MATT TAIBBI: SEC Rocked By Lurid Sex-and-Corruption Lawsuit

Move over, adulterous generals. It might be time to make way for a new sexual rats'nest – at America's top financial police agency, the SEC.

In a salacious 77-page complaint that reads like Penthouse Forum meets The Insider meets the Keystone Kops, one David Weber, the former chief investigator for the SEC Inspector General's office, accuses the SEC of retaliating against Weber for coming forward as a whistleblower. According to this lawsuit, Weber was made a target of intramural intrigues at the agency (which has a history of such retaliation) after he came forward with concerns that his bosses may have been spending more time copulating than they were investigating the SEC.

Weber vs. the SEC: The Full Complaint

Weber claims that in recent years, while the SEC Inspector General's office has been attempting to investigate the agency's seemingly-negligent responses in such matters as the Bernie Madoff case and the less-well-known (but nearly as disturbing) Stanford Financial Ponzi scandal, two of the IG office's senior officials – former Inspector General David Kotz and his successor, Noelle Maloney – were sleeping together.

Weber also claims that Kotz was also having an affair with a lawyer representing a key group of Stanford victims, a Dr. Gaytri Kachroo. Where the story gets really strange is where Weber claims that Maloney last year refused to meet with Kachroo as part of the Stanford investigation. By then, Kotz had stepped down as SEC IG and Maloney had replaced him as Acting IG. The complaint describes Weber confronting Maloney over the issue, asking why she wouldn't meet with the lawyer representing a key group of Stanford victims.

Maloney asked Weber to close the door to her office. Maloney told Weber that she would deny the following conversation if Weber were to repeat it.

Maloney then said that, "David [Kotz] was f...ing that lady . . ." Maloney stated that Kachroo had received special treatment. Maloney even questioned whether the OIG would have ever opened an investigation into the SEC's oversight over the Court-Appointed Receivership in SEC v. Stanford.

The Weber lawsuit is the latest chapter in an ongoing drama that began when Kotz stepped down last January amid not-world-shaking ethics questions (including, of all things, receiving Philadelphia Eagles tickets from a financial adviser). Subsequently, however, an investigation by the U.S. Postal Service Inspector General David Williams concluded more seriously that Kotz violated rules by overseeing investigations involving people with whom he had "personal relationships."


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