The Madoff and Stanford debacles seems to never fade away
for the Commission. Madoff of course is in prison but the litigation goes on.
The failures of the Commission and others such as FINRA continue to linger. The
Stanford case appears to be finally heading for trial. Again however the memory
of the Commission's failure continues to linger, tarnishing its reputation
despite much work to overcome the scandal.
Last week another chapter in the sad saga of these
matters came to a partial end. Former SEC staff member Spencer Barasch, one
time head of Enforcement for the SEC's Forth Worth office, entered into a civil
settlement of ethics and conflict of interest charges with the Department of
Justice stemming from his supervisory role regarding Stanford matters while on
the staff and his subsequent representation of Mr. Stanford's company, Stanford
Financial Group. No settlement was reached with the SEC.
The civil settlement with the DOJ is based on 18 U.S. C.
§ 207. That statute restricts the right of federal employees to handle certain
matters following the termination of their government service. Under the terms
of the settlement Mr. Barasch agreed to pay a $50,000 civil fine, the maximum
permitted for a violation of the statute. Mr. Barasch did not admit the factual
assertions on which the DOJ predicated its claim.
The positions of the DOJ and Mr. Barasch contrast
sharply. According to the DOJ:
These facts constitute a violation of Section 207,
according to the DOJ.
Mr. Barasch denies the claims asserted by the Department
of Justice. He contends that:
Mr. Barasch reportedly attempted to settle the matter
with the SEC, offering to be barred from practicing before the Commission for a
period of six months. The proposal also provided for his automatic readmission
to practice, in contrast to the usual time consuming readmission process. The
Commission reportedly rejected the proposed settlement.
This is the second ethics case referred to the Justice
Department by the SEC Inspector General in recent months. Earlier, the SEC IG
made a criminal referred of a matter regarding a former SEC General Counsel
arising out of his work as a staff member on matters related to Mr. Madoff. The
Department of Justice declined to prosecute. The Commission did not take any
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
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