Post by jcline on Mar 22, 2006 10:37:05 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Subpoenagate 2006: Did Chairman Cox Really Approve those Subpoenas – March 22, 2006
David Patch
It was only a month ago that General Electric’s (NYSE: GE) affiliate station CNBC and the Dow Jones news services (NYSE: DJ) were out spearheading a campaign to discredit the Securities and Exchange Commission over subpoenas issued to several employees on their payroll. Today, with the subpoenas in limbo, the financial news services have trimmed back on their assaults. But is this merely the fire before the storm?
The SEC Commission Staff, made up of four Commissioners spilt equally between party lines and a Chairman elected by the President is set up in such a manner to insure that politics does not outweigh the needs of regulatory enforcement. That was the intent when the matrix that makes up the SEC Commission Staff was created.
Today, Chairman Cox and the four Commissioners that make up the Commission Staff have found themselves deeply involved in what could be considered highly political posturing at the expense of regulatory enforcement. Recent Commission staff interferences have resulted in unintended consequences that reach far beyond the singular case that raised the public’s awareness of how politics plays a role in the SEC daily operations.
Recently, the Commission Staff violated the requisite “Chinese Wall” between Staff and Enforcement and in doing so has raised serious doubt amongst SEC Attorney’s that they can actively pursue their cases without interference. More importantly, the SEC Commission may have actually authorized the issuance of those subpoenas to the financial press and then walked their people through the blame game after the political pressure came knocking at the Staff doors?
On February 8, 2006 the SEC’s San Francisco office signed off on subpoenas to be issued against three members of the financial press along with the on-line financial service TheStreet.com (NASDAQ: TSCM). Nothing was heard of these subpoenas until Marketwatch.com columnist and subpoena recipient Herb Greenberg wrote an article about the issue on February 24, 2006.
What ensued became a public display of Washington politics and the lobbying power of outside forces. In this case, one of the most powerful lobbying groups in this nation – the media.
By the end of the day on February 24 the SEC had temporarily chilled the subpoenas to Greenberg, Dow Jones reporter Carol Remond, and CNBC Host and co-founder of TheStreet.com James Cramer. The Commission has elected to re-evaluate these subpoenas at the Staff level before removing the chill and allowing for these to proceed forward.
The media took this as an act of weakness and used the power of their platform to deride the Commission staff and those in the San Francisco office who had the “gall” to take on such an action as to issue a subpoena against one of their own. The Attorneys out of San Francisco were labeled as rogue agents by the media without any media digging into the facts surrounding the case. Cramer and Greenberg led the charge through print and televised attacks on the Commission and those involved.
The financial press overwhelmingly labeled the Commission “Out of Control” and questioned how an SEC attorney could issue a subpoena to the financial press without Staff Commission approval. The press never providing even the remotest respect to those SEC Attorneys who had uncovered what they believed was enough information to move forward as they did.
Chairman Cox joined in on the fray letting the world know he had nothing to do with the issuance of these subpoenas electing to swiftly distance him from the matter. The new Chairman threw his people and SEC Director of Enforcement Linda Thomsen, who did authorize those subpoenas, under the proverbial bus to protect his political Hyde. The result of such action only further reduced fragile SEC workplace morale. Morale that only recently concerned former SEC Chairman William Donaldson enough to seek out and hire a psychologist to work with the team over issues. A position SEC Spokesman John Heine has confirmed was filled.
But how off base were the Chairman and the financial press in covering this story?
First, lets understand exactly how a formal SEC investigation gets created.
To elevate to a formal investigation, with subpoena powers, the SEC Attorney’s conducting the informal investigation must fill out a standard form controlled by the Securities and Exchange Commission. That template contains several pages of questions and answers that the Attorney must respond to in order to provide the Commission staff with the all the necessary information for the Staff to evaluate and approve or deny such a request.
One such section on the standardized template is a question pertaining to who would be issued subpoenas. The response does not seek out the specific individuals’ surnames but instead requests the basic outline of where the subpoenas will go. In the case in question the list could have included financial journalists along with Analyst’s, Hedge Funds, Broker-Dealers, etc… based on the extent and direction of the investigation.
What we know is that the case under investigation involved “Hatchet Jobs” and/or ghost written reports orchestrated by Hedge Funds to smear a company’s reputation in order to benefit the Hedge Funds stake in the market. Smear campaigns require dissemination of negativity into the public and who better than the financial press to take on such a role? The Attorneys leading this charge would certainly expect that subpoenas could eventually move to the financial press and would therefore cover their basis by adding the press to the potential list.
As the Commission staff authorizes the case to move forward they authorize the case in it’s entirety without placing restrictions on the direction of the case as presented, that “Chinese Wall” thing. If the Commission staff did oppose certain aspects, or require that certain steps would need to be taken prior to actions being implemented they must identify such at the time of the case approval. Had this occurred, restriction being placed, you could easily conclude that those involved would have been reprimanded for going outside of their authorized scope of work.
Based on all reports out of the SEC this has not taken place.
Ultimately, Chairman Cox or one of his delegated staff members must have approved this case including the authorization to subpoena financial journalists. They may not have paid close attention to the details or failed to make the connection at the time of approval but approval elevating to a formal investigation was given and given with authorization on where subpoenas could be served.
The Chairman and the other Commission Staff were disingenuous to claim otherwise and when caught, to throw those who actually work the streets to protect the investors under the bus is irresponsible and cowardly.
For the record requests into the SEC regarding this form filed by the San Francisco Office, and whether the financial press was listed, were not responded to. SEC Spokesman John Heine provided his patented “no comment” claiming this is all part of the SEC’s don’t tell policies regarding on-going investigations.
It is my personal opinion that statements like this out of John Heine is more of the same irresponsible lack of disclosure we have seen come from the agency when they are trapped. This issue has been highly publicized with the Chairman going on record regarding the issue. The Chairman’s comments now must be checked for accuracy and the agency refuses to back up those statements with evidence.
Somewhere the public is being misled and as a Federal Agency that ultimately reports to the public, we have the right to know exactly who it is misleading us. The safety of our financial markets cannot rest on the shoulders of a Chairman and Commission staff that would mislead the public to protect their political positions. It is a matter of integrity. The Commission must address whether or not they signed off on this approval under the original docket presented by the San Francisco office.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006
An online newspaper reporting the issues of Securities Fraud
Subpoenagate 2006: Did Chairman Cox Really Approve those Subpoenas – March 22, 2006
David Patch
It was only a month ago that General Electric’s (NYSE: GE) affiliate station CNBC and the Dow Jones news services (NYSE: DJ) were out spearheading a campaign to discredit the Securities and Exchange Commission over subpoenas issued to several employees on their payroll. Today, with the subpoenas in limbo, the financial news services have trimmed back on their assaults. But is this merely the fire before the storm?
The SEC Commission Staff, made up of four Commissioners spilt equally between party lines and a Chairman elected by the President is set up in such a manner to insure that politics does not outweigh the needs of regulatory enforcement. That was the intent when the matrix that makes up the SEC Commission Staff was created.
Today, Chairman Cox and the four Commissioners that make up the Commission Staff have found themselves deeply involved in what could be considered highly political posturing at the expense of regulatory enforcement. Recent Commission staff interferences have resulted in unintended consequences that reach far beyond the singular case that raised the public’s awareness of how politics plays a role in the SEC daily operations.
Recently, the Commission Staff violated the requisite “Chinese Wall” between Staff and Enforcement and in doing so has raised serious doubt amongst SEC Attorney’s that they can actively pursue their cases without interference. More importantly, the SEC Commission may have actually authorized the issuance of those subpoenas to the financial press and then walked their people through the blame game after the political pressure came knocking at the Staff doors?
On February 8, 2006 the SEC’s San Francisco office signed off on subpoenas to be issued against three members of the financial press along with the on-line financial service TheStreet.com (NASDAQ: TSCM). Nothing was heard of these subpoenas until Marketwatch.com columnist and subpoena recipient Herb Greenberg wrote an article about the issue on February 24, 2006.
What ensued became a public display of Washington politics and the lobbying power of outside forces. In this case, one of the most powerful lobbying groups in this nation – the media.
By the end of the day on February 24 the SEC had temporarily chilled the subpoenas to Greenberg, Dow Jones reporter Carol Remond, and CNBC Host and co-founder of TheStreet.com James Cramer. The Commission has elected to re-evaluate these subpoenas at the Staff level before removing the chill and allowing for these to proceed forward.
The media took this as an act of weakness and used the power of their platform to deride the Commission staff and those in the San Francisco office who had the “gall” to take on such an action as to issue a subpoena against one of their own. The Attorneys out of San Francisco were labeled as rogue agents by the media without any media digging into the facts surrounding the case. Cramer and Greenberg led the charge through print and televised attacks on the Commission and those involved.
The financial press overwhelmingly labeled the Commission “Out of Control” and questioned how an SEC attorney could issue a subpoena to the financial press without Staff Commission approval. The press never providing even the remotest respect to those SEC Attorneys who had uncovered what they believed was enough information to move forward as they did.
Chairman Cox joined in on the fray letting the world know he had nothing to do with the issuance of these subpoenas electing to swiftly distance him from the matter. The new Chairman threw his people and SEC Director of Enforcement Linda Thomsen, who did authorize those subpoenas, under the proverbial bus to protect his political Hyde. The result of such action only further reduced fragile SEC workplace morale. Morale that only recently concerned former SEC Chairman William Donaldson enough to seek out and hire a psychologist to work with the team over issues. A position SEC Spokesman John Heine has confirmed was filled.
But how off base were the Chairman and the financial press in covering this story?
First, lets understand exactly how a formal SEC investigation gets created.
To elevate to a formal investigation, with subpoena powers, the SEC Attorney’s conducting the informal investigation must fill out a standard form controlled by the Securities and Exchange Commission. That template contains several pages of questions and answers that the Attorney must respond to in order to provide the Commission staff with the all the necessary information for the Staff to evaluate and approve or deny such a request.
One such section on the standardized template is a question pertaining to who would be issued subpoenas. The response does not seek out the specific individuals’ surnames but instead requests the basic outline of where the subpoenas will go. In the case in question the list could have included financial journalists along with Analyst’s, Hedge Funds, Broker-Dealers, etc… based on the extent and direction of the investigation.
What we know is that the case under investigation involved “Hatchet Jobs” and/or ghost written reports orchestrated by Hedge Funds to smear a company’s reputation in order to benefit the Hedge Funds stake in the market. Smear campaigns require dissemination of negativity into the public and who better than the financial press to take on such a role? The Attorneys leading this charge would certainly expect that subpoenas could eventually move to the financial press and would therefore cover their basis by adding the press to the potential list.
As the Commission staff authorizes the case to move forward they authorize the case in it’s entirety without placing restrictions on the direction of the case as presented, that “Chinese Wall” thing. If the Commission staff did oppose certain aspects, or require that certain steps would need to be taken prior to actions being implemented they must identify such at the time of the case approval. Had this occurred, restriction being placed, you could easily conclude that those involved would have been reprimanded for going outside of their authorized scope of work.
Based on all reports out of the SEC this has not taken place.
Ultimately, Chairman Cox or one of his delegated staff members must have approved this case including the authorization to subpoena financial journalists. They may not have paid close attention to the details or failed to make the connection at the time of approval but approval elevating to a formal investigation was given and given with authorization on where subpoenas could be served.
The Chairman and the other Commission Staff were disingenuous to claim otherwise and when caught, to throw those who actually work the streets to protect the investors under the bus is irresponsible and cowardly.
For the record requests into the SEC regarding this form filed by the San Francisco Office, and whether the financial press was listed, were not responded to. SEC Spokesman John Heine provided his patented “no comment” claiming this is all part of the SEC’s don’t tell policies regarding on-going investigations.
It is my personal opinion that statements like this out of John Heine is more of the same irresponsible lack of disclosure we have seen come from the agency when they are trapped. This issue has been highly publicized with the Chairman going on record regarding the issue. The Chairman’s comments now must be checked for accuracy and the agency refuses to back up those statements with evidence.
Somewhere the public is being misled and as a Federal Agency that ultimately reports to the public, we have the right to know exactly who it is misleading us. The safety of our financial markets cannot rest on the shoulders of a Chairman and Commission staff that would mislead the public to protect their political positions. It is a matter of integrity. The Commission must address whether or not they signed off on this approval under the original docket presented by the San Francisco office.
For more on this issue please visit the Host site at www.investigatethesec.com .
Copyright 2006