SEC Destroyed SAC Documents, Lawyer Alleges

Aug 18 2011 | 2:32am ET

A Securities and Exchange Commission bête noir is back with allegations that the regulator destroyed documents stemming from its inquiries, including those related to SAC Capital Advisors.

Gary Aguirre—the former SEC lawyer who claims he was fired for pushing too hard in his investigation of hedge fund Pequot Capital Management—is now representing current SEC lawyer Darcy Flynn. And Flynn says the agency systematically destroyed files related to matters under inquiry for at least 17 years, until the National Archives and Records Administration learned of the policy.

Aguirre notified Sen. Charles Grassley (R-Iowa), the ranking Republican on the Senate Judiciary Committee, who has been leading an investigation into the SEC’s investigations—or lack thereof—of SAC.

Grassley, one of the SEC’s harshest critics on Capitol Hill, wrote yesterday to the agency’s chairman, Mary Schapiro that “the internal destruction of at least 9,000 MUIs would appear to greatly handicap the SEC’s ability to create patterns in complex cases and calls into question the SEC’s ability to properly retain and catalog documents.”

The SEC said that “there’s no requirement that every document that comes into possession of an agency in the course of its work be retained.”

In addition to SAC documents, the SEC allegedly destroyed documents related to Bank of America, Citigroup, Goldman Sachs, Lehman Brothers and Bernard Madoff.

Aguirre told Grassley, who made the allegations public yesterday, that Flynn fears that the SEC’s “unofficial internal whistleblower hit team” is “in the process of engaging in a reprisal against him.”

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