"It's What the SEC Does"

That was my conclusion in a recent blog posting on the New York Times' DealBook blog. I was responding to a posting called "Questions for Harry Markopolos." Markopolos, of course, was the whistleblower who tried for many years to get the SEC to investigate the $50 billion Barnard Madoff Scandal -- all to no avail.

Mr. Markopolos (of whom I think highly) pointed out that the SEC investigators are mostly lawyers, and suggested that their lack of proficiency at math was a fundamental cause for the Commission's investigative failures.

With all due respect, that's a bunch of baloney. My response (full posting here):

The SEC’s failure to investigate financial fraud is much more fundamental than just a problem of their investigators’ proficiency at math. The fact of the matter is that the SEC itself is intimidated by high-profile investigative targets like Mr. Madoff, so it deliberately avoids going after such targets. That was never made more clear than by the sad case of SEC investigator Gary Aguirre, who was fired by his management for pursuing a case involving John Mack, who recently resigned as CEO of Morgan Stanley (but remains as Chairman of the Board). Mack had likely provided inside information to the CEO of the hedge fund Pequot Capital, which in turn made millions from their timely investment. Aguirre wanted to interview Mack under oath, but his managers would have none of it. Aguirre’s story was on the front page of the NY Times back on June 23, 2006. A Senate investigative panel and the SEC’s IG ultimately vindicated Aguirre (but much too late, of course).

My own experience in trying to get the SEC to investigate malfeasance by a recent Cabinet Secretary parallels that of Mr. Markopolos. (This Cabinet member received up to $1 million in extra stock options from a major technology company under the SEC’s radar, and for years afterward pushed federal policies and programs designed to benefit the company. Both he and the company almost certainly violated federal securities and ethics laws.) Even after sending a dozen tips to the SEC’s Enforcement tip line during Chairman Cox’ regime, no one every followed up. After Ms. Schapiro assumed the top SEC post I wrote to her and her top enforcement counsel (Stephen Cohen), and after reviewing the evidence I provided both said that they would look into this matter. Many months later and nothing. Apparently they’ve swept this matter under the rug, too. It’s what the SEC does.

Just so there's no confusion, the "recent Cabinet Secretary" I referred to was Norman Mineta, and my forthcoming book The 'Smart Road' Scam goes into great detail about Mr. Mineta's ethical and legal transgressions.

ITS corrupted: intelligent racketeering slowly unravels over traveler data monopoly

That's the title of the piece that my old friend Peter Samuel and I wrote for Peter's newsletter, tollroadsnews.com. (Read it here.)

We were motivated to write it after the U.S. Dept. of Transportation's Office of Inspector General (OIG) finally issued their final report about what I call (in my forthcoming book) the 'Smart Road' Scam.

The OIG took the easy way out, coming down hard on the Federal Highway Administration's Office of Operations (my old bosses) about the FHWA's flawed oversight. (Read our piece for more details. As you'll see, we pull no punches.)

There's no other way to say it, the OIG's findings were simply a cop out. As we concluded in our piece:

The FHWA was an easy target, but was just doing what it was told to do by corrupt legislators. The OIG at USDOT clearly decided the legislative shenanigans - the real story behind the Traffic.com racket - were too hot to touch.

As I detail in my new book, the corrupt legislators include Pennsylvania Senator Arlen Specter, Alaska Congressman Don Young, and former Pennsylvania Congressman (and Young's predecessor as Chairman of the House Transportation Committee) Bud Shuster. Corrupt Executive Branch officials include former Transportation Secretary Norman Mineta and former DOT and DHS Deputy Secretary Michael P. Jackson.