November 14, 2011

Madoff Fallout: 8 SEC Disciplinary Actions – A Rare Occasion?

On Saturday, the Washington Post ran this front-page article about how 8 SEC Staffers have been disciplined by the agency for their failure to uncover Bernie Madoff’s fraud – but no one has been fired. Here is an excerpt:

The SEC’s head of human resources and a law firm hired to advise the agency had recommended that SEC Chairman Mary L. Schapiro fire one person, whom the SEC described as a manager in the office that inspects investment firms. But the chairman decided not to fire the employee, because doing so “would harm the agency’s work,” SEC spokesman John Nester said.

Should someone have been fired? I don’t know because I don’t know the circumstances involved. But as reflected by some of the other inside-the-beltway commentators on the article – there are nearly 600 comments – it is very rare for someone to be fired at a federal agency. During my two tours of duty at the SEC, the only instances of someone being fired occurred during the probationary period after their initial hiring.

And even that was rare – maybe two cases in five years. We would always joke around about how hard it was to be fired in the government, primarily due to the liability risks involved. And I don’t remember any instances of discipline. So as minor as the actions described in the WaPo piece seem to outsiders, it’s actually a big deal for those that work at the SEC…

Nuns Who Won’t Stop Nudging

Great piece in yesterday’s NY Times about the nuns who are shareholder activists. It’s a lengthy piece that covers their history, accomplishments and goals. Here’s an excerpt:

The Sisters of St. Francis are hardly the only religious voices challenging big business. They have teamed up on shareholder resolutions with other orders, including the Sisters of Charity of St. Elizabeth and the Sisters of St. Dominic of Caldwell, both in New Jersey. The Interfaith Center on Corporate Responsibility, the umbrella group under which much of Sister Nora’s activism takes place, includes Jews, Quakers, Presbyterians and nearly 300 faith-based investing groups. The Vatican, too, has weighed in with a recent encyclical, condemning “the idolatry of the market” and calling for the establishment of a central authority that could stave off future financial crises.

“Companies have learned over time that the issues we’re bringing are not frivolous,” said the Rev. Seamus P. Finn, 61, a Washington-based priest with the Missionary Oblates of Mary Immaculate and a board member of the Interfaith Center. “At the end of every transaction, there are people that are either positively or negatively impacted, and we try to explain that to them.”

As the article notes, the topics that the nuns typically select are not ones that attract much support from shareholders. And in talking to some experienced corporate secretaries over the years, I have heard that they are difficult to negotiate with because they often don’t budge from their views coming into a meeting…

Are Some Members of Congress Engaging in Insider Trading?

There’s been news for quite some time that some members of Congress have been engaging in insider trading – a few days ago, convicted lobbyist Jack Abramoff claimed that as many as a dozen have done so. “60 Minutes” included a segment on this topic last night – and as indicated in this transcript of the segment, “insider trading” is defined differently for Congress than the rest of us due to a difference in the laws that apply. Some seek to change that, including this bill called “The STOCK Act.”

Here are three academic studies, with various views on the subject:

Insider Trading, Congressional Officials, and Duties of Entrustment
Insider Trading Inside the Beltway
Cashing in on Capitol Hill: Insider Trading and the Use of Political Intelligence for Profit

– Broc Romanek