Former SEC Attorney Responsible for Diming Out Whistleblower Is Now Running for Congress

" Former SEC Attorney Responsible for Diming Out Whistleblower Is Now Running for Congress

Yesterday POGO published an article in Politics Daily which revealed that George Demos, a former Securities and Exchange Commission (SEC) attorney who is now running for Congress, was previously cited in an SEC Inspector General (IG) report for improperly disclosing protected, nonpublic information about a whistleblower from JPMorgan.

Demos, who is touting his experience at the SEC on his campaign website, has repeatedly denied any wrongdoing. But documents obtained by POGO have confirmed that Demos was the focus of the IG’s investigation, which concluded that he violated SEC rules prohibiting the disclosure of confidential information received in the course of an investigation.

The IG referred the case to the SEC for disciplinary action up to and including dismissal, but the agency took no action. Shortly after the IG report came out, Demos resigned from the agency and announced that he was running for office.

Unfortunately, Demos’s improper disclosure is just one of many examples of the SEC dropping the ball with whistleblower tips. As described last week by Zachary Goldfarb at The Washington Post, the SEC also failed to heed the warnings of Harry Markopolos, who came to the agency with detailed evidence of Bernie Madoff’s Ponzi scheme, as well as a Moody’s executive who tried to warn the SEC that his credit rating agency was giving high ratings to investments that it knew were dangerous. The SEC has pledged to overhaul its whistleblower intake system, but progress has been painfully slow.

Meanwhile, the SEC has also been regularly ignoring the findings and recommendations of its own IG, and not just in the Demos matter. Last month we sent a letter to SEC Chairman Mary Schapiro criticizing the agency for its sluggish response to hundreds of recommendations made by the OIG over the past two years.

The JPMorgan whistleblower, a compliance officer named Peter Sivere, had come to the SEC in June 2004 with evidence that his employer was failing to provide materials sought in a wide-ranging SEC probe into an investment practice known as market timing, which typically involves trading that favors short-term buyers and sellers to the detriment of long-term investors such as retirees.

In his initial email to the SEC, Sivere asked if he would be eligible for a program created by the Securities and Exchange Act that offers rewards to whistleblowers who come forward with information about insider trading. After he was informed that he would not be eligible, Sivere did not raise the issue again, and provided the SEC with the information anyway just a few weeks later.

In July 2004, Sivere filed a complaint with the Occupational Safety and Health Administration (OSHA) under the whistleblower protection provision of the Sarbanes-Oxley Act, alleging that JPMorgan retaliated against him after he expressed his concern that the bank was withholding documents from the SEC. After OSHA issued a preliminary finding in Sivere’s favor, JPMorgan’s counsel responded with an attack on Sivere’s whistleblower credentials, noting that the “SEC has also advised [JPMorgan] that Complainant sought payment from the SEC for providing the SEC with documents.”

Once Sivere became aware of this response, he realized that someone at the SEC had improperly informed JPMorgan’s counsel about his initial inquiry into the SEC’s whistleblower bounty program. This revelation led to the IG’s investigation, which eventually identified Demos as the source of the disclosure, and concluded that he “not only gave...JPMorgan permission to use the non-public information about an informant against him, but actually encouraged such use.”

Sivere has also filed a complaint against Demos before the Departmental Disciplinary Committee of the New York State Supreme Court Appellate Division, which reviews ethical complaints against lawyers and can impose penalties ranging from censure to disbarment. Only days after he announced his candidacy, Demos sent a two-page letter to the Disciplinary Committee conceding that information about Sivere “may have been necessarily disclosed by the Commission’s [SEC] staff,” but only in accordance with SEC rules. He also claims that Sivere “was owed no duty of confidentiality or loyalty by the Commission or me.” However, the IG’s report makes clear that the disclosure of this information was anything but necessary, and was in fact a violation of SEC rules requiring that the information be kept confidential.

As we pointed out in our press release, the Demos episode demonstrates why there is such an urgent need for culture change at the SEC. POGO wrote to President Obama earlier this week urging him to instruct Chairman Schapiro to make it a top priority for the SEC to take swift and decisive action on the IG’s outstanding recommendations, many of which would help to address the long-standing systemic problems that have hindered the agency’s effectiveness. In particular, POGO calls on the SEC to send a strong message of support to future whistleblowers by following the IG’s recommendations for improving the agency’s handling of insider tips, and by cracking down on any employee who is responsible for whistleblower retaliation.

-- Michael Smallberg "

Source and More Information
http://pogoblog.typepad.com/pogo/2010/01/former-sec-attorney-responsible-for-diming-out-whistleblower-is-now-running-for-congress.html

Howard L. Shapiro - Counsel to the Inspector General. Dan Petrole - Peter Sivere Whistleblower Smackdown. Blatant Disregard of Fraud.

SEC Investigators - OSHA Investigators - SEC OIG Report of Investigation - Industry Whistleblower - SEC Fraud and Failing the Public.

Howard L. Shapiro - Counsel to the Inspector General
Deputy Inspector General, Dan Petrole

Below is What Seems to Me Like a Whistleblower Smackdown, as the SEC Fails Over and Over to Protect Whistleblower, Consumers, Shareholders and Faild to Investigate Fraud. Is there No Accountability, Transparency or Rights on any Level?

***********

In a message dated 2/17/2010 7:55:05 A.M. Eastern Standard Time, shapiro.howard@oig.dol.gov writes:

Mr. Sivere:

The Deputy Inspector General, Dan Petrole, has asked me to respond to your recent e-mail to him, in which you state:

In light of the new public interest in this matter I would like for you to re-open this investigation. Please see the attached documentation from Mr. Heddell (signed by you on his behalf) and his reasoning for not re-opening this investigation.

Specifically, Mr. Heddell stated "our review of the SEC OIG Report of Investigation does not provide sufficient basis to revisit this determination."

Why didn't OSHA ever produce a final determination in this investigation? Did OSHA ever interview George Demos or speak directly with the SEC in regard to his allegations of me?

Upon review of the linked web pages (in your e-mail), it appears that the new public interest in this matter primarily relates to actions taken (or not taken) within the SEC, and does not provide a sufficient basis or justification for the DOL OIG to re-visit its previous determination regarding the opening of an investigation with respect to actions taken by OSHA employees.

Howard L. Shapiro
Counsel to the Inspector General "

************

From: PSivere@aol.com [mailto:PSivere@aol.com]
Sent: Thursday, March 04, 2010 6:10 AM
To: Shapiro, Howard - OIG
Cc: Petrole, Daniel - OIG
Subject: Re: Request to OIG

Dear Mr. Shapiro,

Nothing in the attached Memorandum of Understating between the SEC and DOL, entered into July 29, 2008 contain any restrictions on the DOL.

Has Mr. Petrole made any attempt to discuss this matter with the SEC OIG as outlined in the MOU? The fact that my confidential information was leaked during an OSHA investigation and the DOL OIG has no interest in investigating why OSHA investigators did not or will not investigate the leak is troubling.

At a minimum the OSHA investigators should have contacted the SEC investigators to compare "facts." The SEC OIG was concerned enough to investigate their own, why won't the DOL OIG do the same? What is the downside for DOL to produce a similar report as the SEC OIG did?

Thank You,
Peter ""

************

Message from Dan Petrole to Howard L. Shapiro

"In a message dated 3/4/2010 3:16:53 P.M. Eastern Standard Time,
Petrole.Daniel@oig.dol.gov writes:

Howard,

I assume that you are monitoring these e-mails. I also realize that Mr. Sivere agreed to a settlement regarding his issue. Just want to make sure you are comfortable that nothing comes back to bite us.

Dan"

************

"From: PSivere@aol.comTo: Petrole.Daniel@oig.dol.govCC: shapiro.howard@oig.dol.govSent: 3/11/2010 5:41:03 A.M. Eastern Standard TimeSubj: Re: Request to OIG

Mr. Petrole,

Leaving the settlement aside for a moment. Congress charges your agency with protecting the workers of this country. Specifically, it charges you to ensure that certain programs are administered and carried out without interference or political agendas.

Sadly, your comment below illustrates why the American people are fed up. You are in Washington to serve the people of this country. It's a sad state of affairs when the agency charged with protecting the workers of this country believe we are better protected when civil servants, like yourself, put politics before your actual mandate.

This is not a legal issue. This is a systematic breakdown of your agency and all you focus on is CYA. I purposely let your e-mail sit in my in box for the past week with the hopes of establishing some dialogue with you and your agency. Sadly, it did not happen.

Thank You,
Peter Sivere "

Posted here by
Investigative Blogger

Crystal@CrystalCox.com