U.S. Sen. Charles Grassley asked the Securities and Exchange Commission to answer allegations that the agency destroyed files from initial investigations of firms such as Goldman Sachs Group, SAC Capital Advisors LP and Bernard Madoff Investment Securities LLC.
Grassley, the top Republican on the Senate Judiciary Committee, made the request in a letter to SEC Chairwoman Mary Schapiro dated Wednesday, citing claims by an agency employee that more than 9,000 such files have been purged. The Iowa lawmaker asked Schapiro to explain whether the SEC routinely destroys documents related to so-called matters under investigation (MUIs) that are dropped in their initial phases.
“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence,” Grassley said in a statement. “If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame, and to what extent its actions were consistent with the law.”
Grassley said his request was prompted by a letter from Darcy Flynn, a 13-year SEC employee who claimed the agency destroyed documents, including materials related to Goldman Sachs’ trades of American International Group credit-default swaps in 2009, insider-trading probes of Deutsche Bank AG, Lehman Brothers Holdings and SAC Capital Advisors and investigations of possible financial fraud at Wells Fargo & Co. and Bank of America Corp. in 2007 and 2008.
Schapiro was asked to disclose whether the allegations were true and to explain the SEC’s understanding of its legal obligations to maintain and archive records. Grassley is seeking a response by Aug. 31.
“As a general matter, not every document that comes into an agency’s possession in the course of its work must be retained,” John Nester, an SEC spokesman, said in a statement, declining to respond specifically to Grassley’s letter. “We do keep records of our MUIs, and they’re available to our investigators to learn about previous work on matters that have been reviewed.”
