By IULIA FILIP
WASHINGTON (CN) – A former assistant inspector general claims the SEC fired and defamed him for reporting misconduct by SEC officers and exposing potential security breaches at the agency.
David P. Weber sued the U.S. Securities and Exchange Commission and SEC Chairwoman Mary Schapiro, in Federal Court.
Schapiro is the only individual defendant.
Weber, who supervised investigations of fraud, waste and abuse, claims the SEC retaliated after he reported misconduct by SEC officers and employees, to SEC commissioners and Congress.
“Mr. Weber brings this action after SEC officers and employees made malicious and defamatory statements against him in the news media, leaking personal information about him in violation of the Privacy Act, in response to his disclosures of SEC employee misconduct to the Commissioners of the SEC, and to members of Congress through meetings with congressional staff of the SEC’s Oversight Committee,” the complaint states.
“Mr. Weber disclosed to the Commissioners and Congress that H. David Kotz had engaged in misconduct when acting as the Inspector General. This misconduct compromised the integrity of several OIG [Office of the Inspector General] investigations, including the highly publicized inquiries into the SEC’s mishandling of the Bernard L. Madoff and R. Allen Stanford Ponzi schemes.
“Mr. Weber also disclosed to the Commissioners and Congress the existence of severe breaches of SEC and national stock market computer security. These breaches may have compromised extremely sensitive information about the computer infrastructure system of every major stock exchange, including the New York Stock Exchange and the NASDAQ Stock Exchange. These breaches were caused by either the intentional or grossly negligence mishandling of sensitive computer equipment and data by SEC employees and management officials, all while the SEC failed to warn each of the affected exchanges of the breach.
“To this day, the SEC has still not adequately and fully disclosed and warned the stock exchanges of the breadth, severity, and nature of the information subject to compromise by the misconduct of SEC employees and management. Further, no audit trail will ever be able to identify the true nature and severity of the breach, because the employees and officers at issue, themselves highly skilled in hacking, IT security, and IT security incident response, intentionally disabled and prevented the ability of the SEC to learn this information, for unknown reasons.
“Instead of immediately taking action to remedy these significant failures, including by full notification of the breach to the exchanges, SEC officers and employees tried to ‘cover-up’ and ‘white wash’ these public relations disasters by discrediting Mr. Weber, defaming him in the public media with baseless and malicious accusations, unlawfully placing him on administrative leave status, and, later, wrongfully terminating his employment based on meritless allegations.
“These malicious and defamatory statements were leaked by SEC officers and employees to the public media, in violation of the Privacy Act. These leaks were intentionally timed to inflict maximum damage against Mr. Weber. Indeed, there are now pending motions related to a custody dispute of Mr. Weber’s three young children which specifically cite the SEC’s leaked allegations and Mr. Weber’s work status as the grounds for arguing that Mr. Weber is not fit for additional custody of his children. Further, with every potential employer now able to read the SEC’s allegations and Mr. Weber’s current work status on the Internet, he is effectively unemployable in the private sector.”
Weber, an attorney and certified fraud examiner, was the Assistant Inspector General for Investigations for the Office of Inspector General (OIG) of the SEC from January 2012 until Oct. 31, when he says he was wrongfully fired.
Weber took the job at the SEC after working for the Federal Deposit Insurance Corp., the Department of the Treasury and other financial regulatory agencies, according to the complaint.
“Weber has extensive and expert-level experience in investigating, detecting, and prosecuting some of the largest frauds within the United States,” the complaint states. “He is also an expert on information security law, computer crime, hacking, and fraud. He is a prior member of the Attorney General’s Council on White Collar Crime, Subcommittee on Identity Theft.”
Shortly after he began working for the SEC, Weber says, he became aware of multiple allegations of misconduct against former Inspector General H. David Kotz, who resigned in mid-January this year.
Weber’s direct supervisor, Noelle Maloney, who took over Kotz’ s job, confirmed rumors that Kotz had engaged in misconduct during the Stanford Ponzi investigation and other investigations, according to the complaint.
Weber says Maloney, who allegedly had had a sexual relationship with Kotz, disclosed to Weber that Kotz had had various improper affairs with SEC employees and people involved in investigations conducted by his office.
“In particular, Maloney described an affair that Kotz had during a review conducted by the OIG into the SEC’s ‘Restacking Project,’ in which the SEC spent approximately $4 million dollars relocating the desks of around 1,750 SEC employees,” the complaint states. “Maloney stated that Kotz had an affair with one of the key SEC personnel involved with this project, despite being responsible for leading the review, and having personally authored sections of the final report, concerning the allegations of waste in the project.”
Weber says he felt that Kotz’s misconduct and Maloney’s failure to report it had potentially compromised numerous high-profile investigations, and decided to report them to the SEC commissioners.
He claims that as soon as Maloney began to suspect that he had reported it, she and other SEC officers and employees began a campaign of retaliation against him.
Maloney falsely claimed that Weber was “a threat to her personal safety,” and even after the commissioners demoted her she worked to turn other investigative employees against Weber, according to the complaint.
Weber claims Maloney also retaliated against his support staff, preventing him from completing reports into alleged misconduct and delivering them to Congress on time.
He claims other SEC officers, including the chief of security services and the chief operating officer, who were targets of his investigations, supported Maloney in her campaign of retaliation.
The two officers placed Weber on administrative leave, without notifying or consulting with Weber’s direct supervisor, and removed him from the building, according to the complaint.
Weber says that at the time his office was investigating the two officers for alleged nepotism, corruption, sexual assault cover-up, whistleblower retaliation and other misconduct.
He claims that the SEC also retaliated against him for his involvement in an investigation into the alleged misuse of SEC computer equipment. According to the complaint, Weber was investigating alleged security breaches by SEC examiners who had brought their government-owned laptops to a famous hacker conference, exposing sensitive stock exchange information to possible theft.
Weber says that just before he was placed on administrative leave and banned from the building, he insisted that the stock exchanges and Congress be notified of the potential security breaches.
When SEC management refused to do so, Weber took his concerns about stock exchange security vulnerability to members of Congress, according to the complaint.
“Thereafter, Weber was eventually terminated,” the complaint states. “Approximately one week after his termination, a report was issued to the press related to the information security issues. The important issues raised by Weber were buried and obscured in an investigation seemingly focused primarily on employees downloading music on SEC devices. Upon review of the press reports, it appears that certain elements of the investigation, including whether information was stolen, have been whitewashed and covered up by the SEC.”
Weber claims that after the SEC fired him, SEC officers and employees made defamatory statements about him to the press, including that he was a “physical threat,” and talked “openly about wanting to carry a concealed firearm at work.”
He says the defamatory statements ruined his family life and his employment prospects.
He claims that even after an outside investigation cleared him of any misconduct, the SEC failed to reinstate him.
He seeks reinstatement, back pay, and more than $40 million in compensatory and punitive damages for violations of the Privacy Act, the Whistleblower Protection Act, and constitutional violations.
He is represented by Cary Hansel with Joseph, Greenwald & Laake of Greenbelt, Md.
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