC or any other goverment agencies.

The system is so completely corrupt and yet we want to lecture developing countries about rule of law, transparency etc. Such BS.

[jtabs]

09:53 AM on 05/14/2011

This is a very complicated issue and is not limited to just regulators (politician to lobbyist) and lends itself to a great deal of cynicism (it is conceivable that companies hiring these individuals are seeking to strengthen their controls and insure compliance and not simply seeking ways around them) and has existed for a long long time, I remember my early employers suggesting that I work for the IRS for a few years before making the transition to public accounting. Probably the best solution is a policy of transparency coupled with reasonably competitive compensation packages including career paths as well as a positive working environment, and while I'm not necessarily opposed to a waiting period it can be interpreted as restriction of the individual option to better themselves by forcing them to lose time. I believe that in most cases regulators are akin to teachers, nurses, policemen, firemen, soldiers and many other professions where making a buck is not the prime motivating factor in their life choices so that reasonable solutions are available, but then again I'm an optimist.