Austin Mackin 11 a.m., March 7
Suit alleges SEC wouldn't pursue Madoff-like probes
San Diego attorney Gary Aguirre handles whistleblower case
In late 2004, Kathleen Furey, a senior attorney in the New York office of the Securities and Exchange Commission (SEC), started investigating a financial advisor who, she thought, might have violated the Investment Company Act of 1940 and the Investment Advisors Act of 1940. Her story was told in a Bloomberg News column yesterday (May 15). The two acts that Furey thought the advisor might have violated were the same ones that the agency used in its case against Bernard Madoff, who ran the biggest Ponzi scheme of all time, according to San Diego attorney Gary Aguirre, who represents Furey. The SEC was broadly criticized for blowing the Madoff case until after he had confessed the scheme to his sons. Furey, however, according to a legal filing she made demanding that the SEC release more information, was told by a supervisor that the office did not look into violations of these acts.
Later, she complained about this policy to higher-ups, including the internal SEC investigator. For three straight years, she had received promotions and raises. After she complained about the refusal to pursue investment management cases, she was never promoted again, although she was given work of the kind that employees two grades higher were doing. She expects to sue the agency for retaliation, says Bloomberg.
Aguirre says Furey's whistleblower actions are shedding light on the so-called revolving door. This is the quiet process by which lawyers move from the SEC to Wall Street law firms and sometimes back. Through the revolving door, Wall Street firms basically control the SEC. Three of her superiors that she cites for regulatory laxity have already gone into private practice. Bloomberg points out the most disquieting aspect: the person in charge of the New York office during the years Furey complained of regulatory lapses, George Cannellos, has been named co-director of the enforcement division of the SEC. The other co-enforcement chief, Andrew Ceresney, is a former law partner of Mary Jo White, the new head of the agency. She had a top government post, then went to the white shoe firm of Debevoise and Plimpton, from which she recruited Ceresney after she was named head of the SEC.