Reuters : 'The SEC inspector general's office is charged with rooting out waste, fraud and abuse at the agency. It has investigated the SEC's failure to catch convicted Ponzi schemer Bernard Madoff, the agency's oversight of Wall Street during the financial crisis, and other high-profile issues.
But the recent drama has left the office in disarray. Kotz, who started as inspector general in 2007, developed a reputation as a tough watchdog, but his tactics led some staff to claim he created a culture of fear at the agency.
After Kotz left the agency, Weber went to SEC officials and a government council that monitors inspectors general with allegations that Kotz had engaged in inappropriate conduct.
SEC spokesman John Nester said the agency had believed the allegations merited an independent review and it appreciated the Postal Service OIG report.
The report, which was obtained by Reuters through a Freedom of Information Act request, said that during Kotz's investigation of issues related to the SEC-appointed receiver responsible for recovering funds from a Ponzi scheme run by Allen Stanford, Kotz had a personal relationship with Gaytri Kachroo, an attorney for Stanford's victims who were unhappy with the receiver's work.
Kachroo said in a statement on Friday that she understood that the Stanford receivership investigation was prompted by numerous complaints by others. She also said her firm sent a formal letter on behalf of hundreds of victims who have no relationship with Kotz.
Kotz, the report said, also was a "very good friend" of Harry Markopolos, the financial investigator who tried to alert the SEC about Madoff's Ponzi scheme. The report said if the friendship began before or during the OIG's Madoff review, that would have been inappropriate, but it could not establish when it began.
Markopolos could not immediately be reached for comment.
The report also said Kotz exchanged flirtatious emails with an SEC employee, whose name was redacted, while his office reviewed an SEC program the employee worked on. Investigators found no evidence that Kotz interfered in that review as a result of the relationship.
"However, Kotz should have recused himself to assure that conflicts of interest did not manifest themselves," the report said....'
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