Matt Taibbi: Lurid Sex and Corruption Scandal at SEC

Rolling Stone has published details of what looks like a sex scandal at the Securities and Exchange Commission (SEC). Matt Taibbi reports that the former head investigator at the SEC has filed a lawsuit that claims that he is being retaliated against for blowing the whistle on what the investigator says is a lot of sex going on among top officials at the SEC.

Taibbi writes the whistleblower "came forward with concerns that his bosses may have been spending more time copulating than they were investigating the SEC," and that he was retaliated against after airing those concerns.

David Weber, the chief investigator who filed the lawsuit, claims that while the SEC’s Inspector General investigated how they missed the boat on the Bernie Madoff Ponzi scheme scandal, top officials were sleeping around with each other. Weber says that a former Inspector General, David Kotz, and his successor, Noelle Maloney, were sleeping together. Weber also says that Kotz had an affair with a lawyer representing the victims of another case they were investigating, the Stanford Financial Ponzi scheme.

The lurid allegations apparently affected the investigation: Maloney, who is supposed to be working for the Inspector General to investigate allegations of wrongdoing at the SEC, refused to meet with the lawyer representing the Stanford victims. The reason? Because Kotz was sleeping with the lawyer, Dr. Gaytri Kachroo.

When Weber aired these complaints, he says he was retaliated against. According to Taibbi, “Weber was placed on leave in May after being accused of being a ‘personal threat’ who wanted to bring a gun into the office. The ‘gun’ incident was highly publicized, and Weber was ridiculed in the media...Weber was fired on October 31st.” But now, he’s fighting back.

The backstory to this complaint is that Kotz, now being accused of having sex with two people he was working with at the SEC, “stepped down last January amid not-world-shaking ethics questions (including, of all things, receiving Philadelphia Eagles tickets from a financial adviser),” as Taibbi writes. “Subsequently, however, an investigation by the U.S. Postal Service Inspector General David Williams concluded more seriously that Kotz violated rules by overseeing investigations involving people with whom he had ‘personal relationships.’”

There’s more contained in the lawsuit than just sex, though. Taibbi reports that the suit contains “allegations that officials handed out SEC contracts to buddies at influential Beltway consulting firms, claims that sexual harassment cases were covered up and accusations that the SEC failed to properly screen contractors who were given full access to SEC databases.” Taibbi also reports that the lawsuit claims there were “major security violations.” For instance, SEC investigators took sensitive information with them on unsecure laptops and attended a convention in Las Vegas for security specialists and hackers.

The SEC had no comment to Taibbi on the lawsuit, except to say: “We look forward to filing our response with the court.”


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