Aug. 30 (Bloomberg) — Thanks to Darcy Flynn, a longtime attorney at the Securities and Exchange Commission, we now have all the ammunition we need to do what should have been done years ago: terminate the SEC, with extreme prejudice, and in its place construct a new regulatory watchdog for Wall Street free of obvious conflicts of interest.
Flynn’s courage has almost been lost in all the recent apocalyptic talk of earthquakes and hurricanes, but a few weeks back he did something remarkable. After raising concerns internally at the SEC last year — and getting nowhere — Flynn went public and alleged in a formal whistleblower complaint that for at least 17 years the SEC “followed a policy of systematically destroying documents” related to what are known as Matters Under Investigation, or MUIs, most of which were focused on possibly illicit or illegal behavior at Wall Street firms. MUIs are the first step in investigating a case that may lead to a formal SEC inquiry.
Flynn alleged the MUIs were destroyed after the cases were closed when they should have been retained. He catalogued his complaints in a letter to Senator Charles Grassley, an Iowa Republican and the ranking member of the Senate Judiciary Committee. Grassley wrote to Mary Schapiro, the head of the SEC, asking her to respond to him about Flynn’s allegations by tomorrow. She hasn’t yet done so as of yesterday.
In his letter to Grassley, Flynn alleged that the SEC had destroyed documents related to MUIs involving Bernard Madoff; Goldman Sachs Group Inc.’s trading in the credit-default swaps of insurer American International Group Inc.; “financial fraud” at Wells Fargo & Co. and Bank of America Corp.; and “insider-trading investigations” at Deutsche Bank AG, Lehman Brothers Holdings Inc. and SAC Capital Advisors LP.