Former SEC Lawyer to Pay $50,000 in Conflict of Interest Allegation

Ex-Official at S.E.C. Settles Case for $50,000
The New York TImes by Edward Wyatt  -  January 13, 2012

WASHINGTON, DC — A former enforcement official for the Securities and Exchange Commission who was accused of blocking or closing at least three investigations into the activities of the Stanford Financial Group, which the authorities claim was a $7 billion Ponzi scheme, has settled civil charges brought by the Justice Department accusing him of violating conflict-of-interest rules by later representing Stanford before the commission.  John M. Bales, the United States attorney for the Eastern District of Texas, announced Friday that the former official, Spencer C. Barasch, who from 1998 to 2005 served as the enforcement director for the S.E.C.’s Fort Worth regional office, had agreed to a civil settlement that would result in payment of a $50,000 fine.  That is the maximum fine for a violation of federal conflict-of-interest rules, but it is much less than the punishment Mr. Barasch would have faced had the Justice Department pursued a criminal case. The civil settlement ends for now any further criminal investigation of Mr. Barasch. A separate civil case involving Mr. Barasch continues at the S.E.C.  Paul Coggins, a lawyer representing Mr. Barasch, said the case was settled “to avoid the expense and uncertainty of protracted litigation.” Mr. Barasch’s actions after leaving the S.E.C. “were expressly permitted by the postemployment statute,” Mr. Coggins said. “At no time has he compromised his honor or ethics, and we vigorously dispute any suggestion to the contrary.” Government officials said at a Congressional hearing last May that Mr. Barasch was the subject of a criminal investigation into his work for Stanford, which was also the subject of much of a 150-page report by the commission’s inspector general issued in March 2010.  That report found that Mr. Barasch frequently discouraged or halted further investigation into Stanford Financial by S.E.C. staff members, and that he subsequently represented the firm in talks with S.E.C. officials about other or continuing investigations.  The S.E.C. is continuing its own attempts to reach a separate civil settlement with Mr. Barasch, people close to the commission said. Such a settlement could include an extended or permanent bar from work before the commission.  H. David Kotz, the S.E.C. inspector general, said in a statement Friday that the Justice Department settlement “sends a strong message that former federal officials cannot abuse the public trust by attempting to profit personally from matters on which they worked as government servants before joining the private sector.”  Mr. Bales said that the case demonstrated that the S.E.C.’s ethics program worked, because commission lawyers had told Mr. Barasch that he was barred from representing Stanford Financial on agency business. “Today’s settlement demonstrates that we will hold those that shirk their professional responsibilities accountable for their conduct,” he said.  According to the Justice Department’s settlement, Mr. Barasch denied any wrongdoing. He said that he lacked the unilateral authority to close or hamper an investigation, and that he received “directives and pressure from his superiors in Washington” to devote his office’s resources to financial and accounting fraud rather to Ponzi schemes.  Mr. Barasch also denied that he had been told he was permanently barred from representing Stanford Financial. In December 2006, he billed the firm about $6,500 for service and expenses.  R. Allen Stanford, the founder of Stanford Financial, is scheduled to go on trial on Jan. 23 in Houston.  He is charged with 21 federal criminal counts of defrauding investors, who were encouraged to buy certificates of deposit at a Stanford bank in Antigua. Instead of being invested, federal officials say, much of the money went to finance Mr. Stanford’s lavish way of living.