The SEC and Stanford

A Securities and Exchange Commission worker gave investors false and misleading information about an alleged Ponzi scheme that could have hindered investigation of a fraud in which he also was a victim, the agency’s watchdog said.

The employee, based at SEC headquarters in Washington, shared non-public information with several investors during the SEC’s investigation and litigation of the case, SEC Inspector General H. David Kotz said in his semi-annual report to Congress released today. The report didn’t identify either the SEC employee or the firm accused of conducting the fraud.

Kotz opened his probe in February after a senior official said the employee had contacted fellow investors and told them that the company was legitimate and that investors “would be receiving considerable sums of money,” according to the report. Some or all of the investors knew the man worked at the SEC and believed he had first-hand knowledge of the investigation, according to the report.

“His conduct not only confused certain investors and gave them a false sense of hope, but it also had the potential to adversely affect an on-going enforcement investigation,” Kotz said in the report. The employee was placed on administrative leave, and Kotz referred the matter for disciplinary action “up to and including dismissal,” according to the report.

The SEC sued the firm on Oct. 6 and won a judgment on Feb. 14, according to the report. Imperia Invest, a Web-based entity with a fictitious Bahamian address, was ordered to pay more than $15 million in a default judgment on Feb. 14 after failing to respond to the SEC’s lawsuit, according to court documents.

Becker

Elsewhere in the report, Kotz summarized the status of other on-going investigations, including one involving former SEC general counsel David M. Becker. Kotz said his office has searched 1.7 million e-mails and is beginning witness interviews to determine whether Becker violated conflict-of-interest rules.

Becker, who re-joined the SEC in 2009 after the Bernard Madoff Ponzi scheme unraveled, has been sued by the trustee liquidating the jailed money manager’s business over profits he inherited from his parents’ Madoff account. Becker helped set SEC policy stemming from the case before leaving in February.

The inspector general’s staff has met with congressional investigators on the Becker probe and plans to issue findings before Sept. 30, according to the report.

Pornography

The report also details new cases of agency employees and contractors viewing pornography on SEC computers, following reports last year that 30 workers had improperly used agency computers for that purpose in the preceding five years.

An accountant based at the agency’s Washington headquarters “successfully accessed numerous sexually explicit photographs from his SEC computer, including graphic depictions of sexual acts” -- often during normal work hours, according to the report. Managers recommended that he be fired, the report said.

Two Washington-based attorneys were also accused of accessing pornography at work. One of them resigned, according to the report, and management recommended that the other -- who used an SEC computer to access “inappropriate images of partially or fully nude women” -- be fired.

In another case, a contractor was fired and escorted from the building after admitting he had been viewing pornography on his SEC computer for at least a year, even as he’d received computer training and notices that such behaviour was banned.

SEC Chairman Mary Schapiro said last year that she was “angry and frustrated that a very few individuals have demonstrated that they are willing to place the credibility of the SEC at risk.”

John Nester, an SEC spokesman, declined to comment on the inspector general’s investigations.