Much has been chronicled about WikiLeaks and its ability, at a moment's notice, to release or dump tens of thousands of sensitive internal bank documents on the Internet - with Bank of America as the presumed target.  WikiLeaks founder Julian Assange more recently said he had enough material to make bosses of a major bank resign.  Oddly, it's the SEC and other Washington regulators who are likely to be most nervous about a possible dump, according to NYT Dealbook's Andrew Ross Sorkin. 

    Why So, Mr. Sorkin?   It seems that such a dump from a financial institution can be viewed in one of two ways:  (i) as a treasure trove for regulators to scrutinize;  (ii) as an embarrassment for the U.S government, which has spent millions of dollars investigating Wall Street these past 2 years without a scalp to show for it.  "The SEC could be on the horns of a dilemma," according to lawyer Mark Zauderer of Flemming Zulack Williamson Zauderer.

Without really knowing what information WikiLeaks actually has or how damaging it could be to any financial firm, Washington's concern is that it could expose a level of "chicanery, ... in black and white" that regulators hadn’t found - or worse, they had found it but did nothing about it.  Given its past tattered reputation - thanks largely to the Madoff and Stanford frauds - the SEC and other regulators can ill afford to have evidence emerge of another oversight failure. 

It also doesn't help that “the public will often look at the information out of context and not understand,” said Robert Mintz, former federal prosecutor who's now at McCarter & English.

Another difficult issue for regulators:  what they should do if so-called damning information is released - can the SEC or the Justice Department use WikiLeaks as a source to build a case?  Legally, the government is allowed to use any publicly available information - as long as the government wasn’t involved in illegally obtaining the information itself.   So prosecutors could potentially use any WikiLeaks information to subpoena bank documents and build a case around them. 

U.S. Attorney General Eric Holder Jr. has said his department is investigating WikiLeaks’s earlier release of classified cables from the State Department as a potential criminal act and, "to the extent that we can find anybody who was involved in the breaking of American law, who put at risk the assets and the people I have described, they will be held responsible; they will be held accountable."

Or, as so aptly phrased by Jay Fahy or Fahy Choi:  "It's the theory of the fruit of the poisonous tree."   [NYTimes Dealbook, 12/20]