When she was not cracking down on white-collar miscreants for securities violations, enforcement attorney No. 2 at the Securities and Exchange Commission just loved trading stocks.
Two or three times a day, she took breaks from her work to click up Yahoo Finance or surf the latest rants on those wacky investor message boards.
“I do spend a lot of time, you know,” she said. “It’s my main hobby. It’s my passion. . . . I feel very proud of my knowledge.”
For now, she is known only as No. 2. This does not indicate her rank within the agency. It’s her handle as a government regulator under criminal investigation. She is suspected of trading stocks using insider information gained at the SEC.
Last week, CBS News acquired a copy of a report from the Office of the Inspector General that concluded No. 2 violated the SEC’s internal policies. The agency then turned the case over to the U.S. attorney’s office and the FBI.
No. 2 made 247 stock trades between January 2006 and January 2008, according to the report.
She had lunch almost every Monday with enforcement attorney No. 1, who is also under criminal investigation, to discuss stock ideas.
They used SEC computers to research stock picks and communicate personal investment ideas. No. 1 even e-mailed stock tips to his brother and sister-in-law using his SEC e-mail account.
The Inspector General’s Office, which has been investigating two years of suspicious stock trades of several SEC staffers, concluded the SEC has “essentially no compliance system.” The SEC has said it is taking the allegations seriously.
Nos. 1 and 2 have denied wrongdoing.
The two lawyers each made a salary of more than $167,000 a year busting people on Wall Street. She has a personal stock portfolio that at one point was worth $170,000. He has a portfolio that at one point topped $200,000.
On April 27, SEC Chairwoman Mary Schapiro was the keynote speaker at the Society of American Business Editors and Writers’ annual conference in Denver, where she graciously endured questions targeting her agency’s competence.
Remember when those tipsters called the SEC to complain about Ponzi schemer Bernie Madoff, and the SEC couldn’t be bothered? That’s not Schapiro’s fault, since she’s been on the job for only a few months, but man, was she apologetic.
“Last year, we had 750,000 tips,” she explained, “and we’ll never be able to follow up on all of them.”
In another breath, Schapiro promised change.
But not one of the more than 200 financial journalists in the room would have known to ask whether she was talking about insider stock trades within her own agency.
“If we cannot show investors that we are looking out for their interests as much as the interests of the financial institutions, then we will have little success in restoring confidence,” she said. “Enforcement has got to be real.”
Nothing like keepin’ it real, Mary Schapiro. Take that crack staff of yours, and get ’em.
Al Lewis: 201-938-5266 or al.lewis@dowjones.com; read Al’s blog at .
