Matt Taibbi on the Explosive Investigation Revealing the SEC's Cover-Up of Wall Street's Crimes

He begins the piece: "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." Taibbi argues this is exactly how the Securities and Exchange Commission has been treating the Wall Street bankers who helped cause the ongoing global economic crisis.

Matt Taibbi joins us now, political reporter at Rolling Stone magazine. His latest piece, again, "Is the SEC Covering Up Wall Street Crimes?"

How are they doing it, Matt?

MATT TAIBBI: Well, the SEC had a number of different levels of investigation. They had a thing called a MUI, which is a "Matter Under Inquiry," and this is basically any preliminary investigation, any tip that came in from a whistleblower or from a self-regulating organization like the Stock Exchange or FINRA, if they—suspicious trades, anything like that. If they investigated it and they did not get permission from the people up above in the SEC to proceed to a full-blown investigation, they then shredded all that evidence they gathered in the preliminary stage. So they destroyed all the evidence of all MUIs dating back to 1993, and that might be as many as 18,000 cases.

AMY GOODMAN: Under whose authority?

MATT TAIBBI: Under the authority of the enforcement division. Now, this—there’s no legal authority to do this. And, you know, apparently, according to my sources, this was illegal. You can’t just unilaterally shred any government document, no matter how insignificant. And these are significant law enforcement investigatory files that they were unilaterally destroying.

AMY GOODMAN: Talk about just what the SEC does, the Securities and Exchange Commission.

MATT TAIBBI: Well, they police the financial markets. They’re the main cops on the beat on Wall Street. It’s basically a two-tiered structure. It’s—you know, for Wall Street crime, it’s the SEC and the U.S. Attorney’s Office in the Southern District of New York are the two main sort of policing organizations that prevent things like insider trading, market manipulation, securities fraud. They also make sure that all publicly traded corporations—they have to make regular disclosures, you know, every year, and they make sure that those disclosures are accurate, that you don’t have an Enron situation, for instance, where a company is reporting profits that they don’t have and hiding losses that they do have. The SEC is supposed to be the number one cop on the beat preventing all of this stuff. And if they’re not doing their job, which they apparently haven’t been, you know, what results is a situation like 2008, where just corruption overwhelms the markets, and you have this explosion of, you know, a lack of confidence all around the globe.

AMY GOODMAN: Who is the whistleblower who started to expose what was taking place?

MATT TAIBBI: His name is Darcy Flynn. He’s a 13-year veteran of the SEC. He had a variety of positions in the SEC, but most recently, he is an attorney who worked, and part of his responsibilities were to maintain the records, within the agency. Now, when he took this new job in 2010, he discovered this policy that the SEC had been destroying all of its preliminary investigations. And he was, you know, understandably upset. And he started this whole process of coming forward. He contacted the National Archives, because he wanted guidance on the issue. And he only came forward publicly because he couldn’t get reassurances from the SEC that they wouldn’t take action against him for coming forward. And so, that’s why he came forward.