April 23, 2010
The SEC, Pornography, and Red Herrings
Posted by Christine Hurt

   A few months ago guest blogger Miriam Baer posted a blurb about the SEC's problem in getting employees to lay off the internet porn.  Today, a student sent me a link to another news story about the same problem today.  So, I started running down these links to see why this story is good for several months of news cycles.  Why does this story have legs?  I'm less sure than ever why this is earth-shattering 2010 news.

Twice a year, the SEC Inspector General writes a report that is an audit of SEC operations and describes internal investigations.  These reports are on the IG's website:  Here's April and November of 2009 and April and November of 2008, respectively.  The news stories that are coming out today give examples of work pornography abuses that are taken from these reports, most of which have been out for quite awhile.  However, the news reports today talk about a memo from the IG to Sen. Grassley discussing the reports.  In these reports, the IG mentions different times that Sen. Grassley has requested memos from the IG about updates to investigations mentioned in a certain semiannual report, so this in and of itself does not seem that unusual, and even the norm.

Each report lists ongoing and pending investigations, which range from serious to maybe not-so-serious agency problems of employees, which I guess are to be expected in an agency with many employees spread out over various cities across the country.  Here is a listing of some categories, merged from the reports:

Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme;

Disclosures and Assurances Given in Connection with Acquisition of Investment Bank;

Violations of Standards of Ethical Conduct With Regard to Official Government Travel by Managers in the Fort Worth Regional Office;

Retaliation by Senior Officers in a Regional Office;

Misuse of Position, Government Resources, and Official Time in a Regional Office and Headquarters;

Possession of a Weapon Inside SEC Headquarters;

Participation in Fraudulent Scheme by Contract Employee Using SEC Resources;

Assistance with the Operation of a Ponzi Scheme by Former SEC Employee Using SEC Resources;

Allegations of Failure to Conduct Timely Investigation in the Fort Worth Regional Office; Misuse of Government Computer Resources;

Allegation of Unauthorized Disclosure of Non-Public Information;

Allegation of Conflict of Interest by Senior SEC Official; Allegation of Abuse of Authority;

Investigation of Falsification of Personnel Forms and Employment Application;

Investigation of Misuse of Official Government Position;

Follow-up Investigation of Disruptive and Intimidating Behavior by a Senior Manager; Investigation of Failure to Maintain Active Bar Status;

Follow-up on Investigation of Misuse of Government Parking Permit;

Investigations into Misuse of Government Resources and Official Time to Operate Private Photography Businesses;

Investigations and Inquiries into Misuse of Computer Resources to View Pornography;

Investigation into Misuse of Computer Resources,

Appearance of a Conflict of Interest and Lack of Candor

So, yes, there are investigations of employees using pornography based on lists generated by porn-blocking programs.  No one seems to be happy that the SEC has a system in place to reduce the incidence of porn-viewing and that it seems to be working.  And the press doesn't seem to care that people run real estate businesses or other side businesses with SEC resources on SEC time.  That seems disturbing to me.  But, porn has that "YUCK!" factor.  Regardless of your opinion on porn-watching, few people want to envision the person in the office next to them watching porn during office hours.  (Shiver.)

But the press wants to make this porn-watching, which is probably a problem at every company with computers, and which has probably been in most SEC semiannual reports, salient to us now.  So, let's have sexy headlines like "Did Porn Cause the Financial Crisis?"  Wow, that's some causation story.  The SEC had, according to the reports, over 3500 full-time employees during the relevant time periods.  In 2007, there were 2 internal investigations over pornography (.0571%), and in 2008 there were 16 (.457%).  Though the press cites this as a "trend," the reports don't mention that in 2009, there were 3 investigations of employees and 3 of contractors.  It's hard to believe that these porn guzzlers brought about the financial upheaval of the United States and global economy.

How many SEC employees were on Facebook?  (Just as long as we leave university professors out of these types of inquiries!)

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