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Former SEC Official is Subject of Criminal Inquiry
May 16, 2011
Spencer Barasch, a former SEC enforcement official, reportedly is the subject of a federal criminal inquiry for legal work he did for alleged Ponzi schemer Allen Stanford after leaving the SEC, the NYTimes reported. While at the Commission, Mr. Barasch headed enforcement for the SEC’s Fort Worth Regional Office, and during his tenure, is said to have played "a significant role" in numerous decisions by that office not to investigate Stanford despite repeated accusations of fraudulent behavior - according to a report released by H. David Kotz, the SEC Inspector General. Mr. Kotz said efforts to pursue Stanford were stopped at least 6 times over a 7-year period. The disclosures came Friday at a Congressional hearing into the SEC’s failures to stop the Stanford Ponzi scheme.
After Leaving the SEC. Spencer Barasch is now a private-sector lawyer in Texas. He's represented clients dealing with the Commission, including a defendant charged last month with financial fraud. Barasch also did legal work for Mr. Stanford despite being told multiple times by the SEC’s ethics office that it was improper. Mr. Stanford eventually was charged with fraud and is scheduled for trial later this year - although he continues to deny the charges. During Friday's hearing, members of the House Financial Services Committee’s oversight and investigations subcommittee expressed shock that Mr. Barasch, continued to practice securities law before the commission.
“This is not even defensible,” Representative Randy Neugebauer (Rep.-TX) who heads of the House subcommittee, said at the conclusion of the hearing. “It is extremely disturbing that we had a culture in agencies that demand high levels of disclosure and integrity, that within that very agency there wasn’t a similar amount of integrity. It’s inexcusable.”Robert Jewell, the managing partner of Andrews Kurth, the Texas law firm where Mr. Barasch is the leader of the corporate governance and securities enforcement team, said in a statement that he believed that Mr. Barasch “did not violate conflicts of interest.” He further added:
“Spencer Barasch served the S.E.C. with honor, integrity and distinction. We disagree with the characterization of Mr. Barasch’s involvement put forth by the inspector general in his report last year in regard to the Stanford Financial Group matter. We believe he acted properly during his contacts with the Stanford Financial Group and the Securities and Exchange Commission."SEC Testimony on Stanford Inquiry. Inspector General Kotz and Enforcement Director Robert Khuzami told the House panel on Friday that Mr. Barasch had become the subject of a criminal investigation by the FBI and the Justice Department after Mr. Kotz’s report was issued in March 2010. The SEC also referred Mr. Barasch to the ethics boards of the bar associations in Texas and Washington. The SEC can, after an administrative proceeding, bar lawyers from practicing before the commission should it find sufficient wrongdoing. The commission declined on Friday to say whether such a proceeding was under way. Rule 102(e) of the SEC’s rules of practice says that the commission can bar a lawyer who is found “to be lacking in character or integrity or to have engaged in unethical or improper professional conduct.” Such a finding requires a formal hearing, and the SEC has not initiated a hearing on Mr. Barasch, said an SEC spokesperson. The Government Accountability Office is conducting a review of post-employment rules, which the SEC is assisting. For further details, go to: [NYTimes, 5/13, "Former S.E.C. Official .."]
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