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Mary Schapiro

SEC Reviewing Whether B of A Broke Law On Merrill Bonuses

Zachary Roth | April 14, 2009, 11:37AM

Ever since AIG's bonus shenanigans exploded onto the national scene last month, Merrill Lynch's own outrageous payouts have kind of gotten short shrift. We've felt this was unfair to the Thundering Herd, since at an around $3.6 billion, its bonuses dwarfed those of AIG. Granted, its role in bringing down the financial system may not have been quite as central as that of AIG's financial products unit, but it's not like Merrill, which needed rescuing last fall by Bank of America, was squeaky clean. Where's the respect?

But luckily, the Merrill bonuses are back. The SEC is looking at whether Bank of America broke the law by not disclosing, in filings last year, the fact that it was planning to pay those bonuses, reports the Washington Post.

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Topics: Bailout, Bank of America, Financial Crisis, Mary Schapiro, Merrill Lynch, Securities and Exchange Commission, Wall Street

Bernard Madoff

Thomsen Out At SEC, As New Chair Fills Out Team

Zachary Roth | February 9, 2009, 2:11PM

The changes at the SEC continuing apace.

Days after the agency was excoriated by whistleblower Harry Markopolos, and by lawmakers, for failing to catch Bernie Madoff's alleged $50 billion Ponzi scheme, CNBC reports that enforcement director Linda Thomsen -- whose department came in for perhaps the most criticism over Madoff, will likely announce her departure today.

And several outlets have reported, starting over the weekend, that Thomsen's replacement will be Robert Khuzami, a former federal prosecutor who's now Deutsche Bank's top lawyer.

During Thomsen's tenure, the SEC has, by many accounts, devoted fewer resources to enforcement, and made it more difficult for investigators to obtain subpoenas -- changes led in large part by former chair Chris Cox.

As for Khuzami, he's a Republican who spoke at the 2004 GOP Convention in support of the Patriot Act and President Bush's policies in the war on terror. But as a prosecutor, he successfully oversaw some high-profile cases. He was part of the team that got convictions of a blind Egyptian cleric and nine others for a failed plot to blow up New York City landmarks. And, crucially, he led the team that won a conviction on the largest previous known Ponzi scheme, in which Patrick Bennett bilked investors out of $700 million. In 1997, the Clinton Justice Department gave Khuzami its highest citation, the Attorney General's Award for Exceptional Service.

In addition, on Friday the new SEC chair, Mary Schapiro, named David Becker, a partner at Cleary Gottlieb, as the agency's top lawyer. Becker held the same position from 2000 to 2002.

So the names on the doors of senior officials are certainly changing. Whether that improves the agency's regulatory performance, of course, remains to be seen. But the old crew was hardly inspiring confidence.

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Topics: Bernard Madoff, Financial Crisis, Mary Schapiro, Securities and Exchange Commission, Wall Street

Securities and Exchange Commission

SEC Chair To Lawmaker: Madoff Hearing "Cannot Have Been Satisfactory For You"

Zachary Roth | February 5, 2009, 12:50PM

Remember that weird moment during yesterday's Madoff hearings, when the SEC's top lawyer, Andy Vollmer, declined to answer questions, and kinda sorta implied he was asserting executive privilege, before backing off that claim when pressed by lawmakers? The moment that provoked Rep. Gary Ackerman's blunt assessment: "We thought the enemy was Mr. Madoff. I think it's you"?

One staffer described the Vollmer moment to TPMmuckraker as a "bombshell" within the agency's headquarters.

And it looks like the SEC is a little embarrassed about it -- and about the general evasiveness of other agency brass in their testimony yesterday.

Check out this letter, which the SEC's new chair, Mary Schapiro, sent to the committee last night.

Schapiro tells lawmakers that the hearing "cannot have been satisfactory for you." She admits that there needs to be a full accounting of what went wrong, and offers to meet with the lawmakers, at their earliest convenience, to "determine a course forward that will meet all of our interests."

As for the Vollmer issue itself, an agency spokesman confirmed that he wasn't claiming the privilege, but couldn't offer any further explanation, saying he'd get back to us.

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Topics: Bernard Madoff, Financial Crisis, Mary Schapiro, Securities and Exchange Commission, Wall Street

Barack Obama

Obama's SEC Nominee Headed For Bumpy Confirmation Hearing?

Zachary Roth | January 12, 2009, 11:43AM

When Mary Schapiro was announced as Obama's pick for SEC chair, she was warmly received, in general, as someone likely to restore the agency's regulatory teeth after the free-market ideologues who ran the place under Bush.

But it looks Schapiro's confirmation hearings, set to begin this week, may not go perfectly smoothly all the same.

Schapiro heads the Financial Industry Regulatory Authority, the non-governmental body that supervises oversees U.S. brokerages. And as we noted last week, Finra, under Schapiro, failed to catch Bernard Madoff's alleged "$50 billion ponzi scheme". Indeed, it conducted an inquiry into Madoff's operation that concluded, in 2007, that he had violated certain technical rules and had failed to promptly report some transactions, but identified no more serious wrong-doing -- a very similar story to the SEC's.

Still, it's also worth pointing out that Finra's investigation into Madoff was focused on his brokerage operation, which, according to a Finra spokeswoman, is all that it is legal empowered to look into. Madoff's business was split into brokerage and investment-advisory arms -- but the alleged fraud, investigators believe, was centered on the investment-advisory arm. So Finra would appear to bear less responsibility than SEC for missing Madoff.

But that's not the only potential confirmation headache for Schapiro. She was accused in two recent lawsuits of making misleading statements in an effort to build support for the creation of Finra, which was created two years ago by merging the regulatory units of the NYSE and the Nasdaq. Schapiro headed the Nasdaq regulator at the time, and became the head of Finra, seeing her yearly salary rise from $2 million to $3.1 million.

The New York Times explains the details:

Among the misstatements that she is accused of making is that the Internal Revenue Service had prohibited the NASD from paying each member more than $35,000 as part of the merger deal. Although an NASD proxy statement issued while the deal was pending said that the I.R.S. would not permit the organization to give more compensation to members, the I.R.S. did not actually issue a ruling on the matter until March 2007, long after the deal closed and three months after the members voted to approve it.

The first lawsuit was rejected by a Federal judge but is on appeal. The second suit, which is similar and was brought by a former SEC lawyer, appears to have been filed soon after Schapiro was nominated to head the SEC, though lawyers for the plaintiffs say it was in the works before then.

Looks like those hearings could be more lively than we thought. We'll be watching closely later this week...