According to a report in the Wall Street Journal, "SEC General Counsel Mark Cahn issued a memo to Division of Enforcement staff telling them to stop existing record-destruction procedures for closed cases, until further notice." This issue originally arose in mid-August (as discussed here) when Senator Chuck Grassley (R. Iowa) asked SEC Chairman Mary Schapiro whether the Commission destroyed files relating to some of its more high-profile and controversial matters, such as its investigations of Bernie Madoff, Goldman Sachs, Bank of America, Lehman Brothers and others. The Senator’s inquiry was based on allegations he had received in a letter from Darcy Flynn, a thirteen-year veteran of the staff.
According to the Wall Street Journal’s report, Mr. Flynn, through counsel, advised the SEC that documents were still being destroyed and "that ‘we may need to seek injunctive relief’ in federal court if the SEC doesn’t freeze its document-destruction policy."
The Journal confirmed the Commission’s decision to suspend the policy concerning destruction, noting that the agency was working on a new policy with the National Archives and Records Administration. According to a spokesperson, the SEC decided "to suspend the current policy out of an abundance of caution until a new policy is in place."
According to another article in the Wall Street Journal, the SEC’s Inspector General is preparing several reports (expected later this month), including one concerning the document destruction issues. The Journal reported that other issues that are being considered by the Inspector General include: "alleged conflicts of interest concerning payments to Bernard Madoff victims"; the alleged "’revolving door’ between the SEC and Wall Street"; "the financial package offered Henry Hu … to head a new division … [which] included living expenses in Washington"; and "the SEC’s handling of insider-trading allegations against Dallas Mavericks owner Mark Cuban."
