Video: Inside the SEC fraud investigation

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    >> we're here in washington . here with us now on the set, democratic representative from maryland and member of the joint economic committee , congressman elijah cummings . still with us, pat buchanan as well.

    >> elijah, good to see you. of course, we want to talk about financial reform. as is often the case, my home state's political scene is so messy --

    >> the great state of florida .

    >> always goes back to florida , florida , florida . there will be a lot of focus with charlie crist and marco rubio and the irs investigations and the florida party going up in flames. on the democratic side, some have suggested kendrick meek may not be strong enough to win statewide. could the democrats get behind another candidate or would that cause a real concern with african-american voters?

    >> no way.

    >> never happen?

    >> never happen. i cannot even imagine it. kendrick meek has been running for a good while. he's raising money. african-americans are very proud of him. and i think that he will draw a cross-section. not just african-americans but many others. keep in mind, there's still a democratic party down there in florida .

    >> that's not under investigation by the irs, the fbi, the u.s. attorney --

    >> or thinking of switching parties.

    >> that's exactly right. this fight between rubio and crist , let's not kid ourselves. i know you're trying to predict this and that, but crist has to go independent.

    >> he has to, right? he can't win.

    >> he can't win.

    >> i feel incredibly naive because i know lieberman did this and it seemed to work --

    >> it's a little different now.

    >> isn't it hypocritical? like, who are you when you switch parties to win?

    >> everybody says, i didn't leave my party, my party left me.

    >> two weeks before --

    >> but if he really felt that way in 1992 that the republican party had left you.

    >> you sort of have a cause, all of these issues and --

    >> that's not what this is about.

    >> no, it's not. this is about charlie crist --

    >> trying to win.

    >> -- trying to win like our friend up there in pennsylvania , mr. specter did. is there a chance there's another senate seat coming up, if charlie crist walks out of the gop, he ain't ever coming back, so this is the last shot for him.

    >> that's right.

    >> how about, is ben nelson -- not ben nelson -- bill nelson 's seat? could he go for that if he. -- you know, i lost to marco rubio and congratulations, marco, i'll support you in the fall?

    >> no. no. listen, listen --

    >> congressman --

    >> charlie crist was on thin ice until last week. and when he voted against the teachers bill that would hold teachers accountable for performance, it was as if somebody put an anvil in his hands and he broke right through that republican ice. he is done in the republican party . it is over. if he wants to win as an independent or a democrat, that feasible. i've got to say, maybe the better move is for him to get out and wait in line as a democrat because he's popular among a lot of moderate democrats in florida . let's turn to -- i'm sorry, go ahead.

    >> wait a minute. i've been listening to a lot of discussion. let's not underestimate kendrick meek . he's a brilliant, young man. you know him.

    >> i like kendrick a lot.

    >> i think he's in the hunt. i think he's going to do an incredible job and i think he has a pretty good shot of winning.

    >> let's talk about financial reform. is it a done deal? will you answer all the questions that mika's been asking everybody, irritating everybody this week?

    >> i'm sorry. i irritated you, apparently.

    >> no, you didn't. but poor tim geithner came on and she kept going. no, she had a great point. that is, we're afraid the banks that were too big to fail before are even bigger sdmou this financial reform doesn't adequately address that, doesn't pare them down enough.

    >> i think we could do better. we've got a problem here. first of all, we've got to have reform. we've got to. i'd like to have more of a bill that does, in fact, pare them down, but just like, in my opinion, does not go far enough, but we have to --

    >> why is that? is it too hard to stand up to wall street for members of the white house and congress?

    >> i think it's extremely -- i think it's difficult, but i don't think it necessarily -- and i think it's very, very complicated. keep in mind, president went up to wall street just yesterday and he says, look, don't fight against us, work with us. we can work this out. and within hours we have the republican -- your friends , saying that we don't even want to discuss it. we don't --

    >> i'm sure they're you're friends , too.

    >> yeah, they're my friend, too. but -- and so, i think -- and i still believe , and i don't -- i think -- i still believe that the republicans don't want anything to happen. and i hate to say that, but it's true.

    >> you feel that way.

    >> congressman --

    >> i don't know.

    >> we've been talking. you you have jpmorgan chase , runs into tremendous crisis. we're not going to let that thing go ahead, sink and die.

    >> no, we can't.

    >> we can't. so why are we all saying we're going -- you know, they're not too big to fail, we'll let them fail when we're not going to let them fail. those things would take down the country, take down the world economy .

    >> but at the same time w very to do something.

    >> why not go back to glass see it and separate it, the casinos from the bank.

    >> the $50 billion fund is a good idea. the president disagrees with that. the $50 billion f they get too big to fail, to wind them down. i think that's a good idea. it seems as if we've got to do a little bit more than that, though. so, we'll see. glass, by the way, this is by the way, this is a critical moment . we is to have cops on the beat. derivatives have to have tans parency, clear and accountable.

    >> dr. sachs , it has to be bitterly ironic for you that while we're cleaning up the mess of the past decade on wall street and in our economy, the chinese are using all the money they've been hoarding over the past decade to be investing in the type of technologies that are going to shape the economic winners and losers of the 21st century . they're not bailing out banks because of what happened in the past ten years. they're creating lightrail across china. and investing in new energy technologies that, again, will shape the next century. what does the united states do to catch up?

    >> well, look, you know, the first thing is, of course, we put ourselves $2.5 trillion into debt in china's foreign exchange reserves over these huge budget deficits and this reckless borrowing over the last decade. r+q?. we have -- as everybody knows , we have a budget deficit a mile wide and china's financing it and building up reserves. second, we're going for these phoney solutions. here we have this massive oil spill . president announced last week because he was trying to garner some votes to do something, i suppose, that were going to open up more offshore drilling for a tiny amount of oil out there when what you say, joe, is absolutely right, we have to go for new energy sources . we have massive alternatives of solar, wind, of nuclear, of other things we could do, but, you know, again we're stalemated there. today we're having a meeting here in new york on electric vehicles . this is something that something that co uld really transform this country because we could run these vehicles on domestic energy sources , not on imported oil. they're clean, they're state-of-the-art. we could have a lot smarter cars in the future. we've got to get moving in an organized way. when i testified in congress last week on this you see there's no plan still, no coherent framework. this is a big part of the problem. we're just still nibbling around the edges of the things that we need to do.

    >> dr. jeffrey sachs , let us know how that meeting goes for sure. it's very good to have you back on the show. thank you very much.

    >> great to have you, jeffrey. we want you to come back very soon and talk about this debt. i fear when we look at california , we're looking at the future of america in five years. when we look at greece, we're looking at our future and ten years if we don't right our course now. would you agree with that?

    >> absolutely. let's talk about it because it's serious.

    >> thanks, dr. saks. up next,

updated 4/23/2010 12:35:13 PM ET 2010-04-23T16:35:13

Republicans are stepping up their criticism of the Securities and Exchange Commission following reports that senior agency staffers spent hours surfing pornographic websites on government-issued computers while they were supposed to be policing the nation's financial system.

California Rep. Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, said it was "disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation's economy on the brink of collapse."

He said in a statement Thursday that SEC officials "were preoccupied with other distractions" when they should have been overseeing the growing problems in the financial system.

The SEC's inspector general conducted 33 probes of employees looking at explicit images in the past five years, according to a memo obtained by The Associated Press.

The memo says 31 of those probes occurred in the 2 1/2 years since the financial system teetered and nearly crashed.

The staffers' behavior violated government-wide ethics rules, it says.

SEC spokesman John Nester said in a statement Friday that each of the offending employees has been disciplined or is in the process of being disciplined, and some have already been suspended or dismissed.

"We will not tolerate the transgressions of the very few who bring discredit to their thousands of hardworking colleagues," said Nester, adding the agency has lately increased penalties.

The memo provides fresh ammunition for Republicans who suspect the timing of the SEC's lawsuit last week against Wall Street powerhouse Goldman Sachs Group Inc. News of the suit came as the Senate prepared to take up a sweeping overhaul of the rules governing banks and other financial companies.

The memo was written by SEC Inspector General David Kotz in response to a request from Sen. Charles Grassley, R-Iowa. It summarizes past inspector general probes and reports some shocking findings:

  • A senior attorney at the SEC's Washington headquarters spent up to eight hours a day looking at and downloading pornography. When he ran out of hard drive space, he burned the files to CDs or DVDs, which he kept in boxes around his office. He agreed to resign, an earlier watchdog report said.
  • An accountant was blocked more than 16,000 times in a month from visiting websites classified as "Sex" or "Pornography." Yet he still managed to amass a collection of "very graphic" material on his hard drive by using Google images to bypass the SEC's internal filter, according to an earlier report from the inspector general. The accountant refused to testify in his defense, and received a 14-day suspension.
  • Seventeen of the employees were "at a senior level," earning salaries of up to $222,418.
  • The number of cases jumped from two in 2007 to 16 in 2008. The cracks in the financial system emerged in mid-2007 and spread into full-blown panic by the fall of 2008.

About 16 percent of men with Internet access at work admit to looking at online porn while at the office, according to a 2006 survey by Websense Inc.

Former SEC spokesman Michael Robinson said he shares the public's outrage about SEC staffers who enjoyed porn on the taxpayer dime when they were supposed to be keeping the markets safe.

"That kind of behavior is just intolerable and atrocious," said Robinson, now with Levick Strategic Communications. He said he expects the head of the SEC, Mary Schapiro and her team, are "very focused on" the issue.

Schapiro has been parrying GOP complaints about the Goldman Sachs lawsuit, which agency officials hoped would mark a new era of tougher oversight of Wall Street. They followed high-profile embarrassments including the failure to catch Ponzi kings Bernard Madoff and R. Allen Stanford.

Republican lawmakers also accused the SEC of being influenced by politics. The SEC's commissioners approved the Goldman charges on a rare 3-2 vote. The two who objected were Republicans.

Schapiro is a registered independent who has been appointed by presidents of both parties.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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