Sex, Lies, Stupidity, Oh My: SEC Whistleblower David Weber Vindicated, Receives Huge $ettlement

In a world in which it is all too easy to look the other way, to go along to get along, and to sit down when the public needs you to stand up, hope springs eternal.

I am heartened that America still has a chance to eradicate the corrosive and corruptible elements that have thrived within our financial regulatory system when I learn that there are still people who care enough to do the right thing. Who is one of those people?

Former assistant inspector general of the SEC David Weber. Today is his day and America should feel very good about that.  

Regular readers may recall the suit Weber brought against the SEC last fall. I highlighted Weber's case in writing, SEC Whistleblower's Suit: Sex, Lies, Stupidity, Oh My!! Weber was not bashful in pulling back the regulatory blanket conveniently utilized to cover a host of “activities.” I wrote then,

Mr. Weber joined the SEC early this year as the Assistant Inspector General after the seemingly abrupt departure of then IG David Kotz. I have often wondered why Kotz seemed to exit the SEC in such hasty fashion. Well, Mr. Weber leaves little to the imagination in asserting that Mr. Kotz's “intimate relationships” within the Commission (including with his immediate successor as IG) and with counsel for plaintiff in the Stanford Financial scandal was a literal phrase. Weber goes so far as to say that Kotz's relations compromised SEC investigations in both the Stanford and Madoff affairs. Oh my!!

Weber's titillating testimony turns its focus on other executives within the Commission, including the COO and chair Mary Schapiro. Weber's charges of nepotism and a lack of meaningful internal controls expose the risks that the Commission presented in its daily management of operations and beyond that as well. One does not need to read very hard to understand Weber's belief that the SEC's COO utilized a “pay to play” practice. Additionally, in a scene fit for the classic movie Dumb and Dumber, Weber asserts that SEC representatives brought highly sensitive computer code and encryption data to monitor activity on our equity exchanges to a hacker's conference in Las Vegas. You cannot make this stuff up, folks.

Saving some venom for Ms. Schapiro as well, Weber paints her as a “LIAR” for perjuring herself during a presentation before the House and Senate Oversight Committee regarding the SEC's bungled attempt to move to new office quarters. Weber would not be the first to label Ms. Schapiro with the big L. Recall that Attorney Richard Greenfield did just the same in the case brought on behalf of Standard Chartered v FINRA, Mary Schapiro et al.

What did Weber receive in return for running these tales of sex, lies, and stupidity up the chain of command? A pink slip, a defamed reputation, and much more.

Today Mr. Weber is vindicated and then some. In a release put out just this morning, SEC SETTLES WHISTLEBLOWER'S LAWSUIT, AGREES TO CLEAR DAVID P. WEBER'S RECORD, MAKES $580,000 WHISTLEBLOWER RETALIATION PAYMENT . 

OH MY!!

Today, it was announced that the Securities and Exchange Commission (SEC) paid one of the highest settlements on record to a former federal employee subjected to whistleblower retaliation. In addition to making a payment of $580,000, the SEC retracted its retaliatory allegations against former employee, David P. Weber, and fully cleared his record.

On October 31, 2012, the Securities and Exchange Commission terminated Weber, its assistant inspector general for investigations, after he disclosed allegations of serious agency misconduct to his superiors and to members of Senate and House oversight committees. The termination came despite an independent report by the Inspector General for United States Postal Service clearing Weber of any wrongdoing. The Postal Service IG had been asked to investigate because the allegations involved the conduct of Weber and others within the office of the SEC IG.

The fact that Weber was terminated despite the independent report produced speaks volumes as to the manner in which the SEC was run under former chair Mary Schapiro and to the incestuous relationship between the SEC and those it is charged to monitor.

After clearing Weber, the USPS IG also substantiated concerns Weber raised with his superiors and legislative committees, including what the report labeled “flirtatious communications” a “personal relationship” and an “inappropriate relationship” between the former SEC IG and women he worked with on the Bernard L. Madoff and R. Allen Stanford ponzi schemes. The report found that these relationships involved conflicts of interest and violations of the applicable standards of conduct.

Will the SEC reopen the investigations of Madoff and Stanford cases and go down the paths inhibited by these conflicts of interest? They should and Mary Jo White should issue a statement asserting as much.

The September 17, 2012 report also found that Weber did not mischaracterize evidence when he discussed a matter of potential “national security” and “possible espionage” by possible “foreign nationals” related to a case Weber was investigating that “involved unencrypted computer hard drives that contained sensitive stock exchange information.” These issues were raised by Weber in great detail immediately prior to Weber being placed on leave and, eventually, terminated.

The same goes here. Will the SEC answer to the American public on this case as well? Sounds to me as if Weber was looking deeply into the workings of our equity exchanges. Were the exchanges compromised or complicit in allowing supposed “foreign nationals” access to information?

So many questions. So few answers.

Under the settlement paid today, Weber received substantial damages, his termination has been rescinded, and he was reinstated. The SEC has agreed to fully and finally clear Mr. Weber's record. All “negative references” in Mr. Weber's file will be deleted.

Cary J. Hansel, Weber's attorney, issued the following statement, “The SEC's job is to protect Wall Street whistleblowers and investigate the misconduct they report. When Mr. Weber blew the whistle on wrongdoing in the SEC's own ranks, the SEC engaged in a retaliatory cover up.” Mr. Hansel went on to say, “This case is a reminder that there are grave consequences for retaliation against whistleblowers. American law favors the free disclosure of government waste, fraud and abuse. Nothing cures these problems like the light of day.”

Amen.

Mr. Weber's only comment for the media is, “Doing the right thing can be hard – just as my family and I experienced. Yet I still teach my students in fraud and forensic investigations classes that you need to raise your hand. Now that my name has been cleared, I look forward to helping others through my growing law and forensic investigations practice.”

With that statement, David Weber is inducted into the highest echelon of the Sense on Cents Hall of Fame.

As for the SEC, recall that Weber's issues were raised in 2012. Is there any doubt that this commission remains in bed with Wall Street and subsequently a poorly run if not totally corrupted excuse for investor protection?

Navigate accordingly.

Larry Doyle

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.