SEC’s Inspector General Kept Job Despite “Abusing His Authority” By Protecting Subordinates
This isn’t a good look for the SEC, the agency that’s received widespread criticism for going easy on Elon Musk, Tesla and Goldman Sachs while jumping at the opportunity to prosecute small-time traders guilty of acting on bits of MNPI.
According to an exclusive Reuters report, Carl Hoecker, the SEC’s inspector general, was briefly suspended in May 2020 following an investigation into “serious misconduct” on Hoecher’s part. Instead of firing him, the SEC temporarily suspended its own IG without pay for an undisclosed period. And now he’s now back on the job.
The investigation was led by the SEC’s Integrity Committee, a federal panel that examines allegations of wrongdoing against inspectors general. The panel determined that Hoecker had abused his position by carrying out “a remarkably biased and flawed” internal investigation into allegations made against two of his employees, who had also worked with Hoecker at a different agency before he joined the SEC.
The investigation, which was focused on allegations of wrongdoing stemming from a sexual relationship between two employees, “created the appearance that [Hoecker had] attempted to conceal potential wrongdoing.”
Reuters only found out about the incident through a public records request.
The committee concluded that Hoecker abused his authority by conducting a “remarkably biased and flawed” internal probe into allegations against two of his employees, who had also worked for Hoecker at another agency. The inspector general’s investigation, which involved an alleged sexual relationship between the employees, “created the appearance that he attempted to conceal potential wrongdoing” by the two staffers, according to the committee’s report on its investigation into Hoecker, which Reuters obtained through a public-records request.
The committee also found that Hoecker misled investigators, displaying a “lack of candor” throughout the review. In addition, Hoecker “improperly confronted” and questioned a witness – one of his subordinates – about what she had told the committee’s investigators, the report said.
“Hoecker abused his authority in the exercise of his official duties and engaged in conduct that undermines the independence and integrity” expected of an inspector general, the committee concluded in its report. It recommended that the SEC take “appropriate disciplinary action for this serious misconduct, including removal,” according to a summary of the case in an annual government report.
Hoecker rebutted these allegations, insisting that he supervised the investigation “in good faith” and that his work was “objective and thorough.” Though Reuters declined to name names, it shared some details of the wrongdoing that Hoecker allegedly helped to cover up. It centered around two employees – a male and female – who were accused of skipping out on work while on the clock to indulge in their sexual relationship. The committee’s investigation into Hoecker started in November 2017, which means that the wrongdoing in question likely happened years ago. The names of the two employees involved in the affair were redacted from the reports received by Reuters.
Hoecker’s investigation cleared the pair of those allegations. It found instead that the male supervisor “created the appearance of an inappropriate relationship” and concluded the matter with minimal discipline, the committee said.
Hoecker told the committee in a March 2019 rebuttal to its draft findings that he did not investigate whether the pair were actually having sex because “a sexual relationship between employees is not prohibited by SEC policy.”
But a policy sent to SEC employees in February 2016, which was shared with Reuters, requires any supervisor with a romantic or sexual relationship with a subordinate to notify the agency. Failure to do so may result in termination, according to the policy.
The SEC’s Integrity Committee didn’t dig into the allegations against the two employees that Hoecker had been investigating, but instead it focused solely on Hoecker. One red flag was the fact that everyone assigned to investigate the incident by Hoecker had a previous relationship with the two individuals being investigated, creating an obvious conflict.
Asked to comment, Democratic super-lawyer Michael Bromwich, himself a former Justice Department inspector general, said he was surprised Hoecker wasn’t fired. Bromwich added that he had “never heard of leaving someone in charge of a law enforcement or accountability agency who has had allegations like this sustained against him.”
It’s obvious why the SEC didn’t share news of the investigation (and its outcome) with the press: if the SEC can’t hold its own chief investigator accountable, how can it be trusted to safeguard the “integrity” of American financial markets?
Wed, 12/08/2021 – 16:40