SEC inspector general opens probe into timing of Goldman Sachs fraud charges

The Securities and Exchange Commission's (SEC) investigative office said Sunday it had begun an investigation into whether charges against Goldman Sachs were politically timed.

SEC Inspector General H. David Kotz wrote Rep. Darrell Issa (R-Calif.) on Sunday to notify the lawmaker that he had opened an investigation, at the congressman's request, into whether the commission's civil charges against the Wall Street giant were coordinated in order to boost the case for the Wall Street reform legislation before Congress.

ADVERTISEMENT
"At your request, we have opened an investigation into the serious allegations that you describe in your letter," Kotz wrote to Issa, the top GOP member of the House Oversight and Government Reform Committee.

Kotz said he would seek any documents relevant to the investigation, and would conduct interviews "of all persons with potential knowledge of the facts and circumstances regarding this matter, including those outside of the SEC."

SEC Chairwoman Mary Schapiro, President Barack Obama and a host of Democratic leaders in Congress have all denied Issa's claim that the charges might have been politically motivated, emphasizing that the SEC is an independent regulatory agency.

Republicans had raised the prospect of the timing of the charges after they were filed earlier this month and became a central part of the financial regulatory reform narrative. The SEC alleges that Goldman constructed a financial instrument based on mortgage-backed securities that was designed to fail, without disclosing that a hedge funder who helped build the instrument had bet on its failure.