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The Case Of the Mysterious Flaming SEC E-Mail

UPDATED with e-mail excerpts, further SEC reaction at 9:27 p.m.:

NOTE: The Ticker initially decided not to publish the content of the e-mail discussed here because its source could not be verified. But after consulting with top editors here at The Post, we decided to publish excerpts of the e-mail that do not include personal attacks or allegations that cannot be proven at this point. Those excerpts appear below.

At 7:51 a.m. today, an e-mail was sent from the work account of Irene Gutierrez, senior counsel at the SEC's enforcement division to her boss, SEC chairwoman Mary Schapiro, a handful of SEC officials and several reporters, including The Post's Zach Goldfarb.

The e-mail is a four-page jeremiad railing against Schapiro's performance that also attacks the agency's inspector general, David Kotz. It obviously was written by someone with inside knowledge of the SEC.

"Your attempt to take credit for the Reserve Primary Fund case is another head-scratcher," the anonymous e-mailer writes. "According to you, the investigation would have dragged on for years without your intervention. Nothing could be further from the truth. That matter had been identified as a high priority matter by people you have thrown under the bus..."

But the e-mail was not written by Gutierrez, she told Goldfarb, when he called to ask if she had sent it.

She followed with an e-mail at 9:35 a.m.:

"I apologize to everyone who received this email," she wrote. "My blackberry was stolen and someone sent the message below. I did not author this email nor do I know who did. I have notified my supervisors and contacted the Security branch and they are in the process of shutting off the blackberry."

Whether Gutierrez wrote what would be a career-ending email about her boss -- to her boss and several reporters -- is almost beside the point.

The serious questions raised by this incident are two-part:

a) How did this e-mail get sent? It seems unlikely that such a lengthy document was typed out by thumb on a Blackberry then sent. More likely, it was written and then e-mailed to Gutierrez's Blackberry. Then it was forwarded from her account to the recipients. That means either Guiterrez's Blackberry was not secured (password-protected) or whoever forwarded the e-mail had access to Guiterrez's account. Further, this e-mail could have been sent even if Gutierrez's Blackberry had not been stolen, if someone simply hacked her e-mail account.

UPDATE: SEC spokesman John Nester told The Ticker moments ago: "We have determined that the e-mail was sent from outside the agency's network and that the originating e-mail address was spoofed."

This means that someone with computer programming knowledge was able to change their e-mail address to make it look like the e-mail came from Gutierrez.

Also, Gutierrez recovered her Blackberry, which turned out to have been misplaced, not stolen.

The SEC has not determined if the investigation into the origin of the e-mail will continue or if it will be treated like an anonymous tip, like the sort that comes from a whistle blower.

b) What does it say about staff morale at the SEC? Schapiro was appointed by President Obama. Kotz was appointed by former SEC chairman Chris Cox. Chafing between appointees and long-time bureaucrats is normal, and probably even necessary, in government agencies.

But remember, this is the agency that was painfully raked over the coals before Congress and in the media for failing to catch alleged $50 billion Ponzi schemer Bernie Madoff and then was mocked for its subsequent announcements of shutting down nickel-and-dime Ponzi schemes. The tone of this letter, which includes inside agency details, is anger. The e-mailer believes that Schapiro and her staff unfairly blamed former enforcement division head Linda Thomsen for failing to catch Madoff and then hung her out to dry.

UPDATE: The Ticker asked Nester if the SEC will investigate the charges put forth in the spoofed e-mail. "The SEC has a great staff of talented and dedicated professionals who are not going to allow anonymous comments to distract them them from their mission to protect investors and restore investor confidence in this agency," Nester said.

We recognize this is not an answer to our question, but it's the only answer we're going to officially get at this point.


- Elsewhere in the e-mail, an article in The Post was described as "chock full of lies and half-truths."

- Also: "Back to the Post story, you need to be careful not to say things that are demonstrably false. For example, saying that you 'began [your] career as an enforcement lawyer at the SEC' is a flat-out lie. I have been told that you never worked in the Enforcement Division at the SEC. Hopefully, that was a mistake by the reporter and not resume fraud by you."

- UPDATE: It was a mistake by The Post. Schapiro began her career in enforcement at the Commodity Futures Trading Commission, not the SEC. The Post will print a correction.

- UPDATE: In reference to the first excerpt regarding the Reserve Primary Fund case, Schapiro did not take credit for speeding up the case in The Post article. It quoted Schapiro telling investigators: "You need to speed [the case] up to light speed."

- The e-mailer criticizes SEC internal reviews: "Do you know that nobody -- not even the employees who are the subject of the reports -- has a chance to review or comment on the reports until after they have been issued (and, typically, leaked to the press)? What kind of a system is that? Criminals in the SEC enforcement investigations get more due process than the Commission's own staff -- why is that? The system is not only not broken, it's McCarthy-esque, so shame on you if you don't take steps to fix it immediately."

- The e-mailer also gives Schapiro some credit: "To be fair to you, I hear that the Enforcement staff appreciates the two policy changes that you initiated -- allowing formal orders to be approved by a duty officer and eliminating the pilot penalty program -- and you have received a lot of positive press for taking these steps, which goes to show that you don't need to do anything radical to have a positive impact (after all, as everyone knows, all you did was roll back the clock and allow the Enforcement Division to do business the way they used to.)"

"I'm sorry if it sounds like I'm being hard on you, but it's for your own good," the e-mailer continues. "You have the ability to be a good Chairman. If you concentrate on doing what's right, and stop worrying about what Congress and the press are going to do or say, everything will be fine."

-- Frank Ahrens
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By Frank Ahrens  |  June 9, 2009; 9:27 PM ET
Categories:  The Ticker  | Tags: Linda Thomsen, Mary Schapiro, SEC  
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Thank you for your detailed report, but why not share the content of the email? It is fully "sourced" by your description of its origin, and by the quoted denial of the SEC executive whose Blackberry was used to transmit it in her name. You tell us the email was clearly written by someone with inside information and knowledge about operations of the agency, so we should be allowed to see what such a person has to say. After all, the person may be a genuine whistle-blower, and the information provided to your reporter - if used to full advantage - might prevent future investor losses due to trading fraud and abuse.

Posted by: n-tres-ted | June 9, 2009 5:02 PM | Report abuse

With all due respect, the email is the story. Without that, for all we know, Guiterrez wrote the email then had second thoughts. If so, then your questions about security are not applicable.
Let us see the email.

Posted by: lostinthemiddle | June 9, 2009 5:03 PM | Report abuse

Thanks for the comments. Here's why I didn't post the contents of the e-mail: It contains professional and personal criticism of a potentially damaging nature against Mary Schapiro and David Kotz. The putative author of the e-mail -- Irene Gutierrez -- denies she wrote it. Therefore, it seems unfair to me to reveal the specific charges, given that, for now, they come from an unnamed source of unprovable credibility, despite the details included in the e-mail.
That being said, our excellent SEC reporter Zach Goldfarb is on the case and looking into the accusations.
To me, this is like getting an anonymous tip filled with accusations in over the transom: I'd check it out to see if it's true but wouldn't print the tip.
So we'll keep on this.

Posted by: Frank Ahrens | June 9, 2009 5:19 PM | Report abuse


Thank you for your response. Nevertheless, I maintain the public's right to know should prevail. Ms. Schapiro is a public official entrusted with very significant responsibilities in an agency which has utterly failed its statutory obligations both before and since she took office. I suspect the person writing the email may actually be a wrong-doer rather than a whistle-blower, since he/she (according to your description) appears to alibi for Linda Thomsen and accuse the new IG, David Kotz. Kotz appears to be the only current bright spot in the entire SEC scene. He arrived after the Senate Report on the Pequot Capital investigation and the SEC staff's firing of its investigative attorney, Gary Aguirre. That Senate Report shows the scandal at SEC is much broader than even the Madoff fiasco implies.

Posted by: n-tres-ted | June 9, 2009 6:19 PM | Report abuse

Dear n-trest-ted: Some excerpts now posted. Please continue to follow our coverage in the Business pages of The Post tomorrow. I believe Al Kamen will weigh in, as well.

Posted by: Frank Ahrens | June 9, 2009 6:49 PM | Report abuse

Just makes me lose faith in the system more each day. This is what happens when the regulators are in bed with the regulated.

Posted by: cavatellie | June 9, 2009 7:08 PM | Report abuse

Thank you for your attention to this. Much appreciated.

Posted by: n-tres-ted | June 9, 2009 7:14 PM | Report abuse

Interesting indeed.

Based on what has been reported, it seems most likely that this e-Mail did in fact originate from an SEC employee. There is too much detail and too much personal emotion for it not to be somebody with a personal stake in the game. Attacking Schapiro, who has come in and made instant changes to the ‘status quo’ of a conflicted agency, would be what a disgruntled employee who dislikes change would do. Similarly, seeking the resignation of OIG Kotz for his criticisms is again the signs of an individual who fails to think outside the box and who is unwilling to change with the times.

Prior to Schapiro and Kotz the Commission was a black hole where corruption and negligence existed. Heck, it was Chairman Cox, OIG Stachnik, and Director of Enforcement Thomsen that tried to cover up the firing of Aguirre after Aguirre tried to investigate securities fraud by powerful and politically connected individuals. Stachnik, in 12 years, failed to review the SEC staff actions and policies as Kotz has done in less than 2. Clearly this is the environment the e-Mail writer thinks should exist at the SEC.

Posted by: Patchie | June 10, 2009 11:56 AM | Report abuse

Frank, so far today I see nothing further in the Post's coverage of this story. Don't let it sink beneath the surface without another ripple. The public deserves much more transparency in the operations of this agency which permitted rampant fraud to destroy major firms throughout the past two years and continuing presently.

Posted by: n-tres-ted | June 10, 2009 4:50 PM | Report abuse

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