Curiouser and Curiouser: The Inspector General's Investigation of the Timing of the Goldman Case

The Inspector General of the SEC, David Kotz, testified before the Senate Banking Committee on his report about the SEC's failings in the Stanford case.  The webcast is here. 

As part of the testimony, the timing of the Goldman case came up.  Recall that the Inspector General opted to conduct an investigation into the timing of the case after receiving a request from some in Congress.  There were suggestions that the Goldman case was timed to influence the debate on financial reform.  The Inspector General announced the investigation on Fox News and indicated that he would seek “to understand what led to the decision to announce or bring the case on that day, to see if there was any undue influence involved.” 

As the WSJ reported, the Inspector General disclosed at the hearing before the Senate Banking Committee that he viewed the timing of the Goldman case as "suspicious."  But the suspicion was not about some effort to exert political influence over the SEC with respect to the timing of the case.  The suspicion was about the possibility that the Goldman announcement had been timed to coincide with the release of the his report on the Stanford matter. 

In other words, the Inspector General was apparently investigating whether the SEC timed the Goldman case to minimize the impact of his report.  Here is the relevant exchange at the hearings:

• Senator Vitter:  “Well that’s certainly important.  But I’m not asking about the timing of the Goldman case.  I’m asking about the timing of the release of your report the day the Goldman case was made public in terms of the fraud charges.  Based on what you know do you think that timing of the release of your report was coincidental?
• Inspector General Kotz:  I guess.  Certainly one would, it would strain credulity to think it was coincidental.  I can’t say that I have concluded that for sure.  We have a process we go through when we look at these matters.  But certainly it was suspicious that the day that our report was finally issued was on the same day as the Goldman action.  However, I would say that there was a process where our report was redacted.  It was a process that actually we were involved in.  And it took some time.  So it wasn’t suspicious per se that it took a few weeks after we issued the report to have the report issued.  The particular timing with the Goldman case is certainly something worth looking into.  I can’t give you a conclusion right now because we are still looking at it. But I would certainly say its suspicious.  

The Inspector General indicated that the report on the timing of the Goldman case will likely be finished in a couple of weeks.  He noted that his conclusions have not yet been finalized.  But his testimony suggests that he has determined that there was no untoward political influence with respect to the timing of the Goldman case.  Presumably the report will say so forcefully.