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

In an interview with Amy Goodman, Matt Taibbi explains how the SEC has let the Wall Street bankers who created the global economic crisis get away with it all.

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AMY GOODMAN: Senator Grassley said the files include "important cases such as the investigation of [Bernard] Madoff, Goldman Sachs trading in AIG credit default swaps in 2009, financial fraud at Wells Fargo and Bank of America in 2007 and 2008, and insider trading investigations at Deutsche Bank, Lehman Brothers, [and] SAC Capital."

MATT TAIBBI: Yeah, no. One of the criticisms of my article, after it came out, was, well, you know, all of these cases, these MUIs that got destroyed, they were insignificant cases, that’s why they didn’t proceed to full-blown investigations in the first place. Well, we know that this isn’t true. We know that at least a couple of these cases involved Bernie Madoff in the years before the Madoff story came out.

Also, Darcy Flynn, this whistleblower, he also came forward with revelations about his own experience as an investigator. One of the first cases that he talked about was one where he was trying to pursue a case involving Deutsche Bank, a very promising securities fraud case, but it was rejected by the chief of the enforcement division, who shortly thereafter took a job as the general counsel of Deutsche Bank. So we know that this is part of the culture at the SEC. There’s a whole problem where there is this dichotomy. There’s the lower-level investigators, who were the sort of career bureaucrats, career—they’re more like cops, basically. And the guys on the upper level are more like political appointees who come from all these high-priced Wall Street banks, and they’re rejecting a lot of these important cases.

AMY GOODMAN: Peter Henning, who writes "White Collar Watch" for DealBook at the New York Times, wrote yesterday, "Although Matt Taibbi in Rolling Stone described the policy as 'Orwellian,' the practice looks more like corner cutting to avoid cumbersome federal regulations on document disposal—the very type of conduct that the S.E.C. often criticizes companies for when it pursues an enforcement action." And he goes on to say, "The actual document destruction, which ended last year, probably had no significant effect on any continuing investigations because it only [applied] to inquiries dropped [early]."

MATT TAIBBI: Yeah, I mean, that’s just preposterous. I mean, I don’t know how—can you imagine if the DEA, for instance, destroyed the files on 18,000 cases of drug enforcement? How could anybody seriously argue that this wouldn’t have an effect on ongoing investigations? Every—you know, law enforcement these days is increasingly dependent upon this intelligence-based model of enforcement, where you piece together bits of information from all kinds of investigations, and you identify patterns that grow over time. So, if you have a company—and there were a number of these companies, like Lehman Brothers and AIG and Goldman Sachs, that had multiple complaints against them in the last 10 years—if you don’t—if you’re an investigator and you don’t have the opportunity to go back and look at those cases and see what patterns might have been there or not been there, I don’t know how you can say that that doesn’t have a serious effect on all enforcement.

AMY GOODMAN: Is this going to stop?

MATT TAIBBI: Well, they have stopped the policy of shredding the files. Last year, after Darcy Flynn came forward, they did adjust the policy. But the thing that was really troubling about that is that when he came forward and made—and brought this to the attention of the people in the enforcement division, they did not immediately admit it, and, you know, admit the problem to the National Archives. They tried to cover it up. And so, we know that there—the culture problem at the SEC that caused this in the first place is—it’s still there. It’s still the same people who are running the SEC, the same bad instincts that got us to this place in the first place, are still—are still a problem.

 
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