The business press loves to fulminate against Attorney General crusaderism and in particular the spotlight-seeking (or so the critics charge) antics of New York AG Eliot Spitzer in playing securities regulator. It’s true that solving the problem state-by-state rather than federally is a recipe for increased legal and regulatory burden on business for no good reason. But as Steve Bailey reminds us in today’s Globe, there’s a reason state justice departments are stepping into the breach: the SEC isn’t doing its job. Bailey describes the emerging mini-scandal at Boston’s Putnam Investments, a story almost scriptworthy with corrupt managers, a crusading whistleblower, and a mob-like shakedown from the electricians union.
On March 22 Peter Scannell, who spent 2 1/2 years working in Putnam’s call center in Quincy, walked into the SEC’s Boston office on Tremont Street with his lawyer from Dwyer & Collora. He was a whistle-blower armed with internal documents and a story of market timing run wild at one of the nation’s largest mutual fund companies. The SEC attorney, Phil Koski, listened for an hour, commended Scannell for his courage, and promised to get back to him. He never did. Instead, Scannell’s attorney called back several times over the next few weeks with no result. The message was unmistakable: No sale.
On Sept. 11 Scannell and his attorney took the same documents and the same story to Matt Nestor, chief of the Massachusetts Securities Division. Nestor spent four hours reviewing Scannell’s material; six hours later he and his boss, Secretary of State William Galvin, had sent their first subpoenas to Putnam in Post Office Square.
… Did the SEC drop the ball again?
“I cannot comment on the specifics of any investigation,” Juan Marcelino, the SEC’s district administrator in Boston, told me yesterday. “We take in 1,000 complaints a day at the agency. . . . We review all of them seriously.”
While the SEC was “reviewing,” Galvin’s office was acting like a real regulator. And the story that is unfolding day by day sounds a lot like the one Scannell was telling.
Does the SEC spokesperson think we’re stupid? They take in 1000 complaints a day so can’t follow up on an insider trading case handed to them on a platter, just like the current White House has too many leaks to be bothered paying attention to one that very likely was an exposing of a covert agent for petty political ends. Can’t the SEC at least look like it’s being vigilant?
ADDENDUM: Maybe I should add that the Attorney General as Political Crusader’s reputation isn’t helped by the likes of Tom Reilly’s butting into the WEEI radio fracas. There’s no good reason for the AG to be stepping in, save for cheap political posturing.
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